Online lottery ticket company Jackpot announced Wednesday that it has closed $35 million in Series A funding, led by some of the biggest names in esports who see promising growth potential in digital lottery sales.
The cash injection could allow Jackpot to begin rolling out its website and app later this year in select locations where online lottery ticket sales are allowed. For example, the company said it could operate in states like New York, New Jersey, Texas, Ohio and Oregon.
Funding for the round was led by Accomplice, a venture capital firm co-founded by DraftKings board member Ryan Moore and Courtside Ventures, an early-stage investor in sports, digital media, fitness and games. Also among the investors: the Kraft Group, which owns the New England Patriots; the Haslam Sports Group, which owns the Cleveland Browns; Fanatics CEO Michael Rubin; DraftKings CEO Jason Robins; and Boston Red Sox President Sam Kennedy. NBA superstars James Harden and Joel Embiid and NHL legend Martin Brodeur round out some of the notable investors.
“What we’re doing is really just allowing you to buy that lottery ticket without ever leaving your couch,” Akshay Khanna, Jackpot co-founder and CEO of North America, said in an interview with CNBC.
The $100 billion-a-year lottery business is still mostly cash-based, with buyers getting tickets at bodegas, convenience stores, gas stations, and other locations.
Jackpot, which says it wants to transform the store to better align with the online shopping habits of today’s consumers, will make its money by charging a convenience fee on purchases. The company added that it is currently working with local regulators in select states to get approval to roll out the service.
“Over a dozen states have been incredibly receptive to this, recognizing that this is actually a fundamentally different channel for the same product,” Khanna said.
In 2021, Jackpot said its research shows that 53% of Americans have purchased lottery tickets, but only about 5% of them were purchased online. Khanna said making the lottery tickets available online will help increase sales revenue for states.
“We certainly believe that this will appeal to a potentially younger and more diverse demographic,” Khanna said. “That’s one of the reasons states are supporting this model, because one of the goals here is to expand this product to people who might not traditionally have been the ones who bought lottery tickets.”
However, some critics, such as the National Council on Problem Gambling, warn that easier access to purchasing lottery tickets could represent a slippery slope for vulnerable people.
“Any form of online gambling inherently gives the user a sense of anonymity and is much easier to hide than other forms of gambling,” Jaime Costello, the group’s program director, said in an email. “These characteristics, coupled with instant access to purchases, results, etc., increase the risk of problems for individuals buying lottery tickets online.”
Khanna said Jackpot will have age verification controls and that the company is investing to comply with government regulations.
Correction: This story has been updated to correct the spelling of James Harden.