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Despite a controversy in Texas that has garnered national attention, top lottery courier executives do not believe a chilling effect is coming for their continued expansion.
The Texas Lottery Commission last month finalized new rules that prohibited lottery couriers from operating in the state.
The change followed political heat over a 2023 bulk purchase scheme, partially involving lottery courier Lottery.com, which saw an out-of-state syndicate win a $95m jackpot.
Official skepticism toward lottery couriers then increased after an $83.5m win by a player who used lottery courier Jackpocket earlier in the year, although there is no evidence of controversial activity outside the use of the courier itself.
Executives from leading lottery couriers Lotto.com and Jackpot.com said the controversy in Texas came as no surprise after years of politicians chasing couriers out of the state.
“I think it was foreseeable to the extent that the organization that won that jackpot had done it in other jurisdictions, and that's why the two couriers on this panel did not have anything to do with that,” said Tom Metzger, CEO of Lotto.com.
“I think Texas is a special situation where the right wing in Texas is starting to get more and more right, and so there are some folks in Texas who think that the lottery is a sin, like the movie Footloose, that they don't want dancing.
“I think the political headwinds, they started in 2023 and they're still going.”
“It's worth calling out that the central issue in Texas around bulk purchasing is something that is easily solved with regulation,” added Mike Silveira, chief of staff for Jackpot.com. “The path that some politicians in Texas are pursuing to, quote unquote, ‘solve this problem’ isn't necessary.”
Silveira said that these types of hurdles are common for companies entering a regulated industry and looking to disrupt it.
“These types of things can’t be surprises,” he said. “It’s kind of what you sign up for. It happened to Uber, it happened to Airbnb; they’ll probably happen again in this industry.”
Metzger and Silveira are optimistic about progress in other states moving toward regulating couriers.
“Since the situation in Texas has arisen, we’ve already seen Colorado move toward regulation, we’ve seen Arizona start the process of regulation, these things are happening already.
“The hope is that the trend that we're seeing in other states like Colorado and Arizona, it's going to accelerate faster than these little speed bumps that come along the road,” he added. “But you have to have thick skin in this industry.”
Although lottery couriers are only expressly regulated through specific rules in New York and New Jersey, Metzger said his company has never entered a state without explicit permission from state officials in writing.
“We walk through the front door, we’re not trying to do anything in the shadows, and so we have great relationships with every lottery we work with,” he said.
“I think the silver lining here is that our business in every other state is going to be legitimized with proper regulations, which we’re working very closely with the regulators to promulgate, and I think that will protect the courier business and the lotteries themselves for years to come.”
The two operators say they remain focused on bringing new players into the ecosystem rather than cannibalizing existing retailers, state iLottery offerings, or other couriers.
“When I'm thinking about acquiring another customer, I'm not thinking about taking a customer from Lotto.com or Jackpocket or another lottery courier. I'm looking to find a customer that doesn't realize that they can buy lottery tickets online,” Silveira said.
“I think there's a lot of marketing dollars that need to be poured into the lottery industry to make people aware of this, and I think lottery couriers will only help that.”
Metzger said that, longer term, he believes states will ultimately prefer a model that includes both online lottery and lottery couriers in order to maximize marketing spend.
“Most states, legislatively, have a cap on how much they can spend, and it's way too low,” he said. “[In] most states, about 1 percent of sales are devoted to their marketing spend, which is lower than any consumer-facing business on the planet, right?
“And so to the extent that Lotto.com or Jackpot.com is in a state, we're spending millions of dollars marketing that state's lottery,” he continued. “I'm not advertising Lotto.com, I'm advertising New Jersey Powerball or New York MegaMillions, so it's free marketing dollars for the state.”
Texas Senate Approves Bill Scrapping Lottery Commission
Meanwhile, a bill to eliminate the Texas Lottery Commission and move the supervision of lottery operations to a new state agency has been referred to the House State Affairs Committee after passing the Senate through a unanimous vote of 31-0 on May 15, but needs to be fast-tracked with the end of the legislative session less than two weeks away.
Senate Bill 3070, filed by Republican Senator Bob Hall, would move the supervision of the state-run business to the Texas Department of Licensing and Regulation.
The bill would also ban lottery courier services, require in-person ticket sales, and limit purchases to 100 tickets per transaction. It also proposes a limited-scope sunset review of the state lottery to evaluate and make recommendations on the continuation of the Texas Lottery.
Unless the review supports the continuation of the lottery, it will be abolished by August 31, 2027.
The bill needs to be fast-tracked in the House of Representatives, with the Texas legislature scheduled to adjourn on June 2. If the House fails to pass HB 3070, then lawmakers will need to wait until 2027 and a new session to take the issue up again.
