Texas Lottery Blasted Over Loophole That Let Syndicate Win $95M

Posted on: July 10, 2024, 11:49h. 

Last updated on: July 15, 2024, 04:04h.

Philip Conneller @casinoorgphilc Read More
Expertise: Gaming Business, Regulation, Tribal Gaming.

A Texas legislative commission blames the state lottery for failing to plug a loophole that allowed a New Jersey-based lottery syndicate to walk off with a $95 million jackpot.

Texas Lottery, Rook TX, courier services, Sunset Advisory Committee, Hooked on Montana
The Texas Lottery is under fire for its “passive” reaction to courier services that create a loophole allowing the draw to be mathematically exploitable under certain conditions. (Image: CW39 Houston)

The Sunset Advisory Committee (SAC) is tasked with reviewing the performance of state agencies before recommending how they can be improved or even determining that they should be abolished. In a newly published report, the SAC reserves some harsh words for the Texas Lottery Commission (TLC) and especially its tolerance of “courier companies.”

It was thanks to the courier system that the shadowy New Jersey syndicate, known as Rook TX, was able to purchase 25.8 million tickets for a Texas Lottery draw, which guaranteed that it would win the jackpot and pretty much all of the other prizes as well.

The SAC said the TLC had become “stagnant” and “passive” in its failure to react to the loophole. This created a situation where ordinary Texans who entered that day’s draw were unaware they only had a shot at half the big prize, at best.

Lottery Becomes Exploitable

The April 22, 2023, Texas Lottery draw was one of those rare occasions when the lottery becomes mathematically exploitable, but only if you have the means to buy up all possible combinations of numbers, which just so happens to be 25.8 million.

After 93 rollovers, the jackpot had grown to $95 million. So, the syndicate realized that it would need to risk $25.8 million in $1 lottery tickets to be guaranteed a $95 million jackpot, which would be $57.8 million after state and federal taxes. Even if the syndicate was unlucky enough to share the first prize with another winner, it would still make a small profit.

A three-way split would have been a disaster, but considering the Texas lottery only sells one to two million tickets per draw, it was a very low-risk proposition – and hey, that’s why they call it gambling.

Meanwhile, the syndicate would also vacuum up 289 second prizes for matching five or six numbers, plus all the lower prizes, adding roughly another $2.5 million to the haul.

So, how was the syndicate able to buy 25.8 million tickets when the Lottery normally only sells 2 million on a good day? The answer is lottery couriers.

‘Hooked on Montana’

Lottery courier services are third-party outfits that sell tickets online through mobile apps. They fulfill orders from customers by purchasing tickets in bulk from licensed retailers. Generally, the courier service handles the process of collecting and distributing winnings to their customers.

After the draw, it was announced the winning ticket was sold by an outlet called Lottery Now, based in a shopping mall in Colleyville. But when reporters arrived, they found a business called “Hooked on Montana,” which organized fishing trips for tourists to the Big Sky State.

Nevertheless, Hooked on Montana was licensed to sell lottery tickets. Its owner, Richard Wheeler, told USA Today he had started doing some lottery couriering as a spin-off from his main business. He sold more than 11 million lottery tickets to Rook TX.

Currently, only two states, New York and New Jersey, have legalized and licensed courier businesses, but they are tolerated in many other states – too much so in Texas for the SAC’s liking.