Lotto.com Sues Texas Lottery Commission, Acting Executive Director Rey

Lotto.com filed a lawsuit in a U.S. District Court in Texas on Thursday seeking declaratory and injunctive relief against the Texas Lottery Commission and Acting Executive Director Sergio Rey for its new rule announced in February banning lotto couriers in the state.

The lawsuit comes at a time when lotto couriers in the Lone Star State are at great risk as state legislators ponder whether to do away with the state lottery in its entirety. The fallout from a $95 million jackpot in April 2023 won by a London-based group continued Monday with the resignation of TLC Executive Director Ryan Mindell.

Lotto.com took direct aim at the TLC about the April 2023 drawing in its filing, asserting, “The unprecedented ‘bulk purchase’ was made possible by and because of the Commission itself — not LTC (Lotto.com) or any other lotto courier.” The company then detailed how Lotto.com CEO Tom Metzger learned that the one retailer receiving additional terminals “intended to help the bulk purchaser attempt to effectively guarantee the Texas Lotto jackpot.”

The Coalition of Texas Lottery Couriers (CTLC) released a statement in support of Lotto.com’s filing, saying “it lays bare the inconsistency and lack of accountability demonstrated by the TLC regarding the issue of lottery couriers operating in the State of Texas.”

The CTLC added, “It is time to reconsider the agency’s politically motivated decisions regarding lottery couriers and restart good faith collaboration between our companies and fresh leadership at the TLC.

“For years, lottery couriers have asked to be regulated and remain committed to abiding by a regulatory framework that protects the integrity of the Texas Lottery while also allowing our millions of Texas customers to continue to safely and conveniently order lottery tickets.”

Why it is seeking relief and an injunction

LTC claims the Texas Lottery Commission’s ruling is in violation of state code and notes the “Interim Rule included the amendment or repeal of a prior rule.” The courier claims that does not comport with the TLC’s assertion in its letter that the “Commission did not regulate couriers and represented that it lacked the authority to do so in the Confirmation Letter.”

Additionally, the Interim Rule in which the TLC had the authority to regulate and investigate couriers was what Lotto.com called an “overnight, 180-degree change” that was a “new interpretation of the law that the [Commission] never used previously.”

Further drawing details from the filing

LTC’s filing further details that Metzger was worried enough about the April 2023 drawing that he voiced his concerns with Mindell’s predecessor as TLC executive director, Gary Grief.

Grief did not act on Metzger’s concerns at that time, but essentially had buyer’s remorse after the drawing. The filing claims Grief “effectively apologized” to Metzger, and he noted that LTC had “wisely avoided ensuring jackpot schemes.”

LTC also claims Grief reached out to Metzger about how to prevent another such occurrence, and included a screenshot of a text between Metzger and Grief on the subject. Grief resigned abruptly from the executive director position last year as media scrutiny over the drawing grew following an in-depth investigative report by the Houston Chronicle.

A history of collaboration

Lotto.com took issue with Mindell’s February testimony before the state’s Senate Finance Committee “that the Lottery had no ‘bias one way or the other whether they exist or not’ and asserting that the Lottery had not taken steps to ‘facilitate’ couriers.” The courier then proceeded to detail how the Texas Lottery “actively assisted” in the setup of lotto couriers in the state.

One exhibit submitted by Lotto.com was its July 2021 request for a legal opinion from the Texas Lottery that courier operations would not violate state law. It provides a letter from Mindell dated July 19, 2021, “confirming that Lotto.com as a courier was not required to ‘obtain a license or other authorization from the Commission.'”

It detailed another instance in 2022 in which Mindell and other Texas Lottery officials provided “input and assistance” to Lotto.com and other couriers. Lotto.com demonstrated a prototype system to TLC officials — a group that included Mindell, Grief, and General Counsel Bob Biard — in which customers would electronically receive physical state scratch tickets. The three state officials “attended the demonstrations, and offered advice and input that ultimately went into the development” of the Lotto.com product that was launched the following year.