Texas lotteries might not be as fair as you think
If the numbers work out in their favor, investors can legally buy all the possible outcomes, leaving anyone winning through luck with only half the jackpot.A lottery is known as a chance for anyone to strike it rich, but it also might now be an investment opportunity for those with enough disposable income.
In April of last year, the Lotto Texas jackpot sat at $95 million, and someone did the math: At a dollar a ticket and only 26 million possible winning numbers, they could game the system.
According to a Houston Chronicle investigation, the Texas Lottery Commission not only knew what the person was doing, it helped them.
Eric Dexheimer, an investigative reporter at the Chronicle, joined Texas Standard to discuss. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: So buying all possible numeric combinations for a lottery drawing is not against the rules here in Texas, but how does it work logistically? How does someone go about purchasing 26 million lottery tickets?
Eric Dexheimer: Well, historically, it’s been a real logistical challenge. You had to employ kind of an army of people to go out, fan out to convenience stores and buy as many tickets as each store could process. More recently, there have been some developments like these app companies which sell tickets online to facilitate buying.
In this case, what happened is that the buyer worked with four outlets in Texas that ordered a bunch of state lottery terminals so that they could process as many tickets as they needed to over the 72-hour period between lotto draws.
So the Texas Lottery Commission didn’t only know this was happening because of the actual ticket sales, but they actually assisted the sales, and, in part, it’s with those terminals you mentioned. Can you explain more about that?
Sure, so lottery tickets have to be entered and printed out on state equipment, and so most outlets have about one of these machines, maybe two. On April 19, which is when the last lotto drawing ended and sales for the next one were to begin, they received several large orders for terminals to be delivered to these four outlets, and they were unusual in their size.
One of them asked for ten extra machines, another asked for five and another asked for a dozen, so those were really unusual rush orders for state equipment. The only reason they would have one of those is so they could print out an unusually large number of tickets. Most lotto sales have about 1 to 2 million. This one had 28 million.
Alright, so people have got to be curious, who are these people doing it? In Texas, for jackpots over $1 million, winners can remain personally anonymous. In this case, a New Jersey company called Rook TX collected the payout. Do we know anything about them?
Well, Rook TX was formed about two weeks before the payout was collected in June of last year, so about a year ago. They were formed as a Delaware corporation. They have a registered agent in New Jersey, and that’s really all we know about them. As you say, members of that LLC can remain anonymous.
Well, I mean, gosh, I think people think, “God, this just doesn’t seem fair” to have to play against folks like this gaming the system. I understand similar situations have happened in Virginia and Massachusetts. Both resulted in rule changes. Do you think we should expect that here in Texas?
Well, you’re right that it’s a little bit deceptive. If someone has purchased all numeric combinations, then the rest of us playing the lottery are, at best, going to tie for first, right? It’s a split jackpot, so it’s a deceptive number that we’re playing for.
There were two instances – one in 1992 and the other starting in the early 2000s – in Virginia and Massachusetts, respectively, where people figured out either mathematical advantages or, in the Virginia case, purchased all combinations.
There were some rules in place that facilitated that in Virginia at the time. You could print out your tickets at home, and the number of numeric combinations was relatively small, so the price of buying up the entire lottery was pretty cheap. Since then, you’re right – both Massachusetts and Virginia have instituted laws to prevent that sort of thing.
In Virginia, for example, the only way you could get extra terminals like the outlets here in Texas was to demonstrate that you had sales that deserved those extra terminals. That is, you need them because of prior sales. In Texas, the outlets that sold those had sold no lottery tickets up until the April 19 drawing.
And the Massachusetts official told me when they changed their rules, it was, again, this perception of fairness that the everyday person playing the lottery has to be confident that they are in a game with a level playing field, even with people who have millions of dollars to spare.
