At the same time, the industry has seen the emergence on a new kind of lottery provider. Lottery Resellers (aka Lottery Messengers) have come into prominence and as the name implies, is a business born around the opportunity to provide ‘players’ with the ability to purchase tickets in lotteries that otherwise they would not have access to.
Is this a happy coincidence or a marriage made in heaven?
The advent of lottery reselling is changing the face of lottery play due to its ability to open up lottery markets from around the globe to players who wish to buy tickets in specific draws. Whereas the traditional lottery model restricts ticket sales to residents in the host country and as such, prevents non-resident players from entering the draw, the advent of lottery reselling provides players with an ability to effectively play almost any lottery that they wish.
Non-resident lottery play can be accomplished in a number of ways. Firstly, a resident of the jurisdiction in question can act as an agent (or messenger) for the Lottery Reseller and under instruction, can purchase tickets ‘locally’ in the appropriate draw. Once the locally resident ‘messenger’ has purchased the ticket(s), it is ensconced in a safe place until the draw has been completed. The Lottery Reseller has a number of checks and balances in place to ensure the business relationship with the Reseller; the ticket purchase and ticket security arrangements are genuine, whilst ensuring that the local lottery regulations are adhered to. In the event of a winning ticket, the messenger would redeem the prize and the winnings would be passed back through the system to the player.
An alternative business model is where the Lottery Reseller insures against the outcome of the chosen lottery, this model does not require the Reseller or messenger to physically purchase the ticket(s) on behalf of the player, instead the Reseller receives the player’s number selection and then insures against that result occurring in the chosen lottery.
The advantage of this model is quite simple; with less operating expenses, i.e. removal of the necessity for the lottery messenger, the physical purchase of tickets and claims from the lottery operator from the business model, and providing that the cost of the insurance for the draw is less than the physical cost of the tickets purchased in the draw, then it can be a profitable business model.
The Insurance model is arguably more streamlined than the Messenger model, and is simpler to operate. The Reseller has greater control of the operating environment, it requires fewer resources, and the winnings are guaranteed as the Reseller effectively is betting against the player on the outcome of the lottery. However, with ever increasing jackpot prize funds, such as multiple roll-overs, it may be more difficult to make this model work when the cost of insurance exceeds the costs of physically purchasing the tickets.
A further advantage of the insurance model is that is allows operators a greater degree of flexibility regarding the betting options offered to players. For example, whilst the Messenger model provides for a line of numbers to be placed on a chosen lottery draw with a straight win or lose outcome, the insurance model permits the additional combinations of numbers (such as number ranges, odds and evens or high and low numbers) in the same draw thus increasing the chances of winning and enhancing player engagement.
The greater flexibility creates a unique selling proposition and provides the scope to differentiate the operator from the growing number of competitors in the market.
Despite the logistical requirements and expenses inherent in the messenger model – which include locally based messenger(s) potentially spread across a number of jurisdictions, and the implied bond of trust between the reseller and the messenger to hold and pass through the system a winning prize fund – this business is a relatively popular model perhaps because is enjoys simple operational processes and logical flows of funds through the operation, and of course, there is no risk that the insured jackpot claim maybe disputed.
Additionally, depending upon the Reseller, the messenger model allows for a syndicate approach where all of the winnings from the draw are pooled and shared amongst all of the players. Whilst this model eliminates an individual ‘big win’ it does provide a greater chance of a smaller prize.
In an effort to reduce costs and reduce the risks inherent risks of both models, some Resellers are actively looking to develop hybrid models around the same fundamental business principals that include elements of ticket purchase and insurance.
Having established an effective business model, Lottery Resellers need to consider where best to establish their operations. There are a number of options for consideration, but when it comes to balancing the needs for an exemplary technical platform and highly professional support services and a cost-effective financial environment, the Channel Island of Jersey is an attractive alternative to the norm.
The Jersey Gambling Commission has established a modern and dynamic licensing regime and the regulator would welcome discussions with operators proposing this type of business model. Due to the nature of lottery reselling, the licensing requirement for lottery reselling would be determined on a case by case basis and in discussion with the operator to ensure that the operation can legally operate from the jurisdiction.
So why would a Lottery Reseller want to base its operations in Jersey?
Jersey offers Resellers a dynamic and cost-effective combination of experience and innovation, with a regulatory environment tailored to the modern remote gambling operator.
As one of the world's leading International Finance Centres, Jersey offers reliability, political and economic stability, a solid legal basis and a sophisticated and comprehensive infrastructure that has kept the Island at the forefront of global finance for over 50 years.
The Jersey offering is simple and uncomplicated. It consists of two, cost effective, remote gambling licences for B2C and B2B activities in appropriate markets.
There are no hidden costs and eGaming companies based in the jurisdiction benefit from no eGaming duty, 0% corporation tax and no EU VAT regime. All of which are key advantages over other jurisdictions.
Jersey also benefits from excellent connectivity and high quality power provision directly from France, backed up with an on-Island power station capable of serving the needs of the Island indefinitely.
The independent Jersey Gambling Commission is business friendly and approachable and the growing sector boasts an excellent corporate service provider to assist in setting up operations and World-class compliance, banking, legal and technical services.
For the growing Lottery Reseller market, Jersey is an ideal place to base their business.
Group iBusiness Executive
Garfield-Bennett Trust Company Limited
T +44 1534 857 773 | F +44 1534 857 774