Seismic Shift on Lottery Courier Services in Texas

By: Jeffrey Hamlin

On Monday, February 24, the Texas Lottery Commission’s Executive Director, Ryan Mindell, announced that the Commission was exercising its discretionary authority under the State Lottery Act to keep the Texas Lottery honest, secure, and fair “by prohibiting lottery ticket courier services,” effective immediately. The Commission plans to give effect to the prohibition through administrative adjudication and notice-and-comment rulemaking. Mindell conveyed the news in a Policy Statement, which states that the Commission will pursue enforcement proceedings to revoke the license of any authorized lottery retailer who works in concert with a lottery courier. Additionally, the Commission will propose amendments to the lottery rules at the next open meeting scheduled for March 4, 2025. The proposed amendments will make explicit that authorized retailers will lose their lottery license if they are caught assisting lottery couriers in Texas. The proposal to amend will be followed by a thirty-day comment period, after which the Commission will promulgate amended regulations.

Mindell’s Policy Statement and aggressive stance on lottery couriers marks a tectonic shift in the Commission’s approach. For years, the Commission expressed doubt that it had the power to prohibit lottery couriers so it did nothing to stop them. Lottery couriers who saw an opportunity expanded to Texas, building their local business over fault lines that, with time and added pressure, altered the legal landscape for lottery couriers in Texas.

Texas lottery regulators had already been under increasing pressure to act since the week before, when Lieutenant Governor Dan Patrick announced: if mobile and web-based lottery courier services are not banned, the Texas Lottery Commission (the “Lottery”) will cease to exist after September 1, 2025.

Patrick’s comments followed news that, on February 17, the fifth-largest jackpot in the Lottery’s history—an $83.5 million prize—was won by an individual who ordered the ticket through Jackpocket, a lottery courier service. The process was simple: Jackpocket, operating in Texas and several other states, filled the buyer’s order by purchasing a physical ticket from an authorized retailer, Winner’s Corner, in Austin. A scanned image of the ticket was forwarded to the buyer, and the physical lottery ticket was stored securely in Texas pending the drawing last Monday evening.

But something about the arrangement did not sit well with Patrick. Just two years earlier, the Texas Lottery awarded its third-largest jackpot—$95 million—to an individual or group that had purchased almost every number combination possible. With some digging, Patrick learned that Jackpocket and Winner’s Corner share a common owner—DraftKings. So he got on social media and, during an unannounced visit to Winner’s Corner, shot live video of what appeared to be a near-empty store with numerous machines inside, printing lottery tickets almost nonstop. Since then, he has been making his case that lottery courier services violate the spirit of Texas’ lottery laws.

A Realistic Threat: The Senate’s History Suggests It’s Not Empty

Patrick’s demand was not mere rhetoric. Last year, the Texas Senate had voted 29-2 to prohibit the sale of lottery tickets through mobile and web-based applications and passed another bill just yesterday. While it may fail in the House, as last year’s bill did, any such failure will not diminish the Senate’s leverage on the lottery courier issue.

This Senate’s power comes from the Texas Sunset Act, a statute that mandates the assessment of state agencies every twelve years. The Act created the Texas Sunset Commission (“Commission”) and tasks it with evaluating the necessity, efficiency, and effectiveness of these agencies and, ultimately, recommending whether they should continue, be restructured, or be abolished. Since the Texas Lottery submitted its self-evaluation report in September 2023, the Lottery has been under the Commission’s scrutiny. If the Lottery had not taken steps to ban lottery couriers, the legislature may well have refused to extend the Lottery’s existence past September 2025.

The Debate Over Lottery Courier Services

Proponents of lottery courier services argued that these platforms offer customers greater flexibility and convenience, resulting in increased ticket sales and maximizing contributions to the Lottery’s beneficiaries—public education and Texas veterans. From this perspective, courier services represent a modernization of the Lottery, responding to changing consumer preferences and technological advancements.

On the other hand, critics answered back that gray-market lottery couriers undermine the intent of Texas law and siphon business away from traditional, licensed retailers, who sell tickets at authorized locations.[1] Opponents contended further that allowing lottery couriers to operate without clear statutory authority creates unnecessary risks—chief among them, the potential for money laundering and circumvention of the state’s age and location restrictions. Many charged that, in doing nothing to stop lottery couriers, the Lottery effectively abdicated its responsibility, deferring difficult decisions to lawmakers and private operators, all while benefiting from the state’s ever-expanding budget surplus.

The Clock is Ticking

The Texas Legislature have until early June to decide whether to extend the Lottery Commission’s existence past September 2025, but the momentum favors another twelve years. The same day Mindell announced the Lottery’s ban on lottery couriers, DraftKings announced that it was suspending operations in Texas. Texas Governor Greg Abbott has ordered the Texas Rangers to investigate the two jackpots mentioned above, and Texas Attorney General Ken Paxton has initiated his own investigation.

[1] In fact, some studies suggest the sale of lottery tickets online does not cannibalize retail business. See Pub. Gaming Int’l, Ecommerce, iLottery, and Their Impact on Lottery Sales, 17, 17–19 (May/June 2015) (“In lottery and the general retail industry, interactive does not necessarily cannibalize retail sales[.]”); Mark Hichar, A Growing Body of Evidence Demonstrates Why State Legislators Should Consider iLottery: a White-Paper Explanation 19, 19–20 (Pub. Gaming Int’l Mar./Apr. 2023) (“A growing body of evidence demonstrates that iLottery can co-exist with traditional retail sales channels without cannibalizing traditional retail sales[.]”).  At least one concluded that selling lottery tickets online can augment both online and retail sales. See Pub. Gaming Int’l, supra, at 19 (“Adding Internet sales to land-based retail can augment both channels while improving player convenience and increasing product relevance.”).