Some couriers still operating in Texas

By Kate Northrop

Following a scathing Senate hearing meeting last week, Texas Lottery Commission members gathered to discuss its recent ban on lottery couriers and hear public comment, including pleas from couriers to consider all sides before taking a stance.

At this week's Texas Lottery Commission (TLC) meeting, Lottery leadership convened to confirm the policy change that effectively bans couriers in the state, but not before hearing the final appeals of a lottery courier representative to reconsider the action.

Following intense scrutiny over the $95 million Lotto Texas jackpot buyout and the more recent $83.5 million jackpot that was won through a courier service, the Texas Lottery received national publicity that drew criticism for its past and current leadership. After a years-long history of allowing couriers to operate in the state, backlash from Legislature is no longer something the Lottery wants to deal with.

Several lottery courier companies ceased operations the day the ban was declared. The Lottery warned that retailers violating the ban would have their ticket sales license revoked.

But not all retailers are on board. While Jackpocket, for example, has retracted its services in Texas, Lotto.com continues to offer tickets for Texas draw games and scratch-off games.

"Make sure you have the facts before you act," Lotto.com Chief Legal Officer Rob Porter addressed commissioners on Tuesday.

According to Porter, banning courier services would harm responsible, private business that contribute "millions of dollars" to the state, jeopardize the jobs of dozens of Texans, and cut off 5% of lottery sales revenue on an annual basis. However, that figure could be even higher, since lottery couriers accounted for about $173 million in revenue in 2023, or as high as 9% of the Lottery's total draw game sales.

The courier representative made it clear that his company was not one of the services involved in the $95 million buyout scheme, in which a purchasing group approached four different retailers for their help in automating ticket purchases within a 72-hour window.

"You've heard in our testimony, elsewhere and others, that Lotto.com was not involved in that," Porter stated. "We had no role in that. No responsible regulated courier in the state had any role in that. As you know, those tickets were purchased at retail. We weren't involved. We certainly were aware of it. We had heard of it — it would be difficult not to in a circumstance where the number of machines being moved is large and the lottery universe is small."

On behalf of his company, Porter said he understood there are ongoing investigations into all lottery couriers in the state and that he and his fellow employees would be happy to participate if it means creating a world where the Lottery can safely regulate and work with courier services.

"But, it's clear — it was clear at the time, and it's clear now — Lotto.com doesn't support efforts to try to buyout jackpots, and it's not a reason for this commission to pass rules killing couriers."

Porter brought up testimony Texas Lottery Executive Director Ryan Mindell gave during the Senate Committee on State Affairs meeting last week, in which Mindell cited "a regulatory gap" occurring downstream of lottery retailers. While the Lottery's rules have always prevented retailers from selling tickets by phone, that "gap" had prevented them from being able to control what happened after the retailer sold the ticket, hence the "downstream" interactions between third-party lottery couriers and their customers.

In other words, as long as couriers operated within the established rules and regulations and maintained a valid retailers license, the Lottery had no say in what happened after tickets were sold and printed.

It was part of Mindell's defense of the TLC actions when Senator Bob Hall questioned why they had previously lacked the authority to regulate courier services. He also denied that the TLC had made rule changes to specifically aid couriers.

"There was never a point in which we passed rules to facilitate courier services," Mindell said last week. "In fact, last fall working with the board, we passed additional rules to make clear that you have to be present at the terminal for a transaction."

Porter asserted Mindell's testimony served to distance the Lottery from the topic of couriers in hindsight, but he recalled instances where the Texas Lottery made adjustments to accommodate the courier companies and their business model and allow them to operate within the state.

"At all points between 2018 to a few weeks ago, Texas Lottery leadership was well aware of courier activities," Porter said. "They authorized the issuance of terminals and equipment necessary for responsible couriers to operate. They granted authority for couriers in the summer of 2022 to use [the] official Texas Lottery logo and IP on courier websites. They directed software changes to terminals to remove terminal prompts and make courier transactions work better. You don't do this with companies that are operating in a regulatory gap. You don't do this if the responsible couriers are affecting the integrity and honesty of the Lottery."

He clarified that there was nothing inappropriate with the examples he described, rather it was "entirely appropriate for a regulator to be involved and aware of how orders are processed in the state."

"We follow the law, we always have, and we always will," Porter added.

His final point illustrated that the QR codes used to efficiently purchase and create a lottery ticket are not as scandalized as Senator Hall and other legislators are making them out to be.

"What you didn't hear at the hearing is, these are available on the Texas Lottery app," Porter addressed commissioners while holding up a phone displaying a webpage with a QR code. "This is how I generated this image that I'm standing here in front of you demonstrating. It is official, it's put out by the Lottery, it was generated and used by couriers with the assistance and the technology of the Lottery, and we do it — and have done it — consistently for years."

Other Texas residents came to the podium to voice their concerns with how couriers may be creating avenues for illegal behavior that jeopardizes the fairness of the games. One speaker brought up the possibility of individuals located outside of Texas using a VPN, or Virtual Private Network, to falsify their location data and fraudulently purchase tickets elsewhere in the world.

Porter returned to the stand to redress the claim and confirmed that lottery courier companies do not allow the use of VPNs.

The TLC meeting was merely the official publicly accessible setting where the rule change on lottery couriers was formally proposed. According to the Lottery, the ban is intended to be adopted at the April open meeting following a 30-day public comment period.

However, the courier service's final plea was that the Texas Lottery waits to act on any policy changes until a state law banning courier services is officially passed.

"Ultimately, I struggle with how Texas ends up being different than 18 other states that couriers operate in a regulated fashion correctly," Porter argued. "The laws aren't significantly different, the responsible couriers like Lotto.com have the same security, we have the same technological protections, we have the same responsible play guidelines we use in other states. We keep the Lottery informed just as we do everywhere else, and we're going to do it as long as we're allowed."