Sales Dip Spurs Tennessee Lottery To Begin Online Ticket Sales, Relying On Its Interpretation Of Existing Lottery Law

The Tennessee Education Lottery Corporation (TELC) last week quietly began selling lottery tickets online, doing so directly to consumers through a new iLottery app that is currently available in Apple’s App Store, which represents a major departure from the state’s status quo.

“In an effort to increase sales, the Lottery launched the Anytime Powerball app on Jan. 6, 2025,” TELC spokesperson Kym Gerlock said in a statement issued to Lottery Geeks. “Only Powerball tickets may be purchased, and ACH is the only form of payment accepted.”

While no relevant Tennessee laws or regulations have changed — not yet at least — to explicitly legalize iLottery in the state, nor to precipitate the launch of an iLottery product from the TELC, the agency is apparently relying on a (re)interpretation of the state code that it believes authorizes the activity.

“The Lottery implementation law has always allowed for the Lottery itself to sell tickets and accept any form of payment, but legislative action remains necessary to permit retailers to accept anything other than paper or coin currency,” Gerlock said.

TELC officials during a budget hearing in November 2024 noted a dip in instant ticket sales — a year-over-year revenue decrease of $65 million for the fiscal year ending in 2024 — while TELC President and CEO Rebecca Paul stated that the agency was exploring all avenues to reinvigorate sales amid a cycle of fewer draw game jackpots.  

“We are looking at distribution channels, we are looking at prize payout, we are looking at enhanced value in our instant product,” Paul said, also noting the potential impact of legal sports betting in Tennessee, which is a mobile/digital-only enterprise that began in November 2020. “There are all kinds of different things that we’re working on and looking at that we believe will make a difference.”

Asked whether the legislature was consulted about the launch of the app, which was unveiled with no apparent announcement, Gerlock said that “the Lottery has consistently communicated with the legislature about its evolving operations and noted in a recent budget hearing that it is pursuing new sales distribution channels as a way to increase revenues, which have been impacted by sports wagering.”

State of the TN iLottery App

The app is billed in the App Store as a “new iLottery app from the Tennessee Lottery where players can play Powerball online.”

Users are limited for the time being to purchasing tickets for Powerball, which is one of the two large multi-jurisdictional draw games in which Tennessee participates.

As of Thursday morning, Lottery Geeks was able to download the app, register an account, and purchase $10 worth of Powerball tickets through the app.

What is interesting about the shift is that the Tennessee legislature has observed at least two previous efforts to modify the statutory language in the Tennessee code to explicitly authorize the sale of lottery tickets through debit card transactions: In 2012, when iLottery become en vogue in Illinois and elsewhere, HB 2703 failed; and in 2018, HB 2507 would have “authorize[d] the use of money orders, debit cards, and prepaid gift cards to purchase lottery,” amending TCA Section 4-51-108. That bill died in committee. 

Yet, based on one reading of the Tennessee Code as written, as the TELC indicated, it seems plausible that one interpretation would mean that while authorized retailers are expressly prohibited from selling lottery tickets with anything other than cash (coins or bills), the last part of the clause may mean that the restriction does not apply to the TELC:

(2) The sales price of tickets or shares and the manner of sale; provided that all sales shall be for cash only and that payment by checks, credit cards, charge cards or any form of deferred payment is prohibited. For the purposes of this subdivision (a)(2), “cash” means coins or notes.

Nothing in this part shall be construed as prohibiting or restricting the direct sale of lottery tickets or shares by the corporation through any form of payment and in any amount.

Terms and conditions

Currently appearing on the Tennessee Lottery website is the page for “Tennessee iLottery Terms and Conditions,” which contains a clause about funding. Section 7 on “Payment Methods” reads:

7.1 Approved Methods: TEL accepts deposits through ACH to fund your iLottery account. TEL reserves the right to add or remove payment methods at its discretion.

7.2 ACH Transfers: You authorize Global Payments Gaming Services, Inc. (Global Payments) or its Service Providers to initiate debit and credit entries to the account at the depository financial institution for which you have provided information. By authorizing ACH Transfers, you also agree to be bound by the Terms of Use of Global Payments and any Service Providers which can be found here.

This kind of change in terms and procedure would effectively accomplish the intent of the earlier failed 2012 and 2018 bills, although, only with respect to the TELC.  

In other words, the operational TELC-branded iLottery app has effectively made the TELC a competitor to retailers, and one with the advantage of being able to accept ACH payments while the retailers remain limited to accept cash only. 

“This presents concerns to convenience stores in setting up a second set of rules, and adherence to rules that could favor other means of selling tickets over convenience stores,” Jeff Lenard of the National Association Of Convenience Stores told Lottery Geeks. “And that is particular concerning, when convenience stores played a huge role in helping to build lottery to what it is.”

Note that while to date the TELC has not sold tickets directly, according to the state’s code, it is not prohibited from doing so. For the time being, the TN iLottery app does not appear to contemplate the sale of instant tickets, only Powerball.

“Like our neighbors in Kentucky, Virginia, Georgia, North Carolina, as well as many other lotteries, the Tennessee Education Lottery is testing iLottery as a new option that will add convenience for players and increase revenues for the important education programs we fund,” Gerlock said. “We are tasked with maximizing dollars for education, and we must keep up with the rapidly evolving technology of the current retail climate.”

The payment processing for the TELC app would seem to fall to the state lottery’s supplier, International Game Technology (IGT), which is headquartered in Las Vegas. 

TELC CEO and President Rebecca Paul is a lottery industry veteran who was elected president of the World Lottery Association in 2022. Paul has previously served as the chief executive of four U.S. lotteries: Illinois Lottery, Florida Lottery, Georgia Lottery and, since September 2003, the Tennessee Education Lottery Corporation. 

On a separate track, a new tax

One other potential patch for a leak in lottery revenue is new tax on lottery retailers. 

Filed in December and introduced when the General Assembly opened on Jan. 14, Rep. Kelly Keisling’s HB 0051 “requires each county to levy a tax at the rate of 5 percent of the sales price of lottery tickets or shares when sold at retail within the jurisdiction of the county; requires the state to administer the collection of the tax.”

The network of approximately 5,000 retail sellers across the state currently keep a 6.5% commission on lottery sales tickets. Proceeds of the tax on sales would be distributed the same as the county property tax for school purposes.

Lottery Geeks reached out to Rep. Kiesling for comment on Thursday morning but did not hear back prior to publication. 

Rep. Kiesling serves as chairman of the State Government Committee and is also a member of eight other committees including Finance, Ways & Means, and Appropriations. 

Whether or not this proposed new tax is related in any way to the iLottery app, or whether it has any legs, is not yet clear.