Important editor’s note: The original version of this article contained inaccuracies based on a careless reading of a press release by Mido Lotto. The release included vague statements and a quote from a former lottery official, which gave the impression that the product had received official endorsement. It has not, and is operating in an unauthorized, gray market capacity. This revised article now reflects that fact.
Lottery players in Washington State have a new way to play their favorite draws online. However, while it brands itself as safe and legal, the state lottery is cautioning its customers otherwise.
Mido Lotto is an app developed by Silicon Valley startup Lottery Now. It allows you to place orders for tickets through your phone or tablet. A representative of the company will then purchase the tickets you’ve requested from a partner retailer. The company holds these tickets for safekeeping on your behalf, and transfers any winnings to you.
It launched in California last spring, and has begun rolling out in new markets this year, Washington being the most recent of these.
Mido Lotto does not have the lottery’s approval
Lottery Now’s president, Rich Wheeler, explained the launch as follows:
“We’re excited to expand the Lottery experience for Washington residents by bringing them an easy and legitimate way to play, while offering a solution to many common headaches such as misplaced tickets or forgetting to play a draw. We also look forward to supporting the Washington Lottery Commission’s revenue efforts.”
The lottery itself has a different perspective, however, and issued the following statement:
“Washington’s Lottery is aware that a private company recently launched the Mido Lotto app in Washington State. It is important to know that Washington’s Lottery does not support, endorse, condone, encourage, recommend or approve of the use of this product, which is not affiliated with or licensed by Washington’s Lottery.
Because neither the Mido Lotto app nor its creator is an authorized, licensed retailer, Washington’s Lottery cannot guarantee the validity of purchases made via this app or appropriate payment to the player for tickets redeemed through the app.”
The Lottery is currently consulting with the state’s Attorney General and Gambling Commission to determine how it will approach the situation.
What is a gray market?
This is what is known as a gray market situation, where a product is legal – or rather, not illegal – by virtue of the fact that existing laws didn’t anticipate it. Gray markets are unpredictable, as the longer the situation continues, the more likely it is that lawmakers will act, either to create a formal legal framework for the product, or to outlaw it.
In the meantime, legal challenges may be possible if local prosecutors interpret the existing laws differently from the gray market companies and their lawyers. In the US, daily fantasy sports prior to 2015 are a canonical example of a gray market product. Even now, the gray market situation for DFS persists in many states, while others have legislated one way or the other.
It’s possible that the Washington Lottery will eventually grant Mido Lotto its blessing and resolve the issue that way. However, it should probably count as a strike against it – both in the eyes of officials and of potential customers – that it has arguably attempted to give itself a greater aura of legitimacy than is strictly true. For instance, its press release includes a statement from the lottery’s former deputy director, who is no longer employed there and not speaking in an official capacity.
How does Mido Lotto work?
Lottery Now describes its product as being “like DoorDash or Instacart,” minus the physical delivery. If you’ve ever shopped online, you pretty much know how to use a lottery courier already.
You can only use Mido Lotto to buy draw tickets, not scratch-offs or other products. You do, however, have a lot of options. Once you’ve registered an account and funded your wallet, you just choose the games you want to play, along with your numbers. You can, of course, choose to have some random numbers assigned to you.
Lottery Now then buys the tickets, scans them, and sends you the proof. When the draw happens, you’ll get notified to check whether you won or not. If you did, prizes up to $600 get deposited directly to your account. From there, you can withdraw your winnings or use them to buy more tickets.
Bigger prizes require the ticket holder to claim them personally. In that case, Lottery Now will arrange to have the winning ticket delivered to your house in secure fashion.
You can also order tickets for multiple future draws at once, similar to a subscription. If you have friends, family or coworkers also using the app, Mido Lotto allows you to set up pools to share the cost of and winnings from those tickets.
Jackpocket still holds a monopoly on the licensed courier business
Lottery Now isn’t the first company offering such a product. Such gray market courier products are numerous, and have been for many years.
As far as officially authorized couriers go, the only game in town is an app called Jackpocket.
US federal law is very clear about the legality of such products when it comes to sales of physical tickets across state lines. It’s been illegal to use the postal service for such purposes since 1890. Federal lawmakers eventually expanded the law to include other methods of delivery as well.
It’s far less clear when it comes to intrastate lottery couriers. Few states have legislated on the issue one way or another. New Jersey was the first to officially legalize it in 2017. Most have allowed it to remain ambiguous, and gray market couriers have flourished in the absence of attempts to stamp them out. Some would have an easier time defending themselves in case of a court battle than others.
Jackpocket has only launched in states where it has received official permission to do so. Mido Lotto has also been selective with its launches, but it’s not clear on what basis it is choosing its states. Perhaps it is consulting with its lawyers and interpreting state laws to determine in which states it feels it could survive a legal challenge.
One effect of this is that it is not, for the most part, the same states choosing to authorize each app. Each is available in several states, yet only Texas currently has both. That’s unsurprising, as it is also served by other gray market couriers, and hasn’t attempted to shut them down.
Are couriers the solution to falling lottery sales?
Jackpocket’s expansion has accelerated recently. If states are starting to find the idea of couriers palatable, that may bode well for gray market operations like Mido Lotto as well.
There’s one obvious reason states may welcome such services, and it’s one that gets raised a lot in discussions of gambling. This is the COVID-19 pandemic.
Americans have been shopping less overall during pandemic. In many, though not all states, that has led to plummeting sales of retail lottery tickets. Add to that the temporary closure of and subsequent restrictions on retail casinos, and most states are hurting when it comes to the gambling revenue they’ve been counting on.
Allowing lottery players to buy their tickets online seems like a good idea in that light. However, it’s obviously better to do it in licensed fashion, as Jackpocket is doing.
The trouble with legislation is that it’s slow
Fully online lotteries, including instant gaming, have also risen in popularity during the pandemic era. Rhode Island, Virginia and Washington D.C. have all launched theirs in the past year, bringing the total to eight jurisdictions, or nine if you count the Virgin Islands.
The trouble with iLotteries, though, is that they often require special legislation. Lottery couriers generally don’t, if state law doesn’t make them explicitly illegal, and especially if they get official approval from the lottery itself.
Even iLotteries don’t always require legislation. Some states, and Washington D.C. have allowed their lottery to establish one of its own accord. Others, like Virginia, have had to pass a bill.
Passing gambling laws takes time and is never a surefire thing. Unfortunately, this also explains why unofficial operations like Mido Lotto are flourishing.
Typically, the arrival of a legal, licensed market for a product is accompanied by a crackdown on black and gray markets. We may eventually see this with lottery couriers, as states that have licensed Jackpocket or a similarly legitimate competitor could crack down on unofficial operators like Mido Lotto.
The trouble is that such a crackdown would also require effort. For now, if lotteries simply want to boost sales in the easiest way possible, ignoring the gray market may be the easiest way to do so. If it keeps expanding, however, we may see a repeat of the daily fantasy sports scenario in a few years, where legislators are forced to decide on the legality of an industry that has already dug its roots in deeply.
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