Texas Lottery turns blind eye to what are in effect online ticket sales, critics say

AUSTIN — Gov. Greg Abbott’s appointees who run the Texas Lottery have punted to the 2025 Legislature the question of whether ticket sales involving phone apps and middlemen violate state law.

Last April’s $95 million Lotto Texas jackpot was won on one of nearly $11 million of tickets sold to a New Jersey-based entity, at a nondescript storefront in a strip center in Colleyville. The win stoked a legislative controversy over phone app-assisted purchases of tickets for state-run lottery games.

The third-largest lottery payout in Texas history wasn’t on a ticket sold at a convenience store. Rather, it went to a winner who chose to remain anonymous on a purchase made through processes whose labels and descriptions are hotly disputed.

Basically, orders made via cellphone or computer are fulfilled by employees of large purchasing groups, some of which use courier services to dispatch people to brick-and-mortar locations licensed by the Texas Lottery.

“The ticket was not purchased through a courier service,” lottery spokesman Steve Helm said in a recent email, referring to the April 22 Lotto Texas drawing winner.

The immediate cash value of the $95 million prize was $57.8 million, the lottery announced in July.

In the 2023 legislative session, Edgewood Republican Sen. Bob Hall unsuccessfully sought to ban ticket sales using phone apps and third-party couriers. He argued that lottery officials are lax.

“They are flouting the law by allowing locations like that in Colleyville called Hooked on Montana to be considered a legitimate brick-n-mortar business that has almost no business signs, very little walk-in business yet managed to sell, in cash, $11,000,000 in lottery tickets in a few days — almost a physical impossibility,” Hall said in an email.

Attempts to reach Hooked on MT officials through phone messages were unsuccessful.

In late April, Kevin Kramer — chief executive of Lottery Now, which uses the Colleyville store Hooked on MT to serve both walk-in customers and people using Lottery Now’s app Mido Lotto — told KXAS-TV (NBC5) that the winning ticket bought there was not purchased on the app.

Purchasing groups versus couriers

Gary Grief, executive director of the lottery, has said although the April sales surge of Lotto tickets was unprecedented, “there is no prohibition on these types of purchases.”

He was referring to sales to purchasing groups. But Grief also has said courier services lie beyond the regulatory powers of the Texas Lottery Commission.

During the 2023 legislative session, senators of both parties wrung their hands about what they called the commission’s lack of fidelity to the 1991 law that created the state agency and the games it runs. For decades, the law prohibited sales of lottery tickets by telephone.

Last spring, the House didn’t even hold a hearing on a Senate-passed bill by Hall. It would have added to state law’s ban on phone sales additional prohibitions on selling lottery tickets through the internet, mobile devices, phone apps or websites assisted by third-party couriers.

The new technologies weren’t envisioned in August 1991 when Gov. Ann Richards signed the original lottery legislation. Just over two months later, voters approved creating a lottery by a 2-to-1 margin.

In recent months, lottery officials in an agency self-evaluation noted that in the last few years, technology companies have sought to “modernize” lotteries, traditionally reliant on tickets that are “a paper-based product.” The tech firms notched “significant advancements” in other states and countries, “although not in the state of Texas,” the agency wrote.

Top lawmakers have said the lottery is trying to make betting easier and faster — without their permission.

In late May, Houston GOP Sen. Joan Huffman, the Senate’s top budget writer, explained on the floor how a provision approved by House and Senate budget negotiators expressed the Legislature’s intent that there be no phone sales, “including facilitating the sale of tickets via an application on a phone.”

Lawmakers wanted “to instruct the [lottery] commission to knock off these practices,” Huffman said.

The following month, Abbott weighed in — if somewhat elliptically.

In his budget-signing message in June, the three-term Republican governor complained about how the Legislature — in the provision banning phone-app sales — had tried improperly to change general law through the state budget, which is forbidden.

However, Abbott didn’t line-item veto the Huffman-Hall provision, meaning it took effect at the same time the governor was calling it unconstitutional.

Well-connected lobbyists

In ensuing months, nothing has changed, lottery critics complain.

In August, citing mixed signals from lawmakers and Abbott, the commission, whose five members are appointed by the governor, effectively threw up its hands and told lottery officials to take no action along lines suggested by the budget provision.

Commission Chairman Robert G. Rivera, a former Arlington City Council member, instructed Grief and other agency staff members to await the deliberations of the Legislature’s “sunset” review process.

In sunset, a staff overseen by lawmakers periodically looks at state agencies to see if they should continue to exist. The Lottery Commission is up for sunset review this year, with a bill continuing the commission’s existence likely to be taken up by lawmakers in 2025.

Commission critics such as Rob Kohler, Southern Baptists’ lobbyist at the Capitol, and lottery gadfly Dawn Nettles of Garland said they suspect that big money corporations’ influence explains the ponderous review of what’s happening to the lottery.

They called that especially alarming, because the commission a few years ago loosened physical-presence restrictions on ticket sales during the COVID-19 pandemic. But the rule tinkering, which lottery officials say had nothing to do with the pandemic, remains in effect, much to the critics’ chagrin.

Lottery courier services and ticket sale apps have hired well-connected lobbyists, a review by The Dallas Morning News found.

New York City-based Jackpocket.com, which has sponsorship from the Dallas Stars hockey team, retained Houston political consultant Allen Blakemore and Logan Spence, both close to Lt. Gov. Dan Patrick; and former Texas Secretary of State David Whitley, a longtime Abbott intimate.

Jackpot, in which the Dallas Cowboys has invested, is represented by Cowboys owner Jerry Jones’ super-lobbying firm Hillco Partners, with partners Jay Howard and Kelly Barnes.

TheLotter, with headquarters in Malta and retail locations in the Austin suburb of Round Rock, hired Gavin Massingill, formerly chief of staff to former Speaker Dennis Bonnen and current Rep. Charlie Geren, R-Fort Worth.

Kohler, a consultant for the General Baptist Convention of Texas’ Christian Life Commission, said the Texas Lottery has slipped the traces on lawmakers.

‘You can play’

“There are radio ads and ads on social media now saying that you can play the lottery on your phone,” noted Kohler, whose Baptist group opposes expanded gambling. “And the governor and the [lottery] commission are not doing anything about it.”

Helm, the lottery spokesman, dismissed critics’ suggestions that the agency is surreptitiously doing the courier services’ bidding.

A 2020 change by the commission eliminating the definition “present at the terminal” from the rules was adopted only “to simplify and update the rules,” as called for by a law saying all state regulations must be reviewed every four years, Helm said.

“Importantly, there was no change to the requirement that all lottery tickets must be purchased in person at a brick-and-mortar licensed lottery location,” he said.

Abbott spokespersons did not reply to emailed questions about whether the lottery is flouting state law.

Kohler, who worked for the lottery commission early in its existence, said the public is rightly bewildered by lottery phone apps’ advertising, which make phone purchases seem legal. Abbott could stop “this nonsense” but won’t, he said.

“Everyone should recognize that Gov. Abbott’s incoherent statement regarding the lottery rider is solely responsible for the so-called confusion that the Lottery Commission is hiding behind,” Kohler said.

Abbott communications director Renae Eze and Abbott press secretary Andrew Mahaleris did not respond to emails and texts seeking comment.

Nettles, editor of lottoreport.com, noted that lottery sales are setting records. In the fiscal year that ended in August, sales reached $8.7 billion, of which nearly $2.2 billion went to schools and veterans’ services.

“The Texas Lottery does not want to stop telephone sales because they’re getting sales from all over the country,” she said in an interview. “They don’t want to stop it because their sales would fall.”