Gaming the System: Lottery Ticket Discounting

April 13th, 2016 by

Gaming the System: Lottery Ticket Discounting

Read the entire memo here: Lottery Ticket Discounting for Committee April 14

If you heard that one person had won 85-90% of the major-prize-value lottery tickets purchased at a specific convenience store, a red flag would likely go up. If you were then told that this extremely “lucky” person is the owner of that convenience store, another red flag would go up. Every time someone wins any significant-value prize, that person is beating the odds stacked drastically against them. But when one person is winning such a large majority of the significant prizes, there is cause for concern.

Such scenarios are not imaginative, but have actually occurred frequently across the US. In California, there have been several store owners who have been the holders of around 90% of the winning tickets purchased from their stores.[1] Investigators are highly suspicious of this, as these store owners would have had to personally spend millions on tickets to get these sorts of results by chance.[2] An NBC report points to this phenomenon happening nationwide, stating that:

“In Pennsylvania, a Philadelphia retailer cashed eighteen lottery tickets in three months for a total of $45,000. In New Jersey, a retailer cashed 105 lottery tickets for more than $236,000. In New York, another retailer has cashed 120 winning tickets for more than $500,000. In Illinois, we found one store where four employees and five of their relatives cashed a total of 556 winning tickets, for more than $1,600,000.”[3]

If it seems too good to be true, then it likely is. A Dayton, Ohio news source offers an explanation of a practice that could explain why some retailers seem to beat the odds so drastically and win so often:

“In the most obvious form of abuse that the Lottery Commission seeks to curtail, retailers have at times stolen prizes for themselves. In another method, not illegal but against Lottery Commission rules, store employees have at times turned in tickets for the actual winners when the real winners do not want it known that they have won in order to avoid paying child support or other debts. Those individuals can make a small profit by paying a discount for the ticket, allowing the real winner to avoid paying child support, taxes-owed or other debt. The practice is referred to as “discounting” by the lottery commission.”[4]

Other news sources indicate that ticket discounting is a widespread practice, occurring in various states such as New Jersey[5], Georgia[6], and North Carolina[7]. This practice of ticket discounting is harmful for two obvious reasons. First, it enables players to avoid paying child-support and taxes. Second, ticket-discounting actually rewards retailers with monetary incentive for helping dishonest players avoid paying debts.

The NC Lottery Commission contractually prohibits ticket discounting. The Commission does investigate instances in which it suspects it is occurring. Sometimes lottery investigators catch the perpetrators and sometimes they do not. But this points to a significant problem in our state: the prohibition is simply contractual. Violators would typically be subject to some sort of temporary suspension from selling lottery tickets. If the Commission so chose, it could permanently prohibit the retailer from selling lottery tickets. This type of enforcement is the common practice across various State lotteries.

The State of Indiana, however, is different:

From the Indiana Code: Discounting Tickets

IC 4-30-13-1 Violation; misdemeanor      Sec. 1. A person who knowingly:         (1) sells a lottery ticket and is not authorized by the commission or this article to engage in such a sale;         (2) sells a lottery ticket to a minor; or         (3) sells a lottery ticket at a price other than that established by the commission; commits a Class A misdemeanor. As added by P.L.341-1989(ss), SEC.1.

The State of Indiana has made it a Class A misdemeanor to sell tickets at any rate other than the established one.

There are a couple advantages to Indiana’s system. First, having ticket-discounting specifically classified as a misdemeanor provides further deterrence so retailers will avoid using this practice to make extra money off customers’ winnings. Second, making it a misdemeanor opens up the issue to law-enforcement. The Lottery Commission on its own has been unable to prevent ticket discounting and properly enforce its contractual agreements. Law enforcement agencies have much more resources and investigative personnel. Ticket discounting is a significant problem that compromises the integrity of the NC Lottery and intra-state commerce. This would be a clear and effective first step in addressing the problem. A second possibility is to make the perpetrating ticket retailer secondarily liable for the child support and taxes owed by the original ticket buyer.

[1] See

[2] One owner would’ve had to spend about $2 million on tickets in order to get his reported $304,000 in prizes; and another owner would’ve had to spend about $600,000 in order to bring in their $59,000 in prizes.

[3] See

[4] See

[5] See

[6] See

[7] See attached report