Oregon needs to prevent lottery winners from dodging child support and other debts by prohibiting the type of ticket-buying schemes exposed last month by The Oregonian/OregonLive, according to four lawmakers involved with gambling regulation at the Legislature. Action, they said, could come as soon as the 2025 legislative session.

Those bipartisan lawmakers said they had never heard of so-called ticket discounting until a newsroom investigation revealed individuals and business owners who buy winning tickets on a massive scale. Some openly advertise to lottery players looking to score fast cash and avoid paying debts.

While it’s difficult to say how widespread the practice is, the newsroom identified a handful of individuals, all of them well known to the Oregon Lottery, who have cashed in more than $15 million in tickets during the last six years. Those buyers said they purchased tickets from the true winners at 55 to 80 cents on the dollar and subsequently collected full prizes.

While it isn’t illegal in Oregon, the under-the-table practice can allow original winners to evade taxes and avoid past due child support and other debt that state agencies can garnish from winnings when they are claimed. It also reduces state and federal tax receipts from lottery prizes because some of the so-called discounters claim the purchase price of a ticket as a tax deduction, so only the difference between their purchase price and their prize amount is taxed.

In other states, discounting has been linked to money laundering, and several have banned the practice and prosecuted offenders.

“I absolutely think it should be regulated,” said Rep. John Lively, D-Springfield, who chaired the House Committee on Gambling Regulation until it was disbanded after this year’s short legislative session.

Lively said he planned to talk with House Speaker Julie Fahey and the chair of the House Committee on Commerce and Consumer Protection about taking up the issue, perhaps at a hearing during September’s legislative days.

Lucas Bezerra, a spokesperson for Fahey, said in an email that the Eugene Democrat is “supportive of legislators exploring potential solutions to this issue for the Legislature to consider during the 2025 session.”

Sen. Sara Gelser Blouin, D-Corvallis, and the former co-chair of the Joint Committee on Gambling Regulation until it disbanded after the 2022 legislative session, said she will also pursue the issue with Senate leadership and explore draft legislation to make a fix. She said discounting’s impact on child support collections and winners’ eligibility for other human services benefits is potentially significant, and it was another example of the lottery system not receiving the attention it needs from the Legislature.

“I had no idea things like that happened,” she said. “Clearly that is a problem that should be addressed. … It just seems like a common-sense problem to fix.”

Senate Majority Leader Kate Lieber, D-Beaverton, did not respond to requests for comment.

Oregon Lottery officials told the newsroom they’ve been aware of the ticket-buying problem for “years,” but they’ve done little to stop it and have not shared details with lawmakers.

Last year, the agency started tracking high-volume claimants and sharing that information with auditors at the state Department of Revenue. That agency told the newsroom it’s difficult to demonstrate tax evasion, not only because lottery play is anonymous, but also because officials would need to prove “intent” on the part of the original winner. The agency could not provide an estimate of lost tax revenue from the scheme.

Lottery winnings can be an effective source to recoup debt owed by Oregonians. Since 2019, state agencies have collectively garnished lottery winnings for $3.5 million in past due child support and other overpayments of human services benefits.

Kate Richardson Cooper, administrator of Oregon’s Division of Child Support, told the newsroom that’s a significant sum, and even a $100 collection is meaningful to a family that hasn’t seen payments in a while.

Some discounters openly advertise the advantages of winners selling their tickets for cash, including “no tax paperwork,” “no child support situations,” and “no reporting” to keep the winnings anonymous.

“Marketing (and tempting) avoidance of responsibility — particularly toward one’s children, and especially gambling with $ that’s already owed them — is not a winning argument,” Richardson Cooper wrote in an email.

Like lawmakers, Richardson Cooper also said she’d been unaware of the scheme until being contacted by the newsroom. She said she’d be inclined to support legislation banning the practice and would testify in support.

The Lottery and the five-member citizens’ commission that oversees it did not directly respond to written inquiries about why they did not raise the issue with lawmakers or take steps to rein in the discounting problem.

“We don’t like the practice,” Oregon Lottery Director Mike Wells said of discounting, in general, in an emailed statement. “That said, because our play is anonymous, and winning tickets are bearer instruments, restrictions on the sale of the tickets are challenging to regulate. We’re open to continued dialogue with policy makers on how to address the practice.”

Last year, lottery officials did take the limited step of prohibiting only authorized lottery retailers and their employees from purchasing winning tickets at a discount – a practice they say is also difficult to track because employees in the agency’s payment centers have no way of knowing if prize claimants have a connection to retail stores.

Since adopting the rule, the agency has not sanctioned any retailers for the practice, though one retailer in Pendleton previously acknowledged that it happened, infrequently, and he told an investigator he was aware of other retailers doing it, too.

Wells’ statement said the agency will continue to share information about high-volume claimants with the Department of Revenue and will hold retailers accountable if it learns they are involved with discounting.

“I know the Lottery continues to look at this matter as it does not resolve all of the issues,” MardiLyn Saathoff, chair of the commission, said via text about the overarching discounting problem.

The newsroom identified four states that have policies or laws to prevent or prohibit lottery discounting beyond limitations on only lottery retailers, including Massachusetts, which identifies high-volume winners and can halt their collection of prizes. After failing to address the problem for years, that state’s lottery director publicly warned schemers in 2019 that “if you think the Massachusetts State Lottery is a place to engage in money laundering, tax evasion or avoiding child support, those days are rapidly coming to an end.”

Oregon Lottery officials considered creating a similar policy last year but pumped the brakes, questioning how much enforcement would cost and if it would be effective.

Other states, like Texas and California, have banned the practice altogether.

Rep. Kim Wallan, R-Medford, said that rather than having the Oregon Lottery and the Oregon State Police trying to police high-volume winners, like Massachusetts, it should consider banning the practice, too.

“You don’t have to catch every single person,” she said. “You just have to have meaningful enforcement so people know it’s illegal.”

She said the evasion of child support is her biggest concern, along with what financial resources would be needed to enforce any new policy. She said she needed more specifics, but thinks the Legislature is the right place to address it.

“Now that we know this is going on, we are the people, and I think we should do it,” she said. “We need to have legislative action, put it in statute and not allow it.”

Rep. Boomer Wright, D-Coos Bay, another member of the disbanded committee and an ongoing gambling workgroup, said the only information he’d seen regarding lottery games was a report detailing sales. Meanwhile, the committee and workgroup were dealing with issues like the state definition of a casino and how many slot machines individual establishments should be allowed to have – not ticket discounting and debt evasion.

“I agree with Rep. Wallan,” he said. “If (a ban) is something that would stop the process, and if our lottery commission said this is something they want and would need, I think we should pursue it.”

- Ted Sickinger is a reporter on the investigations team. Reach him at 503-221-8505, tsickinger@oregonian.com or @tedsickinger

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