The Early Line: Texas Lottery Is Banning Courier Services
DraftKings-owned Jackpocket says it is suspending operations in Texas in statement to The Closing Line; Fresno State basketball faces betting investigation; Missouri sports betting launch delayed
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Things are escalating quickly for the lottery courier industry after a winning ticket purchased via Jackpocket resulted in a ban on online sales in Texas in just one week.
Earlier today, the Texas Lottery issued a press release saying that lottery courier services are no longer welcome:
Texas Lottery Commission Executive Director Ryan Mindell on Monday, Feb. 24, issued a Policy Statement, announcing that lottery ticket courier services are not allowed under Texas law and that the agency will move forward with proposed rule amendments prohibiting lottery courier services within the state. The Policy is effective immediately and aligns with legislative efforts to address serious concerns raised by players and state leadership regarding the integrity, security, honesty and fairness of lottery operations. Under the proposed amendments, a retailer that works in concert with a courier service would have their lottery ticket sales agent license revoked. The rule amendments will be formally proposed by agency staff to the Commission board at an open meeting scheduled for Tuesday, March 4, with the intent for the amendments to be adopted at an April open meeting following a 30-day public comment period. …
“The Texas Lottery was established to provide a secure and transparent system for players to purchase tickets in person from licensed brick-and-mortar retailers for the purpose of generating revenue for public education and veterans’ services in a responsible manner,” said Mindell. “Lottery courier services operating in Texas have been a significant concern for many of our stakeholders.”
Mindell noted that the agency had previously believed that it did not have authority over regulating or banning couriers. But he said in the release that the lottery was changing its stance after a review in recent days.
DraftKings said in a statement to The Closing Line that it would suspend operations in Texas. From Pete Sullivan, senior vice president, lottery.
“Jackpocket has operated in Texas since 2019 with full transparency and in compliance with guidance from the Texas Lottery Commission. Despite our proven track record of compliance and commitment to responsible gaming, the Texas Lottery Commission has issued a new policy prohibiting our services, effective immediately. As a result, we are suspending lottery courier operations in Texas.
This decision not only limits Texans' access to the lottery but also directly impacts public education funding. Jackpocket has driven over $550 million in lottery ticket sales in Texas, contributing vital revenue to schools across the state.
We remain dedicated to working with policymakers to ensure access to secure lottery options and working with the Texas Lottery Commission to craft regulations that would allow lottery courier services to continue in Texas.”
Let’s get you up to speed on the (very rapid) timeline of events that led to this:
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How we got here on online lottery sales
A ticket sold in Austin ended up being the winner of an $83.5 million lottery drawing in Texas last Monday. The ticket was purchased by a customer using the Jackpocket app.
Texas Lieutenant Governor Dan Patrick learned of the sale of the ticket online and posted a video of his “investigation” of where the ticket was sold.
Patrick threatened that the legislature might sunset the lottery entirely if online sales were to continue.
A new bill to ban online lottery sales surfaced at the end of last week; the Senate had passed similar legislation in the 2023 session.
Texas Lottery Commissioner Clark Smith resigned effective Friday in the wake of the controversy.
That gets us to today. It appears that all lottery couriers are going to have to exit the state, short of some sort of legal challenge to the Texas Lottery’s pronouncement today. Such a challenge seems unlikely given the current environment.
Texas is a big hit to the addressable market for lottery couriers
Lottery couriers serve a relatively small cohort of states, depending on the operator. Some couriers serve a dozen or even fewer states.
Jackpocket serves 18 jurisdictions currently; with the loss of Texas, the addressable market will have decreased by 25%. (Total population of about 90 million, less the 31 million in people in Texas).
The hit is even bigger for the operators that serve fewer states; a few currently list only 7 or 8 states.
DraftKings bought Jackpocket for $750 million in cash and stock less than a year ago.
Will other states take issue with lottery couriers?
The bigger concern might be other states looking more closely at the legality of lottery courier services.
If other states take a lead from Texas in the wake of this negative PR blitz, it could have a devastating impact on the industry. We have seen some copycat behavior on states acting against offshore sportsbooks and casinos, sweepstakes sportsbooks and casinos and fantasy parlay/pick’em operators in recent months and years.
It’s not clear, however, if other state lotteries have as contentious of a view of online lottery sales. For instance, when a jackpot hit via a courier service in Arizona, it was met with a shrug by state officials. Couriers clearly help boost lottery sales in the states where they operate.
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Gambling news today
Fresno State men’s basketball program under investigation for betting activity, sources say (Fresno Bee): “Fresno State guards Jalen Weaver and Zaon Collins will not play in the Bulldogs’ game on Saturday at Air Force for ‘eligibility’ reasons, and university sources say the players could be tied to an internal investigation into alleged betting activity. Guard Mykell Robinson, who has not played since a Jan. 11 loss to Nevada and has since been removed from the roster, also is involved in the investigation, said multiple university sources with knowledge of the probe and granted anonymity by The Bee because they’re not authorized to discuss the matter.”
More details in this ESPN report; the NCAA is reportedly involved.
It’s not clear when or where any of the alleged betting activity occurred, but it’s worth noting that there is no legal, regulated sports betting in California. There are both illegal or otherwise unregulated options in the state. Fresno State also plays opponents in states that do have legal sports betting. For now, however, there’s precious little information other than an investigation is ongoing. One report from a local outlet made allegations on the types of bets placed, but I have not seen those corroborated or reported to an extent I feel comfortable with.
Familiar Foe Delays Missouri Sports Betting Timeline (Legal Sports Report): “Secretary of State Denny Hoskins rejected the emergency rules for Missouri sports betting last week. The Missouri Gaming Commission sent the rules to Gov. Mike Kehoe last month and hoped to have sportsbooks up and running by June. While a state senator, Hoskins derailed multiple efforts to legalize sportsbooks in the state before the professional sports teams went around the legislature with November’s ballot initiative. The ballot initiative has a deadline of Dec. 1 to launch.”
The delay will likely impact Q3 and perhaps Q4 for online sports betting companies, depending on how long the delay to launch ends up being. The start of football season is generally an ideal time for a state to launch sports betting because of the opportunity for customer acquisition.
Bill Filed To Repeal Online Maryland Sports Betting (Legal Sports Report): “Sen. Joanne Benson introduced Senate Bill 1033 this week, which would repeal online sports betting in Maryland. It would not impact in-person sports betting.
It is the second such bill introduced this month, as lawmakers in Vermont filed a similar bill.”
It seems far-fetched that a state would ban sports betting when lawmakers recently legalized it, given the lobbying (or lack thereof) on the two sides.
FanDuel’s sportsbook at DC’s Audi Field closes after 4 years in operation (WTOP): “One of the D.C. region’s first sportsbooks has closed its doors. Sports betting giant FanDuel and Audi Field, D.C.’s soccer stadium, agreed to close the sportsbook located inside the venue on Thursday, Feb. 20, a FanDuel spokesperson told WTOP.”
Retail sports betting activity has generally paled in comparison to online sportsbooks around the country. The relative lack of reasons to visit the stadium outside of soccer gamedays likely contributed to the closure.
'An insatiable acquisitions appetite': Sports betting industry facing major challenges despite growth: (ESPN): “Betting, an extremely popular yet once illicit American pastime, has exploded out of the shadows and into the mainstream. The bookmaking business, formerly restricted to Nevada, offshore websites and backroom phone centers, has evolved into heavily marketed, high-tech corporations capable of taking tens of thousands of bets per minute during big games. FanDuel, the largest U.S. sportsbook by market share, said wagering on Super Bowl LIX peaked at nearly 70,000 bets per minute.”
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