Mobile lottery app Jackpocket’s mission to change the way lottery tickets are sold in the US has been boosted since it received the first lottery courier license issued in the country late last year. CEO Pete Sullivan talks to Joanne Christie
Though it’s been more than eight years since the Department of Justice’s opinion that the Wire Act related only to sports betting paved the way for states to start selling lottery tickets online, the majority of states have been very slow off the mark.
The reversal of that opinion last year and the subsequent legal wrangling between the DOJ and New Hampshire are unlikely to have inspired confidence in any state that was contemplating entering the digital age.
With just five states currently running ilottery programs, it’s perhaps unsurprising that digital innovators saw an opportunity to fill the gap. After all, just because most states aren’t selling tickets online doesn’t mean that players don’t want to buy them.
But unlike some of the digital companies in the lottery space that have sprung up in other parts of the world – Europe and Australia, for example – by and large those located Stateside have aimed for co-operation with official lotteries rather than competition with them.
In fact, mobile app courier service Jackpocket now has not only the blessing of several US states, but since December it has also been operating as a licensed lottery courier thanks to the granting of the first such license in the country by New Jersey.
So far, the market is living up to the company’s expectations, says Jackpocket chief executive Pete Sullivan. “We obviously knew that New Jersey customers loved the lottery; they are one of the highest in terms of per capita spend in the country so we were super excited.
“It’s been amazing. Within the first 45 days of launching we had done somewhere around 2% of all the Mega Millions sales in the state.”
It currently offers four games in the Garden State – Mega Millions, Powerball, Pick-6 and Cash4Life – and is aiming to add more.
It is also anxiously awaiting the approval of its license in neighbouring New York, the only other state to follow New Jersey’s lead and announce a lottery courier licensing scheme. Despite kicking off the process last summer, the state seems to be dragging its feet on actually issuing any licenses.
“As a New York company that employs a lot of New York residents, we would love to be up and running as soon as possible,” says Sullivan. “We are patiently waiting and we have players every single day asking when we are going to be live in New York.”
Crossing state lines
The company has not been resting on its laurels while it waits for the country’s biggest lottery to open up to couriers, however, and in February it also launched in Colorado.
Though Colorado does not have a courier licensing system, their operation is not prohibited and the company even secured an endorsement from the state lottery when it launched. Sullivan says he thinks the New Jersey license has made other states take notice of the potential of couriers.
“I think what is happening is that New Jersey has led the way to states understanding not only is this a viable product, but also that we are working in good faith with the lotteries, that we are above board in terms of compliance and that we are adding legitimacy to the market,” he says.
“Although there are no laws currently or licensing structures in Colorado, our platform is the same, so we are adhering to those same requirements in the state of Colorado that we are in the state of New Jersey. What this has done is really show states that we have passed a very high bar, are completely legitimate and can add incremental revenue to their state.”
Indeed, in a press release at the time of launch Tom Seaver, director of the Colorado Lottery, said: “Courier services offer the opportunity for us to reach players who want to use mobile technology to interact with and order our products.
“We hope this invites new players to the lottery and results in increased revenues to support our lottery proceeds beneficiaries that serve outdoor conservation, outdoor recreation and schools.”
Pulling in the younger crowd
A vital part of Jackpocket’s strategy to increase revenues is by appealing to millennials, a demographic that does not traditionally play the lottery in the same numbers as older players.
“In Colorado 78% of our users who have played were under the age of 45. In New Jersey currently 66% are under the age of 45,” says Sullivan.
He says this kind of data helps overcome any fears retailers have about cannibalisation.
“There has always been that fear but what is great is that there is third party research that shows it is actually just the opposite, so whether we look at Europe or even some of the states in the US, what we have seen is an increase in retail play after some type of online component launches.”
He says the fact the site doesn’t sell instant tickets and scratch cards has also helped keep lotteries on side – in the US these are more popular than draw-based games.
He adds, however, that while its focus is currently on draw-based games, it is looking at new game formats to try and further increase its appeal to younger audiences.
“I think that we can move the needle on supplemental and incremental sales by addressing this new audience, by getting them to interact and by innovating new games,” says Sullivan.
“In the future there will be a time when we can create new game formats that weren’t conceived and weren’t even possible before, but now that players are connected on smart devices – their identity has been verified, they have the ability to interact with a device, make choices and play in a social dynamic –there is an unlimited amount of new types of game categories and structures that can come out of it.”
While he is cautious about giving away too much detail on this front, he says the concepts the company is working on involve social games and the idea of choice rather than chance, as well as making lottery tickets more than a one-time opportunity.
Next stop: direct sales
However, the development of new games is a longer-term goal, and Sullivan says the company’s more immediate aim is to become a direct seller of state lottery tickets.
“What we want to do is just like a regular brick-and-mortar retailer has a storefront like a 7-Eleven, we want to be the digital 7.Eleven, so we would be an official state retailer that has the ability to sell those tickets – not resell them – but sell them digitally and receive the same commission.”
So far Sullivan says discussions with ilottery providers have been promising, with talks having taken place with three of the states currently running iLotteries. “We think it is possible by the end of this year to actually become the first digital retailer in one of these states,” says Sullivan.
At present, in addition to New Jersey and Colorado, Jackpocket also operates as a courier in Minnesota, New Hampshire, Texas and Washington DC.
While the company obviously wants to expand as quickly as possible, Sullivan is clear that its strategy will remain doing so with the backing of state lotteries.
“There are no short cuts. Building relationships and building integrity with each of these lotteries is very important.
“It has taken a while for us to get here. What we learned was, yes, we are going through these lengthy processes but we need to have patience and work with the regulators and showcase to them that at zero cost we are going to help grow their market. It has proven to be tedious and long but 100% worthwhile because then you gather the support of those lotteries.”