The often tense hearing followed a flurry of action surrounding the Texas Lottery Commission. That morning, the head of the commission announced his intent to stop couriers from operating—a reversal from public statements he made to the Senate Finance Committee less than two weeks earlier.
“Lottery courier services operating in Texas have been a significant concern for many of our stakeholders,” Ryan Mindell, executive director of the Texas Lottery Commission, said in a Feb. 24 news release. “The commission will revoke the license of a retailer that works with or assists a courier service and we are moving to prohibit courier services in Texas to ensure all ticket sales comply with state law and agency regulation as well as to maintain public trust.”
Hours later, Gov. Greg Abbott directed the Texas Rangers, an investigative law enforcement agency, to look into two incidents: the bulk purchase of millions of dollars of lottery tickets in April 2023 and a recent $83.5 million jackpot win involving a Northwest Austin courier company.
“Texans must be able to trust in our state's lottery system and know that the lottery is conducted with integrity and lawfully,” Abbott said in a statement.
The overview
Committee members voted unanimously to send SB 28 to the full Senate Feb. 24. The proposal by Sen. Bob Hall, R-Edgewood, would make it a crime to purchase or sell Texas lottery tickets online or through a mobile app.
“The biggest message to come out of this is that Texas is not open for gambling,” Hall said following the vote.
The Texas Lottery was established by a 1991 state law, which prohibits using a telephone to buy lottery tickets—but that law preceded the arrival of smartphones. Hall said he intended to force the Texas Lottery Commission to uphold “prohibitions on selling tickets to minors and selling tickets over the telephone.”
“The problems we now have—underage gambling, cash purchases, telephone gambling, 24/7 access to gambling and the elimination of in-person cash purchases—all have occurred because of the rule changes made solely by the lottery commission,” Hall said. “The Legislature has not changed the law.”
The background
Hall said the Texas Lottery Commission changed its rules in 2015 to “include electronic means” and again in 2019 to allow Texans to purchase lottery tickets from third-party sellers.
“[This was] the beginning of changing what it means to sell Texas lottery tickets, allowing couriers to operate in our state under the disingenuous assumption that they are simply taking orders over the phone for players. ... The Lottery Commission says it implemented this change to allow for lottery sales to take place in the middle of the lanes at a grocery store. However, it is undeniable that lottery couriers fit perfectly within this framework,” Hall said.
During a 72-hour period in April 2023, a single purchaser bought 26 million tickets each worth $1, senators said. A courier service in Colleyville sold the winning ticket for a $95 million jackpot, according to the lottery commission.
Senators said they were concerned bulk purchases like this could indicate money laundering.
“Money laundering is the problem. This is a huge operation of trying to wash bad money and bring it through [the] lottery commission so that it is cleared, effectively,” Sen. Paul Bettencourt, R-Houston, said during a Feb. 12 Senate Finance Committee hearing. “I bring this up because we can't gloss over this. We can't look the other way. This is 99% probability of money laundering.”
Greg Potts, the chief operating officer for Lottery.com, a courier service, said a broker approached his company about a bulk ticket purchase in early 2023. Lottery.com initially turned the broker down, Potts said, until the state lottery commission signed off on the purchase.
“We only did it after we were told that we were able to move forward legally under the lottery license that we had,” Potts said. “As a person and a lottery player, I cannot believe they said yes.”
Mindell, who took over as executive director of the commission last April, said the 2023 incident was the first known bulk ticket purchase and changes have been made to prevent it from happening again.
However, he previously asserted Feb. 12 that the lottery commission could not stop couriers from doing business in Texas.
“Couriers... are outside of the regulatory authority of the Texas Lottery,” Mindell said during the Feb. 12 hearing. “We regulate the brick and mortar retail locations—that’s who we license and that’s who we have regulatory control over.”
Mindell said Feb. 24 he would formally propose a new agency rule banning lottery couriers during the commission’s March 4 meeting. The commission also announced it was opening investigations into all Texas lottery courier services in a Feb. 25 news release.
Zooming in
Leaders of several lottery courier companies told senators Feb. 24 that they were opposed to SB 28.
“I can tell you that regulated lottery couriers are not the problem,” said Rob Porter, the chief legal officer of Lotto.com. “If you want to prevent outside companies from buying all combinations to guarantee a jackpot, if you're concerned about money laundering..., if you want to prevent minors from purchasing lottery tickets, regulated lottery couriers are a part of that solution.”
Porter said Lotto.com and other couriers have strict age verification systems in place to prevent minors from participating in the state lottery. Couriers also use spending limits to “control problem gambling” and avoid bulk purchases, he said.
Peter Sullivan, the senior vice president of DraftKings’ lottery division, said nothing in Texas law prevents couriers from operating or selling lottery tickets online. DraftKings owns Jackpocket, another courier service.
Jackpocket paused its Texas operations Feb. 24 after the state lottery commission announced it would crack down on couriers, Sullivan said.
“We believe it's legal, but obviously the commission had a change in perception,” Sullivan said.
What’s next
SB 28 was sent to the full Senate and placed on the chamber’s intent calendar for Feb. 26. It is unclear when the proposal will be discussed on the Senate floor, as the Texas Constitution prohibits lawmakers from passing most legislation before the 60th day of the legislative session—March 14.
“I’d like to close by urging our governor to immediately issue an executive order to terminate the lottery commission now and to initiate an in-depth and broad [Texas] Ranger investigation of the lottery commission that reaches all the way back to at least 2015,” Hall said after the committee voted to approve SB 28 on Feb. 24.
Texans voted in November 1991 to amend the state constitution to create the Texas Lottery.
