Indiana Lawmaker Wants To Regulate Lottery Couriers — Is That Necessary?

Currently, only two states have formal regulation and licensing requirements for lottery couriers: New York and New Jersey.

Now, a third state wants to join the party.

Indiana Rep. Ethan Manning recently introduced House Bill 1432, which would legalize an online lottery and create a regulatory framework for lottery couriers, as well as legalize online casinos in the state. HB1432 has already received its first reading in the House, and the House Public Policy Committee will review it Tuesday.

If this bill passes, Indiana could put some national spotlight on the regulation of lottery couriers and encourage more states to examine the courier market moving forward.

Courier regulation details in HB1432

Manning’s bill gives the State Lottery Commission of Indiana the right to “authorize and regulate courier services.” It’s sparse on specifics about what exactly that regulation would look like. But there are a couple of details to take away:

• It would be considered a Class A misdemeanor to run a lottery courier service in Indiana without written permission from the commission.
• The bill mandates voluntary self-exclusion policies for lottery couriers, including making all reasonable efforts to stop marketing to those on exclusion lists.

Do couriers even need to be regulated? Dustin Gouker, a U.S. gambling consultant and author of The Closing Line newsletter, told Lottery Geeks more states will continue to pay closer attention to lottery couriers as the gambling industry, at large, starts to focus more on online lottery.

“I don’t think lottery courier regulation is inevitable, but I do think the states are probably going to get more involved with it over time, rather than be passive actors,” Gouker said. “It would definitely make sense for the lotteries themselves to own the business, choose vendors, etc.

“But I don’t think that outcome is guaranteed in the short term, at least.”

While couriers must be regulated in New York and New Jersey, they are still active in many other states where they aren’t regulated. Market leader Jackpocket, for instance, is up and running in 19 jurisdictions.

Technically, outside New York and New Jersey, lottery couriers are gray-market operators, similar to “sweepstakes casino” sites. However, there is a key difference.

Couriers (at least the reputable ones) work to get some form of approval from state lottery commissions before launching in those states to ensure a lasting working relationship. These couriers don’t want to surprise or upset the state lotteries, who may then turn to their attorney generals, who then may ban couriers in the state — which is the exact process we’ve seen with several states booting out sweepstakes operators. 

Take these comments on the Minnesota Lottery’s website, for instance:

“Though they are purchasing Minnesota Lottery tickets, LSBs (couriers) are not affiliated with the Minnesota Lottery, and we have no regulatory authority over their operations,” the website reads. “ … Even though we have no regulatory authority, we work with LSBs to communicate and encourage industry best practices regarding issues such as protection of personal information, verification of legal age and Minnesota residency, and the importance of encouraging responsible gambling habits.”

How regulation could change courier industry

Regulating lottery couriers would, in effect, formalize this informal relationship. It would add legally required responsibilities to couriers, such as:

• Know Your Customer (KYC) guardrails
• Location and age verification
• Responsible gambling tools and promotion
• Advertising restrictions

Regulation may also open the door for entry to states that have previously been opposed to couriers — like California, Florida, and Texas.

In 2021, the California Lottery publicly announced couriers were in violation of state laws. However, if the California Lottery was able to have full regulatory control over couriers, might it think differently?

Texas, meanwhile, in 2023 considered a bill that would ban any type of online purchase of lottery tickets in the state. Just a couple of months ago, a Texas tribe called upon lawmakers to ban couriers and threatened to throw its weight behind casino legalization if they didn’t.

And just last month, Florida shut down operations of courier The Lotter, which the state deemed was selling lottery tickets illegally online.

Again, if these states had more control over the couriers — to “own the business,” as Gouker said — maybe that changes things.

Looking back at 2023 analysis

In a 2023 analysis of the lottery courier industry by Spectrum Gaming Lottery Group, analysts wrote that, even if they don’t face actual regulation in a state, the only path toward a sustainable future is for couriers to act as if they’re under strict regulatory oversight.

“In those lottery states (and the District of Columbia) that do not fully regulate lottery couriers, courier services should be required to earn the privilege of participating in lottery sales,” analysts wrote. “This means: Couriers should submit to a process established by the state lottery akin to securing a lottery retailer license. Lotteries should provide some form of oversight of the courier operations, including reviewing, approving and monitoring their internal-control processes.”

Indiana wants to create a formal structure to ensure couriers do everything Spectrum analysis wrote in 2023. It wants to formalize the informal.

And maybe other states will follow suit.