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Emily D. Swoboda

New Ohio Service Could Run State-Level Compliance Risk

22 November 2008

A new online service promises to make playing the lottery in Ohio more convenient, but omissions in its terms and conditions could lead to compliance issues at the state level.

Ohio Lotto Butler was launched in August by Bryan Melendez, an entrepreneur from Norwood, Oh.

In essence, Ohio Lotto Butler is an online subscription service, much like those offered through the state lotteries in North Dakota, New York, New Hampshire and Virginia. However, it is not affiliated with the Ohio State Lottery and it makes a disclaimer to that effect on its Web site:

Important Note: It is Illegal for anyone other than the state Lottery to sell Lotto tickets. WE DO NOT SELL TICKETS, we are a delivery/courier service. We are your loyal man servant who merely runs errands for you. We get the tickets and deliver them. This is our service.

According to the site, for a monthly fee -- and there are different plans with different fees -- Ohio Lotto Butler will purchase lottery tickets on behalf of its customers and hand-deliver them in the event they are winners.

Seems like an innocent enough idea. In an interview with the Cleveland Plain Dealer, Mr. Melendez likened his business to "handing a friend 5 bucks and asking them to pick up a gallon of milk and a lottery ticket while they're out."

While perusing, however, IGamingNews noticed two essential legal disclaimers absent from the service's terms and conditions: a minimum-age requirement and a geographical requirement.

According to the terms and conditions of the Ohio State Lottery, one must be 18 years of age to play the lottery, though such a disclaimer does not appear on Mr. Melendez's site.

Moreover, federal law, which covers the importation or transportation of lottery tickets, prohibits one in the business of procuring lottery tickets in one state for someone in another state, according to Mark N.G. Hichar, a partner at Edwards Angell Palmer & Dodge in Boston. Also illegal is transferring information across state lines that would facilitate a purchase.

"They come right out and say on their site that we are buying on your behalf -- 'you own the tickets,' " Mr. Hichar said. "So, they, in my view, walk right into the scope of that statute unless they keep the transaction entirely within the state.

"I would expect that it's limited to within the Ohio boundaries," he continued. "And I would expect that because that's the only game they sell."

However, nowhere on the Ohio Lotto Butler Web site does it state that a customer must be a resident of the state of Ohio with an Ohio address.

To test whether or not the Web site had geolocation measures installed, IGN attempted to subscribe to the service, which is funded through PayPal, an online payment solutions provider.

IGN, located in Missouri, was able to choose a plan, open an account with PayPal and come just short of paying for the service without running into any alerts regarding location.

While this is not hard proof of the missing requirements to operate the service legally, it calls into question how well-advised Mr. Melendez was when building his business.

The Ohio Lottery Commission, for its part, is being relatively mum on Mr. Melendez's business.

Other than sending a cease-and-desist letter to Mr. Melendez a few weeks ago asking him to stop using the lottery's Classic Lotto logo, the commission is not taking a position on the legality of Ohio Lotto Butler, according to Marie Kilbain, spokesperson for the commission.

"We're leaving that to the law enforcement to make that decision," she said.

Ms. Kilbain told IGN that the commission has spoken with the appropriate law enforcement authorities to make them aware of the service and ensure its compliance with state law.

And while she agreed that a site like Mr. Melendez's should have safeguards for age verifications, she reiterated that the lottery's position was to notify different law enforcement agencies about Mr. Melendez's site.

Ms. Kilbain said Mr. Melendez asked her whether the commission would consider offering the service.

"We have a base of around 8,200 retailers and we bring in foot traffic to their stores," she said, without specifying further.

Ohio Lotto Butler may indeed be a legal offering, and a remedy may be as simple as modifying the terms and conditions to include age and location disclaimers. However IGN has been unable to obtain a compliance opinion from the office of Nancy H. Rogers, Ohio's attorney general.

"It is not an area we have jurisdiction over," Michelle Gatchell, spokesperson for Ms. Rogers' office, told IGN. "If consumers feel their consumer rights are violated during a transaction with any company, they can file a complaint with our office," she added.

Multiple calls and e-mails this week to Mr. Melendez were unreturned.

New Ohio Service Could Run State-Level Compliance Risk is republished from
Emily D. Swoboda
Emily D. Swoboda