The Texas Lottery Commission might be breaching a 32-year-old established state law by allowing online ticket sales for games such as Lotto Texas, Powerball and Mega Millions, several senior lawmakers say.
“I agree that they overstepped their authority,” state Sen. Joan Huffman, a Houston Republican who chairs the budget-writing Senate Finance Committee, told the USA TODAY Network.
In spite of the allegations, Gary Grief, the executive director of the Texas lottery, says that the agency is not selling tickets for games such as Lotto Texas, Powerball and Mega Millions, over the internet.
Instead, private gaming operations, better known as “courier companies,” purchase tickets for online players after partnering with authorized retailers. He said the commission does not have the authority to stop the practice.
On Jan. 9th, a courier company called Jackpot.com announced that it had received $42-million in start-up funding from the Dallas Cowboys, Houston Rockets and San Antonio Spurs, among other sports franchises, to launch online lottery ticket sales in Texas via an app.
The matter was questioned during Grief’s appearance before the Finance Committee to discuss funding for his organization for the two-year cycle that starts Sept. 1.
“The Texas lottery does not sell any tickets (or) any products over apps, over the telephone, over the internet, period,” Grief said.
To state Sen. Charles Perry (R-Lubbock), this sounded like walking on thin ice.
“I’d just say it’s kind of walking the line a little bit,” Perry told Grief. “(The lottery) statute prohibits playing a lottery game by telephone, and so it’s kind of dancing around. … I think a literal reading of what the original intent of the statute was, you’re violating it.”
THE LOTTERY LAW AUTHORITY
The law provides the lottery committee with broad authority to determine how its games are played and the agency is responsible for making sure the retailers and vendors are following the law to the letter, various committee members said. They also said that, although a phone app was unheard of when the law was enacted in 1991, the rule should be the same as using a phone in the early 90s.
Ron Kohler, an anti-gambling lobbyist for the Christian Life Commission who had worked for the lottery communion when it first started, said the window that allowed courier companies to participate in the Texas lottery games was opened in June 2020.
The Texas lottery commission amended its rules and removed the wording, “physically present at the terminal,” that governed the draw games.
Taking out the clause inherently changes the way draw games are played, Kohler said.
“From ’92 when we first started until August of ’20, it was a face-to-face transaction,” he said. “A player went to the location, purchased their ticket and got the prize.
In an interview, Grief said the wording, “present at the terminal,” was removed to respond to customer service requirements and not as an invite to courier companies. Note, for several years these companies have been operating in various other states that operate the lottery.
Even with courier companies ticket sales remain face-to-face transactions, Grief said. When the ticket is purchased online via the courier company a physical ticket is still generated and its digital image is transmitted via the app. The commission’s authority ends once the ticket is legally purchased from an authorized seller, he said.
Questioning the logic, Sen. Robert Nichols, an East Texas Republican, asked Grief, “So you’re saying you have absolutely no control over that, absolutely no interest in that and receive absolutely no income from that?”
“We don’t see any violation of our statute in what these entities are doing,” Grief replied.
After the tickets are printed and sold, it goes outside their purview unless it comes back to claim for a winning price, he said.
$8 billion in lottery sales; $2 billion to the state
The lottery takes the legally required percentages from their authorized retailers on each ticket sold and earns no money from the courier companies, Grief said.
The Texas Lottery generated more than $8 billion in sales during the 2022 fiscal year and contributed $2 billion to state revenue. The agency has now contributed over $35 billion to the state’s Foundation School Fund, supporting public education and $192 billion to the Fund for Veterans Assistance.
Setting the confusing language aside, Sen. Royce West (D-Dallas), said that the lottery commission is obliged to ensure that the state law is not breached and that the prohibition on phone sales was protected.
“If you want to do that (allow phone sales), you’ve got to come to the Legislature,” West said. “It’s just that simple.”
State Sen. Bob Hall (R-Edgewood), filed Senate Bill 1820 to end this confusion. Introducing a “rider,” clarifying statement in the still-being-crafted 2024-25 state budget.
“The executive director shall not allow the order, purchase, or sale of a lottery game by telephone or digitally by mobile telephone, including a game’s facilitation via an application on a mobile telephone or Internet website by an independent third-party courier,” the bill says.
“Lawmakers in 1991 went out of their way to make sure lottery games were not too convenient, especially for players who might be prone to compulsive gambling,” Hall said, according to the Austin American-Statesman.
“They wanted to limit it to an in-person event that would take place in a retail location, person to person, face to face,” Hall said.