The Texas Lottery, a game of chance that has been a fixture in the state for over three decades, is about to embark on a new chapter. After facing months of controversy and legislative scrutiny, the Texas Lottery Commission will be dissolved on September 1st, 2025. However, this doesn’t spell the end for the lottery itself. Instead, the Texas Department of Licensing and Regulation (TDLR) will take over the reins, inheriting both the challenges and opportunities that come with managing an $8 billion operation.
This transition marks a significant shift in oversight and regulation, prompted by concerns over jackpot wins, money laundering allegations, and illegal online ticket sales. As the TDLR prepares to step in, it faces the immediate tasks of addressing declining revenues, implementing new legislative guardrails, and restoring public trust in the Texas Lottery. With a blend of cautious optimism and pragmatic resolve, stakeholders are now looking to the future, hoping to revitalize a game that has long been a source of both entertainment and revenue for the state.
The Lottery’s Tumultuous Past
The Texas Lottery, since its inception, has been a significant source of revenue for the state, particularly for public education. However, recent years have been marred by controversy. Two multimillion-dollar jackpots won in close succession raised eyebrows among lawmakers, leading to accusations of lax oversight and potential money laundering. Lt. Gov. Dan Patrick and other legislators voiced concerns that the Texas Lottery Commission had been turning a blind eye to illegal activities, prompting a deeper investigation into its operations.
These concerns culminated in Senate Bill 3070, which effectively ended the Texas Lottery Commission and transferred its responsibilities to the TDLR. The bill also introduced stricter regulations aimed at curbing illegal play, addressing issues such as bulk ticket purchases and online ticket sales by courier services. The legislative action was a direct response to the perceived failures of the lottery commission to adequately address these issues, signaling a new era of accountability and oversight.
Smooth Transition Under TDLR
Despite the significant change in leadership, the transition to TDLR is expected to be relatively smooth. Lottery transition director Glenn Neal emphasized that most employees would remain in their current roles, simply reporting to a new agency. This continuity is intended to minimize disruption and ensure the seamless operation of the lottery during the transition period. TDLR Executive Director Courtney Arbour also highlighted the agency’s experience in absorbing new programs, noting that TDLR has successfully integrated 25 different programs since 2015.
The lottery represents the largest transition TDLR has undertaken, increasing the department’s staff by 50% and multiplying its budget sixfold. The agency will now oversee more than 20,000 lottery retailers and the state’s charitable bingo games. While the change in management may not be immediately noticeable to lottery players, SB 3070 brings a series of new regulations, including restrictions on bulk ticket purchases and the criminalization of online ticket sales, which aim to create a fairer and more transparent system.
New Regulations and Restrictions
Senate Bill 3070 introduces several key changes designed to address past controversies and prevent future issues. One of the most significant is the stricter regulation of ticket purchases to prevent a single entity from buying up a large percentage of tickets. This measure was prompted by a 2023 incident in which a group purchased 99% of the Lotto Texas draw game’s tickets to win a $95 million jackpot. Lawmakers criticized the lottery commission for allowing such bulk purchases, which they viewed as potential money laundering.
The new law also bans courier services from selling printed lottery tickets online. Courier-owned stores had become top-selling ticket retailers, raising concerns about unfair advantages and the legality of their operations under existing state law. By prohibiting online ticket sales, the legislature aims to level the playing field and ensure that all retailers have an equal opportunity to reach customers. These restrictions reflect a broader effort to enhance transparency, fairness, and regulatory control over the Texas Lottery.
Tackling Declining Sales
In addition to addressing regulatory issues, the TDLR faces the challenge of reversing a two-year decline in lottery sales. The Texas Lottery is on track to end the fiscal year with approximately $500 million less revenue than in 2024, marking the second consecutive year of decline. Significant drops in Powerball and scratch ticket sales have contributed to this slump. Dawn Nettles, a longtime Texas lottery watchdog, noted that the decline in sales is linked to a decrease in the frequency of major prize payouts.
The slump in sales has also diminished the amount of revenue provided to the state’s public education fund. Transfers to the Foundation School Fund have decreased by 11% compared to the same period last year. To address this issue, TDLR is exploring new games and ways to reengage customers. Courtney Arbour emphasized the importance of offering new ticket options and draw options to incentivize play. The agency is also meeting with lottery directors from other states to discuss strategies for revitalizing sales and attracting players.
The Sunset Review Ahead
TDLR’s performance in managing the Texas Lottery will be closely monitored in the coming years. Senate Bill 3070 requires the state’s Sunset Advisory Commission to review the department’s lottery operation in 2029. This review will assess the effectiveness of TDLR’s management and determine whether the lottery should continue to operate under its oversight. Without further legislation, the lottery would be fully abolished on September 1, 2029.
To ensure long-term success, TDLR is establishing a lottery advisory committee and a bingo advisory committee. These committees will provide input and guidance on the operation of the games. The Texas Commission of Licensing and Regulation has already adopted emergency rulemaking to establish the terms of these committees, with appointments scheduled to take place at the commission’s next meeting on September 4th. The Sunset review and the advisory committees underscore the importance of accountability and continuous improvement in the management of the Texas Lottery.
A Second Chance for the Texas Lottery
As the Texas Lottery transitions to the oversight of the Texas Department of Licensing and Regulation, it stands at a crucial juncture. The move comes after a period of controversy and declining sales, presenting both challenges and opportunities for the agency. With new regulations in place and a renewed focus on transparency and accountability, the TDLR aims to revitalize the lottery and restore public trust.
The long-term success of the Texas Lottery is not only important for the state’s revenue but also for the economic impact it has on local communities. As Dawn Nettles pointed out, lottery winners often reinvest their winnings back into the economy. The TDLR’s ability to navigate the challenges ahead and capitalize on opportunities will determine whether the Texas Lottery can reclaim its position as a reliable source of revenue and entertainment for Texans.
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