If it ain’t broke, don’t fix it

Khalid Jones moved to Richmond from New York City’s Upper West Side in April to start his new job as executive director of the Virginia Lottery.

Virginia’s River City may move at a slightly slower pace than the city that never sleeps, but Jones found himself instantly at home. Richmond reminds Jones of his youth spent in Little Rock, Arkansas. Both cities are capitals; both are divided by rivers.

In the 1990s, Little Rock had a lot going on, Jones will tell you. It’s the headquarters of Stephens, one of the largest investment banks outside Wall Street, and of course it’s where Bill Clinton as Arkansas governor launched his successful 1992 presidential bid. People who made something of themselves there, Jones says, could make it anywhere.

When Jones visited family in New York’s Queens borough in the summers, they would pepper him with questions about his life in the South. He got the feeling that they didn’t see Little Rock as a bustling hive of activity like he did.

Today when people from out of state ask Jones about his new life in Richmond, he similarly wonders if they’re discounting the city. He wonders if they know that Virginia is a technology hotbed and whether they’re aware the Virginia Lottery in particular has embraced innovation with open arms.

Jones takes the wheel at the Virginia Lottery at an interesting time in the agency’s history. On one hand, for fiscal 2023, the lottery made a record $867 million in profits and $4.6 billion in sales. On the other hand, a coalition of lottery retailers protested Gov. Glenn Youngkin’s proposal of higher taxes and tougher regulations on convenience store skill game machines by refusing to sell Virginia Lottery tickets on April 15, a ploy repeated a few days in May. The governor said in mid-May he would continue to work with state lawmakers to come to an agreement on a skill games bill, ending the protest. 

Even in less tumultuous times, running the agency is a big job. In addition to managing the lottery, Jones also oversees licensing and regulation of the state’s nascent online sports wagering and casino gaming industries. 

After graduating from Wake Forest University and Stanford Law School, Jones spent nearly a decade at different law firms, specializing in defending financial institutions in large-scale government investigations.

He then decided he’d rather be paid by the idea than by the hour, and became a managing partner at SourceRock Partners, an investment firm focusing on real estate, media, sports and technology. In 2015, Jones co-founded Echo Fox, a now-dissolved esports organization, with actor and former NBA player Rick Fox.

Through his investments in Echo Fox and other gaming businesses, Jones developed a relationship with the Arizona State Lottery and helped to build that lottery’s Ultimate Playlist, a free-to-play, promotional mobile app.

In 2020, Jones co-founded the Kolier Group, a business consulting firm that counted the Multi-State Lottery Association, Paramount Global and Universal Music Group among its clients. A year later, Jones also took on a role as a partner at All American Licensing, which, among its other services, develops merchandising programs for brands like Powertown Wrestling and the Smithsonian Institution.

In an April interview with Virginia Business, Jones talked about how he expects his varied work experiences will pay off in his new position heading the Virginia Lottery.

Virginia Business: How does someone get hired to lead a state lottery? It’s not the kind of job where you fill out an application on your computer, is it?

Khalid Jones: I think my career path, it took me to a point where I developed some of the relevant skills unwittingly. Around 2019, a business partner of mine had a relationship with … Gregg Edgar [then executive director of the Arizona State Lottery], and we started talking. He was really interested in innovation at that point in time. 

In my investment company [SourceRock Partners], we had made some investments in the digital space, in the gaming space, and so we had started to develop an expertise there, not in lotteries specifically. [Edgar] saw a lot of crossover between what was happening in the digital space and what the future of the lottery would look like.

Through working with [Edgar] … [I] started having a more formal working relationship with the Arizona Lottery that blossomed into a working relationship with the [Multi-State Lottery Association]. … Over the course of five years, [I became an industry expert,] finding mentors like him … and [by] having a broad lens on what was happening in the industry nationwide and even worldwide, [by] looking at trends and speaking at conferences, [by] making myself educated and really just diving in with both feet and exploring the broad tapestry that the lottery is, especially from the standpoint of beneficiaries.

One of the questions during [the Virginia Lottery hiring] process [was], “Well, why is this something that you want to do?”

I [said] quite flatly, “I’ve never had a job before, and I’m not going to ever have a job again where I can realistically say I have a goal of putting a billion dollars back into public education.”

It’s just a lofty thing to be able to say. Unless you’re Jeff Bezos, if you just write the check yourself, no one can realistically say that. That’s what I go to work every day trying to do.

