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Lottery courier businesses should continue to see rapid growth amid the languid rollout of state lotteries’ own digital operations, according to the CEOs of two leading U.S. courier services.
Online lottery couriers have been thrust into the spotlight in the recent weeks since DraftKings’ $750m deal to acquire leading courier operator Jackpocket, bringing fresh attention to a segment that at least partly owes its success to the inability of many states to launch their own iLottery programs.
In the 12 years since a landmark December 2011 U.S. Department of Justice opinion opened the door to online lottery sales, just 11 states have been able to launch iLottery, noted Thomas Metzger, CEO of Lotto.com, a competitor of Jackpocket’s.
“It’s less than one state per year and I don’t see that pace changing,” Metzger said at last week’s NEXT Gaming Summit in New York City.
In contrast, it is generally far easier for courier operators to expand into new markets as they can be approved through administrative action by lottery commissions or directors, without requiring legislative action, Metzger said.
Online sales of traditional lottery tickets still account for less than 2 percent of a U.S. lottery market worth more than $100bn in total annual sales, said Akshay Khanna, CEO of Jackpot.com, another courier operator.
If the rapidly expanding U.S. sports-betting market were a baseball game, it would probably be in the third of nine innings, Khanna told NEXT summit delegates.
“With lottery, the coin toss hasn’t even happened yet!” he said. “We’re so early [in the game]; there’s so much green space in front of us.”
Unlike states’ iLottery programs in which state lotteries directly offer digital tickets for lottery drawings or virtual instant games to players, lottery courier services operate by charging a convenience fee to acquire physical lottery tickets for their registered customers from an approved retailer.
Those tickets are then stored on behalf of the player who will be notified of any winnings, with prizes below $600 debited directly to their account. Couriers are also able to offer a wider variety of subscription services, for example, enabling players to choose to automatically buy lottery tickets when a jackpot for a specific game exceeds a certain amount.
As highlighted by recent research by Vixio GamblingCompliance, courier services are licensed and regulated in just two states: New Jersey; and New York. However, operators such as Jackpocket, Jackpot.com, Lotto.com and Mido Lotto are also active in more than a dozen other markets, typically with the blessing of the relevant lottery commission.
Two states — Virginia and Wisconsin — have laws that expressly prohibit courier operations, although Indiana also bans traditional lottery retailers from knowingly selling tickets to a courier service.
Jackpot.com’s Khanna said a key focus for lottery couriers in 2024 will be continuing to expand into new states, including California.
Following DraftKings’ acquisition of Jackpocket, however, executives acknowledge that there will likely be more attention on the courier space than before.
A threshold question is whether the “energy around couriers” will now cause states to become more aggressive in realizing their own iLottery ambitions, according to Brad Cummings, CEO of EQL Games, a developer and aggregator of games for the iLottery market.
He cited the example of New Jersey, where the state lottery commission approved new regulations in September to enable the New Jersey Lottery to directly sell lottery tickets online, some five years after it started to license courier businesses.
That move seems to be generating pushback from state lawmakers, with at least three bills or resolutions since filed in the New Jersey Assembly or Senate to block iLottery operations without legislative approval.
iLottery programs are also expected to launch in the near future in both Connecticut and West Virginia, while legislation to authorize iLottery is currently pending in Maryland, Massachusetts and New York. Two bills have been introduced this year in Iowa’s legislature to expressly prohibit lottery couriers.
Although iLottery operations have not yet expanded across the country, Cummings said iLottery has still been transformative for the U.S. lottery industry as it has opened the door to a far wider range of suppliers than traditional, ticket-based draw games and scratchcards, which can generally be supplied to a state lottery by one or two large providers.
Cummings told NEXT summit delegates that iLottery offers online casino game providers a compelling opportunity to reconfigure their products for the iLottery market, which is generally a less competitive and more static space for game content than iGaming.
Metzger said courier businesses are also expanding their offerings to provide instant lottery products.
Lotto.com last year launched a service offering players in Colorado, Ohio and Texas the ability to order higher-priced scratchcard games costing at least $20, with players able to replicate the game outcome by digitally scratching their screens to reveal whether they have won a prize.
