(Texas Scorecard) – Lottery ticket reseller Lotto.com has sued the Texas Lottery Commission over recently contemplated rule changes that ban the online sale of lottery tickets.
The online lottery company is also chapped about investigations into its operations and state limits on the number of machines allotted to retailers, which was capped at five in early February.
The suit, filed in Travis County, seeks declaratory and injunctive relief, alleging that the Commission’s recent crackdown on online lottery resellers is arbitrary, unlawful, and a reversal of years of official guidance and cooperation.
Of course, that posture presupposes that the lottery was previously operating within its authority.
Unfortunately for Lotto.com, also known as LTC, the rules changed to its benefit were altered to Texans’ detriment and were non-compliant with legislative intent.
The company maintains it operated within state rules and regulations.
Lotto.com, like other online lottery ticket sellers, calls itself a courier. That’s a misnomer that confuses some people about operations and serves as a cover for circumventing state law.
The lawsuit confirms what has been publicly stated: lottery ticket resellers were enticed to come to Texas and set up shop, even though rules were written to exclude them, and state law does not allow their operations.
Despite the clear intention for Texas lottery tickets to be sold in-person to the end buyer with cash in a retail store, Texas became the Wild West of lottery play under the leadership of former executive directors Gary Grief and Ryan Mindell and the lottery’s current general counsel, Bob Baird.
For instance, in 2023, “Texas became the first state for the Lotto.com digital scratch product.” Yes, “scratch” tickets (featuring the nonsensically labeled “digital latex”) have been sold online in Texas for two years.
And, according to the suit, Lotto.com went live using QR codes to print tickets in Texas in April 2022, making this “LTC’s first use of QR codes for ticket order fulfillment in any state.”
You may recall that QR code technology was deployed in 2023 to facilitate a $95 million jackpot win, one that was rigged by an international gambling syndicate and has been called a “clear sign of money laundering” by lawmakers.
The New York Times last week reported on the event and released footage taken from inside one printing location, where children can be seen sitting at lottery terminals processing tickets with the assistance of QR codes.
When it comes to developing this technology for Lotto.com, the lawsuit states that IGT—the state-contracted company that facilitates the Texas Lotto—played an integral part. IGT equipment was provided to Lotto.com to develop the technology it rolled out.
These and other revelations in the suit are consistent with testimony given during the Lottery Commission’s March meeting that vendors were dictating to the state how machines should be configured to expedite mass ticket printing operations.
It’s also clear from the lawsuit that Ryan Mindell and Bob Baird were indistinguishable from former Executive Director Gary Grief.
Lotto.com complains that TLC did not indicate it would retreat from the position it staked out in a confirmation letter (it likely wouldn’t have before media attention), and the company argues that the $95 million rigged jackpot in 2023 is to blame for the reseller ban.
Trying to distance its business from that jackpot, the company states that resellers weren’t to blame.
But that’s just legal hairsplitting.
Every single one of the four retail outlets that sold tickets for the rigged 2023 $95 million jackpot was linked to a lottery ticket reseller. In fact, the machine changes that Lotto.com boasts about in its complaint—developing QR codes and limiting reseller interfacing with screen prompts —were essential to pulling off the heist.
The machines were another essential part of the 2023 scheme and are mentioned in the suit. Lotto.com correctly notes that additional machines being sent to the four locations that printed the bulk of the tickets was a tell that the lottery knew the purchase was about to take place.
Tom Metzger, the CEO of Lotto.com, was texting both IGT and Gary Grief about the matter before the drawing. According to the suit, Metzger called Joe Lapinski of IGT to try to halt the surge of machines being sent to retailers participating in the scheme.
After that, Metzger called Gary Grief, who ignored his alleged warnings, according to the suit.
The suit specifically notes that “In April 2023, LTC learned, through its CEO, Tom Metzger, that one retailer with low sales was receiving these additional terminals from the Commission.” Although the specific retailer is not mentioned, one reseller/retail location was ahead of the game, receiving machines as the jackpot grew: Hooked on MT.
Like other resellers, Hooked began with a couple of machines. However, in March, a month before the location would sell the winning ticket, it started bringing in additional machines. Six machines were delivered on March 23. Four more followed on March 30 and two more on April 19, 2023.
Of those 14 machines, all but three were collected on May 2, 2023, ten days after the April 22 drawing.
The flames of the corporate dumpster fire that is Lottery.com have distracted from Hooked on MT, the location that ultimately sold the winning ticket, which itself had strong ties predating the draw to Gary Grief and the Texas Lottery. It’s also connected to Metzger.
Rich Wheeler, the president of Mido Lotto and Lottery Now, is the reseller behind the Hooked on MT retail location.
The world of the lottery is a small one. Wheeler and Metzger both used to work for Camelot, which operates the United Kingdom’s national lottery.
Both men contributed to an article about lottery resellers published in February 2023. In the piece—published mere months before his courier and retail location was used to secure a jackpot—Wheeler wrote that resellers were “at a very early stage” and that “not all Lotteries have the legislative purview nor formal path to expressly accept our help or sanction our business, yet.”
The article suggests that Wheeler, like Grief, was comfortable operating in the grey area.
In 2014, Camelot “assisted” the Texas Lottery to identify “opportunities to enhance performance.”
Immediately following this review, Gary Grief led the Texas Lottery on a legislatively unsanctioned push to expand the lottery.
First, he tried to end-run fantasy sports gambling into Texas. When that was slapped down, he snuck resellers like Wheeler, Lottery.com, and Lotto.com into the state.
The Camelot review of the Texas Lottery, which was jointly conducted with IGT according to TLC annual reviews, came at the tail end of Wheeler’s time at Camelot and his start at IGT. These two companies and the state of Texas have a history.
Back in 1997, Camelot was sullied by its U.S. partner, IGT (then GTECH), when a senior GTECH executive was imprisoned on corruption charges following an investigation by an Austin grand jury.
Ater the April 2023 drawing, a flurry of negative press emerged about the rigged jackpot. The lawsuit alleges that Grief had recognized the error in facilitating the event. That suggestion is backed up by the activity of the lottery.
In May and June, the lottery commission went to all four locations used by resellers to rig the jackpot and clawed back the majority of machines that had been delivered in the run-up to the win.
Gary Grief, texting Metzger, suggested a meeting with a member of the Texas Lottery Commission in Austin in June of 2023. At the time, there were only five members: Robert G. Rivera (chair), Erik Saenz, Jamey Steen, Cindy Lyons Fields, and Mark R. Franz.
Except for Saenz, this is the same board composition that exists today.
The meeting between Metzger and the unnamed commissioner never occurred. Grief abruptly retired and, according to multiple senators and the lieutenant governor, cannot be located.
According to the government accountability website Transparency USA, Lotto.com retained Michael J Johnson to lobby the legislature in 2023 and 2024.
It’s difficult to see how the lawsuit will benefit the reseller, any of its cabal, or the lottery overall. Increasingly, lawmakers view the lottery as a liability, and those elected officials who don’t and seem to be maneuvering in the shadows to save the agency may soon realize it is.
Appearing on a talk radio show this week, State Sen. Charles Schwertner (R-Georgetown) suggested that the lottery is beyond repair and should be abolished, sentiments echoed by State Rep. Matt Shaheen (R-Plano) in a post on X.
It appears as though Lotto.com is still taking orders via its website for Texas scratch and pick’em tickets. A request for comment to confirm was not returned.
Lotto.com has been aggressively confronting Texans with ticket purchasing options in the past year, including offering Uber customers tickets after their trips.
The 140-day-long legislative session ends in just over a month.