Published: February 10, 2023

Startups funded by billionaires Jerry Jones, Mark Cuban and other venture capitalists are betting big to disrupt the $100 billion lotto industry.

If there’s any question as to where Lady Luck lives, it’s in an office above the Utopia Deli on the New Jersey side of Greenwood Lake.

In Jackpocket’s operations center in West Milford, a town known for its defunct iron ore mines and waterfront homes 40 miles from Manhattan, dozens of lottery terminals sit on long tables, spitting out more than 100,000 tickets a day. Barcode scanners beep every second, signaling that a customer just bought a Powerball, Mega Millions or another lottery ticket somewhere in the Garden State. Employees then feed the tickets into a high-speed scanner and in a few seconds, the gambler who bought a $2 dream to get rich quick with a few taps on the phone can view the scanned image of the ticket in the Jackpocket app.

Eric Parker, 37, who cofounded 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 photos of each one with a smartphone. “In the beginning, it was me and Pete buying tickets at the bodega,” says Parker. “Now we can process 1 million tickets in a day.”

Technically speaking, Jackpocket is a licensed lottery courier service, meaning it’s legally allowed to buy lottery tickets on behalf of others and store them until a drawing. Instead of going to the convenience store to buy a ticket, a player can open the app, pick their numbers (or let the computer select) and Jackpocket will buy it for them. The app is geofenced so gamblers cannot buy an out-of-state lottery ticket. (For anyone who wins less than $600, the company will credit the money directly to an account. With wins greater than $600, the company will mail the physical ticket for the player to cash it in.) 

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 gets all the headlines, state lotteries are the gambling industry’s cash cow. In 2021, gamblers spent $98 billion on lottery tickets, according to the North American Association of State and Provincial Lotteries. To put that in perspective, slots and table games across the country’s casinos generated less than half that, $43.79 billion, in 2022 (from January through November), while sportsbooks rang up $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 expanding and modernizing the lottery for a younger, tech savvy gambler, says Sullivan.

“This has been the story of my life for 10 years,” says Sullivan, also 37. “America is in love with sports and sports betting is a sexy sell to investors. But it’s extremely niche. What people don’t understand is how huge the lottery is—it's America’s secret. The lottery is so mass market that it's grown to be the sleeping giant.”

With $100 billion market at stake, Jackpocket, which is live in 15 states, is not alone in seeing the enormous potential of lotteries. Currently, the best estimates are that Jackpocket and the other mobile lottery courier apps have captured between 2% to 3% of the national lottery market, meaning there is nothing but upside.

Mark Cuban, the billionaire owner of the Dallas Mavericks and one of the stars of Shark Tank, 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 started in New Hampshire in the 1960s, but humans have been playing similar games throughout history—America’s 13 colonies were funded, in part, by lottery revenue. The earliest known lottery was in China during the Han dynasty, which is said to have helped fund the Great Wall. Later, the Roman Empire had its own lottery games. Today it is big business for most states, which protect their tax-generating institutions with a fortress of legislation, regulation, and bureaucracy. It is estimated that nearly 50% of Americans will buy a lottery ticket in a given year.

And lottery jackpots have only gotten bigger, adding to the excitement and the industry’s growth. Since 2016, there have been six jackpots (between Mega Millions and Powerball) with prizes greater than $1 billion. Three of them took place in the 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.

Over in Jersey City, competitor, which is operating in seven states, has a slick open office with views of lower Manhattan. Tom Metzger, the company’s CEO, bristles at the idea that mobile lottery couriers are “disrupting” the lottery industry.

“I'm not trying to take one dollar away from the traditional retailer, and the guy that likes going to the store in the morning and buying his cup of coffee and his Pick 3 ticket; I don't want to convert him to being a customer,” says Metzger. “I want the Millennial or the Gen Zer, the customer who is completely digital native.”

In addition to its lottery ticket offering, is launching digital scratch-off games in Texas and will eventually bring that product to the six other states the company operates in. “All the growth is in scratch-offs,” he says. “The [lottery] hasn’t changed in 60 years. The jackpots got bigger, but there isn’t the instant gratification of scratchers. People play these things like slot machines.”

Metzger—who previously worked for Scientific Games, the largest manufacturer of scratch-offs—also consulted for LottoLand, which is operated by EU Lotto Ltd, a Gibraltar-based gambling outfit that has been hit with sanctions by the U.K. government for money laundering violations. Metzger says there is no connection between and LottoLand, even though his lobbyist says is the U.S. arm of LottoLand. Metzger denies the link between the companies but is elusive with any details. He won’t reveal the name of his company’s single investor—“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 U.K.-based 99Dynamics, which launched in the U.S. late last year. 99Dynamics is known for running what’s known as derivative lotteries, which allow gamblers overseas to bet on the outcome of the U.S. and European lottery games. Founded by Roi More, the Israeli entrepreneur who launched ridesharing company Gett, and Yariv Ron, who has founded other gambling companies, Jackpot raised $42 million at an undisclosed valuation, from the likes of billionaire Dallas Cowboys owner Jerry Jones and the Tisch family, co-owners of the New York Giants, and others. Akshay Khanna, who worked at StubHub, the Philadelphia 76ers and was named a Forbes 30 Under 30 in 2017, joined the company as CEO last year to help Jackpot pivot into the U.S. lottery market.

With so few companies fighting for a percentage of a $100 billion market, the competition is vicious and at times, even litigious. (Jackpocket sued Jackpot for federal copyright infringement, unfair competition, violating deceptive trade practices laws last year. In December, a judge ruled in favor of Jackpot. Jackpocket filed an appeal in early January.) But Khanna says the lottery courier space is up against greater competition than one other.

“The real competition is the status quo,” he says. “The key item that we're focused on is not taking market share away from other digital businesses. [Lottery players] have done things one way for the last six decades and all of a sudden, there's a new way to do it.”

And when it comes to running a gambling business, the lottery can’t be beat. Bill Pascrell III, a lobbyist who has worked with Jackpocket and, sees the lottery as a uniquely no-lose proposition for companies. For players, of course winning is nearly impossible. You have a 1 in 302 million chance to win a Mega Millions jackpot, according to lottery officials.

“There's massive risk management in the sports betting industry: you have to know what you're doing when you're putting up the odds or else you can suffer massive losses,” says Pascrell. “But the lottery is far more profitable—there’s no risk. You’re not taking a bet; there are no odds. You get a [percentage] of the ticket—win or lose.”

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