LOTTERY
Courier services a growing trend One of the growing innovations in the lottery arena is the use of lottery courier services. While lottery courier services as a concept have been around for decades, 4 the proliferation and adoption of these services is a relatively new phenomenon. The “new” model of lottery courier services relies on technological innovation and current consumer trends to reach both the traditional lottery player-base as well as those demographics that have historically proven to be difficult for brick-and- mortar lottery retailers to capture. Most popular lottery courier services operate similarly to other commonly recognized online purchasing applications. Lottery customers create an account on the courier’s mobile or desktop application. Customers are required to upload identifying information and provide a method or methods to fund their account. When the customer places an order through the lottery courier service’s app, a courier employee is assigned to complete the transaction by purchasing the desired lottery ticket from a licensed lottery retailer. The courier employee scans and uploads the serial number and other identifying information from the purchased ticket to the app platform, where it is linked to the purchaser’s account for viewing and tracking purposes. The courier then acts as an escrow service located in the state of purchase, which requires compliance with all applicable state laws related to such services, as well as an office and additional staff. Winners are usually notified through the app and via email to begin the prize claim process. This shift from traditional in-person lottery purchasing to an app-based model is designed to appeal to a younger, more tech savvy audience that favors convenience and speed over the experience of visiting a familiar location or store clerk. To date, providers of such services have been largely successful in reaching this group. The mobile app also provides state lotteries a fringe benefit by subsidizing some marketing cost s
– the app must “advertise” the available games as well as retail locations to direct customers through the purchase flow where before this type of marketing was solely a state lottery responsibility. The formal adoption of the practice by New Jersey in 2017 5 serves as the beginning of the current era of lottery courier services. Currently, 16 states 6 and the District of Columbia authorize some form of lottery courier service. New Jersey and New York license the services directly under their own license type 7 . Other states that have officially addressed lottery courier services do so either through administrative rulemaking, or by attempting to fit the services into a previously existing category or license type (e.g. “merchant of record”). Texas chose to address the proliferation of these services with an entirely hands-off approach, stating that “the lottery courier business model is not contemplated by current Texas law and is now being examined closely by the Texas Legislature. Legal and policy issues related to courier services are for the Texas Legislature to determine. 8 ” 9 Washington took the opposite approach and claimed that when gaming statutes fail to specifically prohibit a practice such as lottery courier services, this failure to address the practice does not imply authorization. This position led to the Washington State Gambling Commission issuing a cease-and-desist letter to Mido Lotto, whose parent company responded by filing a declaratory action against the Commission 10 . Clearly, the U.S. currently lacks a consensus view on where these services fall within the regulated gaming space. It is therefore imperative that regulators plan ahead to design an environment that best aligns with their goals in this area. Furthermore, despite some predictions by opponents of the courier services, there does not appear to be any evident cannibalization of brick-and-mortar retailer based sales. This lack of overlap appears to support the premise that lottery courier services serve an audience beyond traditional lottery customers. 11 Additionally, the businesses appear to be
4 https://www.mcall.com/1989/03/02/lottery-couriers-say-they-have-a-sure-bet/ 5 N.J. Stat. § 5:9-14.3 6 Arizona, Arkansas, Colorado, Idaho, Indiana, Massachusetts, Minnesota, Montana. New Hampshire, New Jersey, New Mexico, New York, Ohio, Oregon, Texas, West Virginia. 7 N.J. Stat. § 5:9-14.3; N.Y. Comp. Codes R. & Regs. tit. 9 § 5014.1. 8 Lottery watchdogs: Is there a way to beat the system? , quoting the Texas Lottery Commission. Originally posted May 1, 2023, available at https://www.cbsnews.com/texas/news/lottery-watchdogs-is-there-a-way-to-beat-the-system. Last accessed September 11, 2023. 9 Note Texas’ 2023 General Appropriations Act included a rider directing the commission to prohibit the activity of couriers after the Texas House did not consider legislation designed to ban courier operations. However, the Texas Governor’s proclamation on the signing of the act included a reference to the likely unconstitutional nature of the rider language. 10 Lottery Now, Inc. v. Wash. St. Gambling Comm’n ., Case No. 21-2-01794-34 in the Thurston County Superior Court. Summary judgment motion hearings are set for October 2023. 11 Spectrum Gaming Group. Future of Lottery Courier Services: Identifying Opportunities, Challenges . P. 14-16. June 27, 2023.
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IMGL MAGAZINE | OCTOBER 2023
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