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Lottery couriers operating “outside the law”
Lottery couriers operating “outside the law”
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BOSTON – The Massachusetts Lottery cannot sell its products online, but players can use apps or the web to connect with courier services that will take an online order for lottery tickets, buy them on the player’s behalf and then deliver any winnings to the customer — services that Lottery officials believe are currently operating illegally and without oversight.

Executive Director Michael Sweeney said courier services, some operating in a more legitimate way than others, have become more common in Massachusetts and other states with lotteries over the last three to five years. The Lottery Commission voted unanimously Tuesday to give Sweeney the authority to draft regulations for the oversight of courier services with a plan to bring them back to the commission in September or October.

“It is our belief that these businesses are operating outside the law. In one situation, we have forwarded a request to the Attorney General’s Office seeking to have a cease and desist letter sent to the business in question,” Sweeney wrote in a memo to the Lottery Commission. “However the lack of formal rules and policies that specifically address this type of business activity is an impediment in the Commonwealth’s attempts to control and regulate these activities.”

The executive director said he envisions a set of regulations that “ensures both good customer interaction but also protects the branding and integrity of the Lottery here in Massachusetts and the multi-state games that we are obviously active partners in.” He made clear during the commission’s meeting Tuesday that he is not seeking to put an end to all courier services, but rather to impose a set of rules to ensure that the services operate in a standardized way and can be held accountable.

New York and New Jersey have already adopted formal regulations to govern lottery courier services, Sweeney said, and courier services can also operate legally in New Hampshire, Texas and Arkansas.

In other states, he said, the regulations address insurance requirements, unclaimed property laws, fees, restrictions on who can legally use courier services, cybersecurity requirements, products that can be offered, restrictions on advertisements, audit requirements, and what information is required to be provided to the state lottery.

Sweeney said existing state laws, regulations and Lottery policies “just don’t reflect the modern realities, particularly on the technology front” and that updated guidelines are necessary to keep pace with the changes in the economy.

“This is certainly one of those areas. And we just feel that it’s really ripe for potential abuse, potentially causing some negative reaction towards the Mass. Lottery — not because of anything we did do, but because of the action of these third party private actors that may not be operating quite up to the standards that all of us would like,” Sweeney said. “There are other business entities out there again that are trying to do this in what I would term a good partnership way — good communication, good business practices — but they’re also looking for guidance from states including the commonwealth as to what exactly would the requirements be.”

The commission’s agenda initially called for a vote to give Sweeney the authority to draft and promulgate courier service regulations, but a few commissioners balked at the speed of the process and said they would like more information before giving the green light to the yet-to-be-drafted regulations.

“I think this is really potentially a very, very large issue. You’re looking at embracing an entirely new type and class of actor within the state system,” Comptroller William McNamara, who serves as a member of the Lottery Commission, said.

Sweeney also told commissioners Tuesday morning that fiscal year 2022 got off to a decent start for the Lottery in July. Sales were up $23.2 million or 4.4 percent over July 2020 and the agency posted a $15.7 million increase in the monthly estimated profit.

“I think all of our games are performing very well to start the year off. Obviously, I have the benefit of knowing the unofficial August figures for the most part at this time. But even during the month of July, I think across the board we’ve done well,” he said. “Instant ticket sales, while down somewhat compared to July of last year, continued to sell very well and certainly picked up additional momentum in the month of August, which we’ll review next month.”

But once accruals for Lottery prizes that have been won but not yet claimed are factored in, Sweeney said, the Lottery has posted an estimated profit of $92.8 million so far in fiscal year 2022 — a decrease of $1.3 million compared to one year ago.

The Lottery set new standards for revenue, profit, prize payouts, commissions and bonuses for retailers, scratch ticket sales and Keno sales in fiscal year 2021, generating an estimated profit of $1.105 billion to be used for local aid from $5.827 billion in revenue while paying out $4.283 billion in prizes and handing out $333.3 million in commissions and bonuses.

“I think we’re stacking up very well compared to the prior fiscal year which, as the commissioners know, saw a significant number of records set by the Lottery as an organization and the team,” Sweeney said. “Tough record to compete against, but so far we’re doing well, providing a very solid basis for what we hope will be a good upcoming year.”