To combat systems that facilitate tax fraud and unpaid child support, state lawmakers are thinking of prohibiting Oregon lottery winners of significant wins from reselling their tickets.
Around the state, a cottage economy of so-called lottery discounters has grown up as a result of the sales practice. Every year, they purchase millions of dollars’ worth of winning tickets from their original winners at great discounts, primarily video lottery and keno tickets with rewards above $1,500. When they show the tickets at Wilsonville and Salem lottery payment facilities, they then claim the face value of the rewards.
The plan facilitates tax avoidance, according to an investigation that was reported by The Oregonian/Oregon Live last summer. Some winners are able to escape having their winnings taken away from them in order to pay off past-due child support and other state debts. Shady operators may be encouraged to coerce winners into selling tickets. Additionally, it has been connected to money laundering in certain states.
The first public hearing on House Bill 3115, which is sponsored by Rep. John Lively, D-Springfield, took place Thursday. Members of the House Committee on Commerce and Consumer Protection heard testimony. In particular, it would prohibit people from purchasing or selling winning tickets or shares, as well as from claiming winning tickets or shares on behalf of another person in exchange for payment.
The lottery has long been aware of the practice. Each year, the most active discounters—including freelancers and pawn shop owners—collectively claim millions of dollars in awards. Employees in its payment centers are familiar with them because they frequently arrive with bundles of winning tickets to claim all at once.
Some discounters informed the media that they save their ticket receipts and claim the cost as a business expense on their yearly taxes. This method undervalues the state because it only levies the discounter’s net gain rather than the entire prize value.
Matt Shelby, the director of communications and policy for the Oregon Lottery, said committee members that some people have professionally entered this market, as we have seen and as The Oregonian has previously documented. We are aware of a few pawnshops and a few people in the state who specialize in purchasing winning tickets at steep discounts.
All awards worth more than $1,500 must be redeemed in person at a payment facility or by mail, Shelby informed the committee members. He listed a number of justifications for why winners are prepared to sell their tickets for up to 50% less: For nefarious reasons, a winner may be misinformed that the lottery will check their immigration status or claim the majority of their prize in taxes; or they may wish to remain anonymous in order to conceal their winnings from third parties or to avoid paying child support and other state debts; or convenience winners do not want to travel to Salem or Wilsonville or trust their large prizes to a mail-in claim.
Regarding the practice, state legislation is ambiguous. It forbids winning tickets from being assigned. Shelby noted that enforcement is challenging because lottery play is anonymous and the state has no way of proving a ticket has changed hands, even if it is obvious that the discounters aren’t the real winners and that nobody is so fortunate.
The Oregon Lottery does forbid its shops from buying winning tickets at a discount, and it gives the Oregon Department of Revenue a list of high-volume claims. However, Shelby said he was unaware of the agency’s use of the data due to taxpayer confidentiality.
The practice has been outlawed in other states. For example, selling a prize winner’s right to claim a prize is illegal in Texas. Since implementing a strategy of looking into frequent winners in 2014, Georgia has clamped down by refusing to pay claims associated with it. People involved in large discounting operations have been imprisoned in Massachusetts.
Rep. Virgle Osborne, R-Roseburg, questioned whether the legislation should make discounting a misdemeanor and what type of stick Oregon would have to enforce the proposed statutory language.
Rep. David Gomberg, D-Otis, expressed his worry that discounters were encouraging problem gambling by paying winners cash right away. He claimed that seeing the state pursue those who fail to pay child support inspired him. Additionally, he inquired as to whether bar owners and other businesses were intentionally permitting discounters to operate at their locations in violation of their agreements with the state lottery.
According to Shelby, they were, and those who violated the law may lose their contracts, but the statute’s more forceful wording might work better. At the lottery shops they frequent, discounters are frequently well-known. One told the media that he gives bartenders a 3% finders fee if they recommend prize winners.
Lively and Rep. Kim Wallan, R-Medford, said Thursday that Oregon should first clearly state in law that the practice is illegal before granting the lottery rule-making authority to apply the law more creatively.
Saying unequivocally that “this is illegal and we don’t want to do it” is a good way to start addressing some of these behaviors, Lively said. Additionally, the law would give the lottery the authority to create rules, which might include additional enforcement strategies. Before we move on to further discussions on how to make sure it doesn’t happen, let’s make it clear that we think this is wrong.
Although there was no opposition to the bill at the hearing, no action was taken on it Thursday. In the past, Governor Tina Kotek has stated her support for resolving the matter.
-One of the reporters on the investigative team is Ted Sickinger. 503-221-8505, [email protected], or tedsickinger are his contact details.
Your support is essential to our journalism. Please sign up for a subscription at OregonLive.com/subscribe right now.
