New Jersey based group turned the odds to win in their favor

By Kate Northrop

Around this time one year ago, the Texas Lottery's Lotto Texas jackpot was bursting at the seams, boasting the game's third-largest prize ever at a mouthwatering $95 million. One New Jersey-based group gamed the odds to win the jackpot.

Following a seven-month period without a winner, the Lotto Texas jackpot had ballooned to $95 million for the drawing on April 22, 2023, the game's largest in over 12 years. One jackpot winner would finally emerge from that evening's drawing, but an analysis of sales, winnings, and probability statistics show that the win was more premeditated than one might think.

One ticket matched all six winning numbers in the April 22, 2023 Lotto Texas drawing. Those numbers were 3, 5, 18, 29, 30 and 52. On June 27, a New Jersey-based limited partnership called Rook TX received a check for $57.8 million from the state lottery.

In fact, Rook TX may have gamed the odds to win the jackpot in a "nearly risk-free — and completely legal multimillion-dollar payday," the Houston Chronicle alleges. In a way that's similar to how a group of MIT students gamed the Massachusetts Lottery, the April 22, 2023 drawing demonstrated another instance of a large purchasing group profited from playing the lottery in a "brute force attack."

Rook TX's winning ticket was purchased at a small store called Hooked on MT in Colleyville, except the retailer was actually listed under the name "Lottery Now."

According to state lottery sales records, Lottery Now was the top-selling retailer in the state for the April 22 Lotto Texas drawing, which catalogued just under 11 million tickets sold out of around 28 million total across the state. What made this retailer, whose storefront does not seem to have anything to do with the lottery at all, so successful in not only selling a majority of these tickets, but also selling the coveted jackpot-winning ticket?

Lottery Now is not an ordinary brick-and-mortar retailer, like most convenience stores players read and hear about on the news. When the Texas Lottery announced the win, a press release confirmed that Lottery Now was a ticket butler service that buys and stores physical tickets from licensed Texas Lottery retailers on behalf of players through a third-party app.

State law technically does not allow the digital sale of tickets directly to players and dictates that tickets must be sold at physical retail locations. Lottery courier services get around this by buying the physical ticket at a store on behalf of the player, sending them a digital copy of their ticket, and storing it at a secure location. It's also not unheard of for these couriers to set up storefronts as a base for their operations and apply for their own license as a physical retailer. Ticket butler companies will charge players a fee for the service, much like how customers will pay for the cost of delivery through Doordash versus picking up their food from the restaurant themselves.

"Lottery couriers, as these third-party companies are known and as has been reported in the media, have aggressively entered the U.S. lottery market and, while all the lottery tickets involved are purchased at licensed brick-and-mortar retailer locations, the lottery courier business model is not contemplated by current Texas law and is now being examined closely by the Texas Legislature," then-Texas Lottery Executive Director Gary Grief said at the time of the jackpot win. "It is also possible that some of the lottery couriers operating in Texas assisted various purchasing groups in purchasing large quantities of tickets, particularly in the last few days leading up to last Saturday's drawing."

At a glance, one wouldn't be able to tell that this tiny strip mall retailer even sells Lottery products. Having just obtained their license in October 2022, they don't deal in all Lottery games like a majority of other licensed retailers do. 98% of their sales in 2023 were for Lotto Texas draws.

In total, the Colleyville store generated $15.6 million in ticket sales last year. An overwhelming majority of those sales, around $14.5 million, was for just two draws in the year — April 15 and April 22.

At the beginning of 2023, the store had one terminal to print tickets. By April 19, the day before the sales began for the April 22 jackpot, it had added 12 more terminals, the Lottery Commission told the Houston Chronicle. This was enough to allow for the printing of hundreds of thousands of tickets in a day.

Ten days after the $95 million win, the store had removed most of the terminals, keeping just three of them.

"The request for additional terminals and the buying activity described is consistent with the State Lottery Act, and the commission's rules and retailer license requirements," Lottery spokesperson Steve Helm wrote to the Houston Chronicle.

Sales figures from the Texas Lottery show that, on average, Lotto Texas usually generates between 1 million and 2 million ticket sales. Compare that to the total number of possible number combinations of over 25.8 million, and you'll see how its possible for draw games to go several months without a jackpot winner.

For the April 22, 2023 Lotto Texas drawing, the Texas Lottery sold an absurd 28 million tickets.

"To better understand this type of buying activity, you need look no further than our top 10 selling retailers for last Saturday night's Lotto Texas drawing," Grief explained at the time of the win. "Sales for last Friday and Saturday were through the roof, with the vast majority of the buying activity focused at those retailers who appeared to be selling to various purchasing groups. In fact, it appears that the winning ticket was likely bought by one of the purchasing groups. While there is no prohibition on these types of purchases, it certainly generated unprecedented jackpot growth over the last few days of this jackpot run."

