Even Better Than The Real Thing

Sometimes the stand-in product turns out to be a better option than the real thing.

Don’t confuse the lack of legal online casino and poker options with the availability of online casinos and poker rooms.

When something is prohibited, you can bet your last dollar that there will be a black market. And as we’ve seen in legal, regulated markets, a black market can still thrive even when it’s available legally.

Plenty of gray-market products will also appear.

These workarounds fill a void and reside on a sliding scale of legality.

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Sweepstakes sites and daily fantasy sports provide a workaround for residents in states that haven’t legalized sports betting or online casino games.

VGT/VLT/Skill Games are another example of a product that operates in a legal gray area (these games are different shades of gray in other states).

And then there are the stand-ins, the wholly legal placeholders. DFS fits the bill as a stand-in in some states that still lack legal sports betting. In states where sports betting is legal, DFS is an alternative product.

Online lottery provides two examples.

First, there are instant win games. In some states, they compete against legal online slot machines; in others, they act as stand-ins.

However, the best example, and the focus of today’s column, is online lottery courier services, which have regulatory approval and, in some cases, licenses to operate on behalf of the lottery.

The Black Market Has a Lot of Buffers

As much as we would like it to change, it’s important to realize that the black and gray markets will always exist.

As Willie Cicci (played by Joe Spinelli) says in the classic Godfather II scene, when he is testifying and asked if he ever got a direct order from Michael Corleone or if there was always a buffer involved, he responds, “Yeah, the family had a lot of buffers.”

Like the Corleone Family, the offshore industry has “a lot of buffers” that make enforcing the law (from the US side of the coin) extremely difficult. I’ve written about this topic in the past, as has Richard Schuetz, who poignantly wrote:

“I worked offshore and learned nobody would do anything about anything offshore without the State Department’s involvement. Where I worked, the country’s Opposition Leader owned a betting establishment that did not end at the water’s edge. The point is if you think the State Department is going to let Merrick Garland start running Eliot Ness-type raids in other countries and screwing up our foreign relations, you have no idea what you are talking about. It might be time to open your ears and shut your mouths.”

The Gray Market’s Legal Limbo

For me, stand-ins are the most interesting part of this equation.

Earlier, I mentioned online lottery couriers and instant win games as stand-ins—one stands in for a full-fledged online lottery, and the other for online slot machines.

In my view, a stand-in isn’t the best descriptor for lottery couriers. Because 100% of the ticket price goes to the state lottery, couriers can coexist with the state’s online lottery. It’s not a competing model; it’s merely another distribution channel.

As I wrote in my deep dive on Jackpocket:

“Jackpocket is active in four states that offer online products through the Lottery. Meaning, don’t confuse Jackpocket with a placeholder product. The Lottery doesn’t care if the ticket sales come from their website or Jackpocket; a sale is a sale, and the same amount of money lands in the Lottery’s coffers regardless of the source.”

This was made clear in a wide-ranging interview with Lottery Geeks by Andrew Walter, the director of legal and business affairs for sports betting at the Connecticut Lottery Corporation, who was asked about lottery courier services. Walter said the couriers are having a positive impact, noting that whether it’s Jackpot, Jackpocket, or Lotto.com, a physical ticket is still being printed.

“They’re still doing the physical printing of the ticket,” Walter said. “So, it’s not technically an Internet lottery sale.”

Taking the Pepsi Challenge

More relevant to today’s column, Walter also talked about couriers as stand-ins until full-scale online lottery sales are approved.

“If you’re a lottery in a state where it has been difficult to get legislation passed for actual internet lottery, this gives you a way to be relevant and to have an online presence even though it’s not something you directly control or manage like iLottery,” he said.

Walter called couriers “an end-around to internet lottery sales,” but I would go a step further.

As I said in my Jackpocket column, the biggest misconception about online lottery couriers is that they are tech companies. They are not placeholders or replacements. “They are a delivery channel that grows and continually modernizes the overall lottery market.”

Couriers are not a stand-in for or a stepping stone to online lottery products. Licensing and regulating couriers is as good or possibly a better system than a state-run online lottery. The best-case scenario is a state-run online lottery plus couriers, but I would argue (and that’s precisely what I’m about to do) that couriers are a better option than state-run online lotteries.

Here’s why.