The startups funded by billionaires Jerry Jones, Mark Cuban and other venture capitalists are betting on revolutionizing the $100 billion lotto industry.
IIf there was any question about where Lady Luck lives, it’s in an office above the Utopia Deli on the New Jersey side of Greenwood Lake.
At the center of Jackpocket’s operations in West Milford, a town known for its defunct iron ore mines and waterfront homes 40 miles from Manhattan, dozens of lottery stations sit on long tables, fielding more than 100,000 tickets a day. Barcode scanners beep every second, indicating that a customer has just purchased a Powerball, Mega Millions, or other lottery ticket somewhere in the Garden State. The staff then inserts the tickets into a high-speed scanning device and within a few seconds, a gambler who has bought a $2 get-rich-quick dream with a few taps of the phone can view the scanned image of the ticket in the Jackpocket app.
Eric Parker, 37, who co-founded Jackpocket with CEO Pete Sullivan in 2013, says that when they started the company in a WeWork space in SoHo, they would go to the corner store three times a day to buy lottery tickets for customers and take pictures of each one with a phone. tasty. “At first, Pete and I were buying tickets at the bodega,” Parker says. “Now we can process a million tickets a day.”
Technically, the Jackpocket is a licensed lottery courier service, which means that it is legal to purchase lottery tickets on behalf of others and store them until the draw. Instead of going to the convenience store to buy a ticket, the player can open the app and choose their numbers (or let the computer choose) and Jackpocket will buy it for them. The application is geographically restricted so that gamblers cannot purchase a lottery ticket outside the country. (For anyone winning less than $600, the company will credit the money directly to an account. With a win greater than $600, the company will mail the actual ticket to the player.)
To date, Jackpocket has raised more than $200 million at a $620 million valuation from the likes of billionaire Mark Cuban, convenience store chain Circle K, and celebrities like comedians Kevin Hart and Whitney Cummings.
While Sports betting grabs all the headlinesThe state lottery is the cash cow of the gambling industry. In 2021, spend gamblers $98 billion on lottery tickets, according to the North American State and County Lottery Association. To put that in perspective, slots and table games across the country’s casinos generated less than half of that, $43.79 billion, in 2022 (January-November), while sportsbooks accounted for $6.56 billion during the same time.
“It’s a very simple business,” Mark Cuban says of his investment in Jackpocket. “It makes playing the lottery easier and more fun.”
The gaming industry is focused on expanding sports betting, which is currently legal in 36 states, but DraftKings, FanDuel, Caesars, Wynn and others are fighting over table scraps. The real opportunity, a $100 billion opportunity, is to expand and modernize the lottery for a younger, tech-savvy player, Sullivan says.
“This has been the story of my life for 10 years,” says Sullivan, 37. “America loves sports and sports betting is a hot sell to investors. But it’s very niche. What people don’t understand is the enormity of the lottery — it’s America’s secret. Lotteries are such a mass market that they’ve grown to be gigantic.” sleeper.”
With a $100 billion market at stake, Jackpocket, which lives in 15 states, isn’t alone in seeing the huge potential of lotteries. Right now, best estimates are that Jackpocket and other mobile lottery courier apps have captured between 2% and 3% of the national lottery market, which means there’s nothing but a positive side.
Mark Cubanthe billionaire owner of the Dallas Mavericks and one of stars Shark tankHe says he invested in Jackpocket for two reasons: “It’s a very simple business,” Cuban wrote in an email to Forbes. “It makes playing the lottery easier and more fun.”
The modern-day lottery began in New Hampshire in the 1960s, but humans have been playing similar games throughout history—the 13 American colonies funded, in part, by lottery proceeds. the The closest known lottery He was in China during the Han Dynasty, which is said to have helped finance the Great Wall of China. Later, the Roman Empire had its own lotteries. Today it is big business for most states, which protect their tax-generating institutions with a bulwark of legislation, regulation, and bureaucracy. It is estimated that approximately 50% of Americans will purchase a lottery ticket in a given year.
And lottery jackpots are getting bigger, adding to the excitement and growth of the industry. Since 2016, there have been six jackpots (between Mega Millions and Powerball) with prize pools of over $1 billion. Three of them occurred last year. Lotto ticket sales grew 18% between 2020 and 2021, according to data from NASPL. Not a bad growth rate for a 60-year-old industry.
In Jersey City, rival Lotto.com, with operations in seven states, has a sleek open plan office overlooking lower Manhattan. Tom Metzger, the company’s CEO, is wary of the idea that mobile lottery couriers are “disrupting” the lottery industry.
“I’m not trying to take a dollar from the traditional retailer, the guy who likes to go to the store in the morning and buy his cup of coffee and his Pick 3 ticket; I don’t want to convert him into a customer,” says Metzger. “I want the millennials or the Gen Zers, the digital customer. completely.”
In addition to offering lottery tickets, Lotto.com is launching digital scratch games in Texas and will eventually bring this product to the six other states in which the company operates. “All the growth is in scratch,” he says. “the [lottery] It has not changed in 60 years. The prizes have gotten bigger, but there’s no instant gratification to scratch. People play these things like slot machines.”
Metzger — who previously worked at Scientific Games, the largest maker of scratchers — also consulted on LottoLand, which is run by EU Lotto Ltd, a Gibraltar-based gambling company that was hit Sanctions by the UK government to commit money laundering violations. Metzger says there is no connection between Lotto.com and LottoLand, although the lobbyist says Lotto.com is the US arm of LottoLand. Metzger denies the association between the companies but is elusive with any details. He will not reveal the name of the sole investor in his company — “a wealthy individual in Europe,” he says — nor will he say how much the company has raised. “I don’t have money from the Russian mafia or anything like that,” he jokes.
Another entry in the lottery app wars is Jackpot, owned by UK-based 99Dynamics, which launched in the US late last year. 99Dynamics is known for running what is known as a derivative lottery, which allows overseas gamblers to bet on the outcome of American and European lottery games. Founded by Roi More, the Israeli businessman who launched ride-sharing company Gett, and Yariv Ron, who has founded other gambling businesses, Jackpot has raised $42 million at an undisclosed valuation from the likes of billionaire Dallas Cowboys owner Jerry Jones and the Tisch family, New York Giants owners among others. Akshay Khannawho worked at StubHub, Philadelphia 76ers and earned Forbes 30 Under 30 in 2017, joined the company last year as CEO to help Jackpot get into the US lottery market.
With so few companies fighting for a percentage of a $100 billion market, the competition is fierce and at times, even litigious. (Jackpocket sued Jackpot for federal copyright infringement, unfair competition, and violations of deceptive business practices laws last year. In December, a judge ruled in Jackpot’s favor. Jackpocket filed an appeal in early January.) But Khanna says the courier space in Lottery against greater competition than the other.
“The real competition is the status quo,” he says. “The main thing we focus on is not taking market share away from other digital businesses. [Lottery players] They’ve done things one way for the last six decades and suddenly, there’s a new way of doing it.”
And when it comes to running a gambling business, the lottery can’t be beat. Bill Pasquerel III, a lobbyist who has worked with Jackpocket and Lotto.com, sees the lottery as a unique no-lose corporate offering. For players, of course, winning is almost impossible. According to lottery officials, you have a 1 in 302 million chance of winning the Mega Millions jackpot.
“There is tremendous risk management in the sports betting industry: you have to know what you are doing when you are betting or you will incur huge losses,” says Pasquerel. “But the lottery is much more profitable – there is no risk. You don’t bet. There are no odds. You get.” [percentage] From the ticket – win or lose.