When Grief said "these types of purchases," he was referring to the idea of one purchasing group buying up a large number of, if not all, possible combinations to maximize the chances of guaranteeing a win. In other words, essentially buying a jackpot outright.

But what's to prove that Rook TX really did buy nearly 26 million tickets containing all possible combinations to guarantee a win?

"As the Texas Lottery does not track sales by individuals or groups at the time of purchase, the agency cannot confirm the claimant you're referring to purchased every number combination to guarantee a win," Helm told the Houston Chronicle. At the same time, the Lottery did reveal that that "the total coverage rate" — the percentage of all possible six-number combinations in play — for the April 22 draw "was greater than 99%."

Buying up an entire draw "is not prohibited by Texas Administrative Code or the State Lottery Act," Helm continued.

While Helm is right in that there's no way to tell just by looking at the jackpot win alone, one could instead look at the number of lower-tier prizes won, which heavily indicates that Rook TX did indeed buy every possible number combination.

The Lottery does not track lower-tier prizes under a certain amount, or those that are typically cashed at a retailer. However, they do track prizes valued over $599 and require them to be claimed at a Texas Lottery Commission office.

In every Lotto Texas drawing, once the numbers are drawn, they can be arranged in 288 different ways to match a five-of-six prize amount (i.e., second prize). For example, if the numbers drawn were 1-2-3-4-5-6, one possibility of winning would be to have played 1-2-3-4-5 and any other sixth number. Another possibility is 1-3-4-5-6 plus any other sixth number. One can keep arranging five of the six numbers that were drawn, plus each of the remaining numbers that were not drawn in different ways, and in the end there will be a total of 288 different ways to win the second prize in Lotto Texas. (Likewise there are 16,920 combinations that could win the four-of-six third prize, and 345,920 combinations that could win the three-of-six fourth prize.)

According to data from the Texas Lottery Commission, Rook TX not only claimed the jackpot, but cashed 289 winning tickets for second-tier prizes that won by matching five out of six numbers. Rook TX only shows up in Lottery winner records for the April 15 and April 22 draws.

The odds that a single entity managed to win the jackpot and simultaneously hit every possible five-of-six number combination — but somehow didn't buy every possible number combination — are vanishingly small, Davidson College math professor Tim Chartier told the Houston Chronicle. In layman's terms, it basically confirms that the group purchased every possible combination of numbers.

Since the four-of-six and three-of-six prizes are less than $600, they could be cashed at a lottery retailer, meaning there's no way to verify that Rook TX also won using every possible combination for every prize tier. However, if the winner did indeed buy all possible combinations — and evidence from sales and winner data indicates that they almost certainly did — Rook TX would have won 16,920 third-tier prizes of $50 and 345,920 fourth-tier prizes of $3. In addition to the $95 million jackpot, that would make their total take-home from lower-tier prizes just over $2.46 million before taxes.

Texas state law allows lottery winners of $1 million or more to remain anonymous, so we will likely never know the identities of those in the New Jersey-based purchasing group, which was formed two weeks before the $95 million prize was claimed.

You can find state-by-state information about anonymous lottery claims by state in this forum thread.

While "buying a jackpot" in this manner may seem straight-forward, there are other factors that a purchasing group like Rook TX had to consider. The first is the cash value. Assuming the winner would take the lump sum payment instead of annuitized payments over 30 years, the jackpot would actually be worth $57.8 million.

Then there are taxes. While there is no state tax on lottery winnings in Texas, there is a top federal income tax rate of 37%. That cuts the cash value amount to around $36.4 million. After spending almost $26 million on every possible number combination, that leaves the purchasing group with a $10 million profit — not bad.

Still, there was some risk involved. What if there had been another jackpot winner? Assuming one other ticket matched all six numbers, that would cut the cash value in half to about $29 million. By the time all federal taxes are paid on the prize, that amount would be whittled down to about $18 million. That's about an $8 million loss.

But the odds were nevertheless in their favor from the very start, and they definitely played them to their purchasing power advantage.

Since Rook TX bought 25.8 million of the 28.1 million lottery tickets sold for the April 22 Lotto Texas drawing, that meant that 2.3 million tickets belonged to other players.

According to Fairfield University statistics professor Nicholas Kapoor, the chances of one of those tickets matching all six winning numbers was 8%. This made the game mathematically appealing to "hack" — Rook TX had a 92% chance of being the sole winner of the jackpot.

Rook TX took a risk, albeit a calculated one, and managed to game the odds to buyout a jackpot. But an 8% chance is still an 8% chance, and the Texas Lottery emphasized to the Houston Chronicle that "lottery drawings are random and independent events that provide every ticket holder has an equal chance to win regardless of the number of players, tickets purchased or the jackpot's history."

Thanks to Richard for the tip.