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Texas Republican Governor Greg Abbott has said a legislative effort to potentially limit the use of online lottery courier services in the state is unconstitutional.

During the state’s budget process, legislators included a unique policy provision addressing “lottery sales by phone” that, rather than specifically prohibiting the use of lottery courier operations, effectively directed regulators to do it.

The provision, which is Article IX, Section 17.36 of House Bill 1, says that “it is the intent of the legislature” that the executive director of the Texas Lottery Commission “shall not allow the order, purchase, or sale of lottery tickets by telephone including facilitating the sale of tickets via an application on a phone.”

If implemented, the provision would prohibit the use of lottery courier services such as Jackpocket, Jackpot.com and Lotto.com in Texas, one of the most populous states in the U.S. and a key market for lottery couriers.

However, in a veto proclamation related to the budget bill, Abbott stated that he believes the provision to be illegal.

“I must note that section 17.36 of Article IX is unconstitutional,” Abbott’s message reads. “[The provision] purports to tell the lottery commission that it must issue a new rule on a particular subject.”

“A similar command to the lottery commission was proposed in Senate Bill 1820, but the legislature did not pass that bill,” he continued.

Senate Bill 1820 did have similar, but stronger, language that would have statutorily required the Texas Lottery Commission to promulgate rules to enforce prohibitions on facilitating the playing of a lottery game through the internet.

“Over the past eight years, our lottery commission has made incremental rule changes to purposely circumvent legislative intent that have enabled independent third party couriers to enter the state, and offer novel ways to play the lottery by facilitating the purchase of games via an Internet application,” Republican Senator Bob Hall, the bill’s sponsor, said during a hearing on the bill in March.

SB 1820 was passed by the Senate but did not receive a vote in the House before the end of the state’s biennial legislative session.

Despite Abbott's statement, the Texas governor did not issue a line-item veto of the provision, as he did for other non-gaming related portions of the state budget.

Texas law permits the governor to issue line-item vetoes on spending issues in the state budget bill but is less clear on issues that are in the budget bill but are not directly related to spending.

As such, the provision became law earlier this month, and a state lottery spokesman said that the lottery commission was now in the process of reviewing the bill.

“The Texas Lottery’s five-member commission is reviewing the rider provision included in Article IX of HB 1 along with the Governor’s proclamation statement,” said Steve Helm, a spokesman for the lottery. “It is anticipated this will be an agenda item for discussion at the Commission’s August meeting.”

Bishop Woosley, former director of the Arkansas Lottery and a senior advisor to Jackpocket, said during the March Senate committee hearing that the company has more than 1.3m users in Texas. He said Jackpocket has produced more than $250m in incremental revenue for the Texas Lottery, and added that the company projected $550m in state revenue between 2023 and 2025.

“Every day in every jurisdiction where lotteries legally exist, friends, families and colleagues call, text or otherwise communicate with one another, asking one of the others to pick up lottery tickets on their behalf,” Woosley said “That's the essence of what Jackpocket allows and provides.”

The Texas budget language is a rare legislative effort to constrain lottery courier operations that have risen in popularity over the past few years. Lawmakers Virginia and Wisconsin both prohibited lottery courier operations in 2016 and 2017, but Jackpocket and other courier operators have been able to expand to more than a dozen states including Texas.