LOTTERY
work and what their responsibilities will be. The courier services will have access to a vast amount of personal and financial information from customers. The responsibility for securing this data and ensuring that applicable financial standards are upheld should also be addressed through regulation. Most lottery agencies will not have employees well versed in banking regulations, anti-money laundering, know-your- customer best practices, and associated federal/ state requirements. This situation creates a need for independent, certified auditing of internal controls and compliance standards that should be integrated into lottery courier service regulations, particularly given the industry’s potential use for illegal activities and the dollar amounts of prizes at stake. Similar protections are necessary for both customers’ personal identities and payment information. Record keeping requirements must also be addressed. It should be clear from the outset what information must be retained by a courier service, the proper retention period, and the method and timeframes in place for sharing the information with the state lottery agency upon request. Thereafter, like all strong regulatory bodies, enforcement mechanisms must be in place to permit the lottery agency to coerce compliance or responsiveness when necessary. Regulations should be in place that permit the agency to levy penalties, either administrative or financial, within reasonable timeframes, and the penalties for violations should be clear to any lottery courier service seeking to do business in the jurisdiction. Courier services should be obliged to disclose any disciplinary or other negative action taken against them in other jurisdictions, and to the extent that sharing of such information exists between state agencies, such information should be included in the appropriate database. Regulators must also decide whether they intend to use the brick-and-mortar vendors, who are already within the agency’s regulatory sphere as the pressure point (through suspension or revocation of lottery privileges unless dealings
with a rogue courier service are terminated, for example), or whether they will attempt to license or otherwise have jurisdiction over the courier services themselves. Either way, the penalties must be both sufficient and timely enough to incentivise compliance and empower the regulator with true enforcement power. Finally, there must be sufficient information, with marketing materials distributed by the agency and the lottery courier services, to allow customers to understand the distinction between the lottery agency and courier service. Lottery customers need to understand who is responsible in the event of errors. For example, if tickets were available at the retailer and the courier botched the purchase or retention of the ticket, it is clear that the lottery agency itself is not at fault and the customer can still play with confidence through either another service or via traditional retail purchasing. All marketing materials must also comply with the provisions of 18 U.S.C. §1301- 1307. Conclusion The gaming industry will continue to evolve, creating new revenue ideas, new gaming practices, and new questions for regulators to consider as they try to maintain the standards set by their respective legislature. Lottery courier services using app platforms are one of the current trends, and, as their spread is limited to around one-third of the U.S. market, their expansion and evolution can be expected to continue over the next several years. By considering and addressing the concerns identified prior to the launch of lottery courier services in a given jurisdiction, regulators can attempt to stay ahead of the curve and get a better understanding of the challenges they will face as alternative retail channels continue to prosper. However, stakeholders on both sides must be aware of the interplay between the express provisions of individual state laws and the overarching federal restrictions in 18 U.S.C. 1301 and UIGEA to ensure that any new retail options comply with all applicable restrictions.
DANIEL R. RUSSELL Board Certified Attorney and Shareholder, Dean Mead, Talahassee For information contact drussell@deanmead.com 001 850-999-4100
DANIEL J. MCGINN Associate
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IMGL MAGAZINE | OCTOBER 2023
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