Minnesotans can now buy lottery tickets on smartphone but legal status debated

A company's attempt to sell Minnesotans state lottery tickets via smartphone is meeting fierce resistance from legislators and anti-gambling activists, who say it is an unauthorized expansion of gambling.

The New York company, which is called Jackpocket, began selling Minnesota lottery games Tuesday through its smartphone app, making Minnesota the first state where the service is offered, said company CEO Peter Sullivan.

The Minnesota State Lottery emphasized that the state agency is not affiliated with the company but entered into a "memorandum of understanding" with Jackpocket "to say, these are the rules that we expect you will live by, including making sure people live in Minnesota and are 18 years old," said Adam Prock, a lottery spokesman.

State Rep. Greg Davids, R-Preston, said he's drafting a letter to get more information from the lottery but is currently of the belief the app violates state law in significant ways.

This is the second time in recent years that the state lottery has found itself at odds with the Legislature, which passed a law in 2015 that banned the agency from pursuing online sales or other platforms like gas pumps and ATMs without legislative approval.

Jackpocket and the Minnesota State Lottery say the new app is legal under a different statute that allows "a 'lottery service business' ... that for a fee or commission purchases lottery tickets on behalf of customers or subscribers."

The new app works like this: After a sign-up and verification process, the user gives the company a bank account number to create an account and then buy tickets.

Jackpocket has people working in the Twin Cities area buying lottery tickets with one specific retailer, said Sullivan, the company CEO. He declined to identify the seller.

It's like Bite Squad restaurant delivery service, but for gambling instead of food.

The company charges a 7 percent fee for the service. Jackpocket limits daily purchases to $100, and scratch-off tickets are not offered. Players must be in the state where they want to buy tickets, and GPS technology allows Jackpocket to confirm their location, Sullivan said.

Upon ordering, players receive an e-mail that matches their identity to the ticket serial number, said Sullivan. An image of the front and back of the ticket appears on the app.

Winners with a payout of $600 or less receive a credit on their Jackpocket account for the full amount. From there, transfers can be made to a bank account, or more lottery tickets can be purchased.

For payouts topping $600, Jackpocket's website notes that "we will arrange to have the ticket delivered to you in a secure fashion so that you may claim your prize from the State Lottery."

But Davids, the chairman of the House Taxes Committee, said the service appears to violate state law. He said the law requires games to be sold on the premises of the retailer under contract; that sellers cannot charge a fee to buyers; and that tickets must be bought with cash or the equivalents spelled out in statute.

"What could possibly go wrong with people giving this company their bank account number?" Davids said. "You talk about the fox guarding the hen house."

State lottery officials across the country are confronting a wave of competition from online gambling operations and splashy casinos, sending them in search of new ways to hold onto existing customers and find new ones.

Minnesota's lottery took in $563 million in 2017, down more than $29 million from the year before. Of that, $139.2 million went to the state budget, various conservation efforts and gambling addiction programs.

Despite the lottery's public arm's-length posture toward Jackpocket, Sullivan, the company CEO, said, "We've had an open and great conversation with the Minnesota Lottery."

The test run in Minnesota helped "make sure the lottery was comfortable" with the process, he said.

Davids, who co-authored the 2015 legislation that hemmed in the lottery's attempt at expansion and who acknowledges he's a gambling opponent, said the lottery should reconsider any relationship with companies like Jackpocket: "Preying on people's addictions should not be the business of the state."

Jake Grassel, executive director of Citizens Against Gambling Expansion, said smartphone gambling is a red line that will draw opponents out in force at the Legislature next year.

"If it's in your hand, you can be constantly gambling. You can play without leaving your couch," he said.

Patrick Coolican • 651-925-5042 Paul Walsh • 612-673-4482