Last month, a Houston Chronicle investigation revealed how wealthy investors were gaming the Texas Lottery, buying up millions of tickets to ensure a winning number.
That story caught the attention of lawmakers who have scrutinized the Texas Lottery Commission over allowing the practice. The commission has since said it will be implementing changes to prevent mass ticket buys in the future.
Eric Dexheimer, investigative reporter for the Houston Chronicle, joined the Texas Standard’s Laura Rice with the latest developments stemming from his reporting.
This transcript has been edited lightly for clarity:
Texas Standard: All right. Give us a quick refresher on your previous reporting. Tell us more about these mass buy-ups with the Texas Lottery you uncovered.
Eric Dexheimer: So this particular draw happened in April of last year. It was a Lotto Texas draw, which requires the players to pick six numbers. And if you get all six numbers right, then you win the jackpot. And by April of last year, there had been 93 draws without a jackpot winner, which meant that the jackpot had soared to $93 million.
And for institutional or wholesale or syndicate buyers – there are a number of names for them – there is a certain set of mathematical circumstances that make it worthwhile for them to literally buy up every combination. And if there are six numbers, you must purchase 25.8 million combinations, which is what one buyer did in this draw. And they ended up winning the jackpot, which was a one-time payout of $57.8 million.
Wow. So what did the lottery commission say at the time about this practice? Were they aware of it?
They said that no laws were broken. There were no laws preventing either the retailers from selling these tickets or a single buyer from buying all of them. Subsequent to the draw, they did concede that it affected the perception of fairness at the lottery.
And also, if the jackpot is advertised at $95 million and a single person is already guaranteed that he will win it, then the rest of us are only playing for half that amount.
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Lawmakers saw your reporting and have criticized the lottery commission for allowing this to happen. What have they said?
So one of the big challenges with this operation is the logistics – that is, how do you actually acquire 25 million tickets? And so there were four stores that sold them all. They were in on the operation, and they had to gear up to get a lot more equipment. Tickets for the lottery must be processed and sold on lottery-issued machines. So these stores needed a lot of machines, and they made last-minute requests that were very unusual.
These stores hadn’t done a lot of business up until then. They were kind of like pop-up operations. And they requested of the lottery, you know, a couple dozen new machines so they could process these tickets in the 72 hours between draws.
And rather than investigate what was going on, the lottery just kind of signed off on it. So after that, the lottery commission, which was appointed by Governor [Greg] Abbott, asked the staffers of the lottery to look into how this had happened.
And so one of the changes they made is that if there’s an unusual request like this in the future from outlets that have not previously sold a lot of tickets – that is, who have not earned the right to have these additional machines – then it’ll have to be reviewed by the executive director. If that had been done in this case back in April, then this draw probably wouldn’t have happened.
Now it doesn’t, I guess, prevent it from happening again. It just sort of would require more planning. And now I guess these outlets already have the machines so they could potentially be involved in this again, right?
They have since returned them; as I said, these were pop-up operations. But you’re right, there’s no law that is preventing it. I think what they’re doing is trying to, you know, maybe throw up a couple more obstacles.
It’s up to the Legislature to enact laws. And the lottery commission is going through what’s called the Sunset review this year, which is once every 10 years, a commission kind of reviews the operations of an agency.
And I know that this will be a big topic of conversation for them going forward as the Legislature meets, starting early next year.