[But] there’s really no application [to be lottery director]. You put your foot forward in the industry and you help out in the ways that you can. And in this scenario, there were some folks who thought that this might be something that I was both interested in and capable of, and [I] went through the process, and I was fortunate that the governor agreed.

VB: What goals do you have for your first year as the lottery’s director?

Jones: You walk in, and you have things that you want to accomplish, but whatever you want to accomplish … when you have success that precedes you, your first mission should be to come in and learn, acclimate, ask questions and make sure that you’re buttressing the success that’s come before you.

The phrase I’ve been using is, “I’m not going to come in and start turning all the knobs.” The first order of business is to look in the past, and the lottery had a lot of success that came before me. … Obviously, my main goal is to make sure we’re maximizing the dollars that get sent back to K-12 public education.

I would say my secondary goal is … I want to make sure that the Virginia Lottery is always at the forefront of innovation and that we are leaders in this field.

VB: What future innovations are in store at the Virginia Lottery?

Jones: [There are] a couple things. So, the first is thinking about our online growth. The Virginia online lottery is the largest in the nation. It’s grown the fastest in the nation. At some point in time, that growth curve will flatten. Innovation looks like one of the techniques that we can use to ensure that that growth [curve flattens] as slowly as possible.

And then also, retail, for the sales side of the lottery, is always the backbone. … As the online lottery continues to progress, [the Virginia Lottery must ensure] that we’re bringing the retailers along with that experience, so using innovation to continuously connect those experiences between online and offline.

The casinos and the online sports games, they’re built on technology. Technology drives what they do. Technology has to drive what we do from a regulatory standpoint, so we don’t get left back. … We will at some point in time be convening an AI task force within the lottery. How do we use that tool? How do we use it responsibly?

We just attended a problem gambling task force meeting this past week, and we talked pretty extensively about the ways that in the future technology will be used to support that function as well, because that’s something that’s very, very, very important to us here.

VB: The Virginia Lottery, like the Virginia Alcoholic Beverage Control Authority, differs from other state agencies in that it operates more like a business than a government entity. How do you handle that?

Jones: That’s true. You obviously have to think like a business but have the responsibility of the government as well. Fortunately, you’re given some leeway to do that. We can market. We can advertise. … I think that you have to take your business hat and put it on real snug.

I think a lot of times there’s areas of government where the best answer is the one that’s always the safest answer. We’re not in that position. We’re in a position where we have to be strong in the marketplace, come up with ideas.

VB: How will your experience in law, licensing and consulting help the lottery grow?

Jones: I have a background in law and defending regulated entities. I’ve obviously never been in a casino or a gaming regulatory posture, but [I understand] the mindset of those who are regulated. It really is not the posture that you’re coming in and lifting under every rug and trying to find a violation. That’s not our role. The role is to ensure the safety and fairness of the players and ensure that the operators are following the rules. At the end of the day, it’s really undergirding the integrity of the system as a whole.

The relationship should always be one where they understand that we’re not there to be primarily punitive; we’re there primarily to be protective of both the players … [and] them as well because we don’t want a bunch of operators not following the law.

I think I draw a lot from what I’ve seen in the industry as a whole. Obviously, my background with doing some of the licensing matters. [That] will help bring partnerships. I think that the way that lottery partners with outside industry could be enhanced and can be increased. That’s something that I’ll want to do almost immediately and bring to bear some relationships that I have.

Last year, [the lottery] had record sales, record growth. This year, fingers crossed, we’ll be able to do the same. There are professionals that have been in this building for a really long time that have been doing an excellent, excellent job.

The analogy I’ve been using internally is if you take over the head coaching job of the Kansas City Chiefs, you’re not going to start telling Patrick Mahomes how to throw the ball.

This really is for me one agency. It really is. We don’t have this agency, and that’s the lottery, and that agency, and that’s gaming/regulatory compliance. There is much more crossover to me in terms of mindset, whether it’s technology, whether it’s learning from others, whether it’s ideas, whether it is taking a leadership position in all that we do that I apply across the business lines.

VB: ​​What does partnering with industry look like?

Jones: For example, right now the lottery has in market a Willy Wonka ticket. That’s an example of a licensing agreement that would happen. I’ve got some ideas on different ways we can do that to maximize profitability, maybe bring different partners in.

You don’t want the liability that you printed a bunch of tickets and they went out and nobody bought the tickets. Well, through our iLottery platform, we obviously don’t print tickets. Maybe there’s an opportunity to work with more niche partners or work with larger partners for very specified items.

I’m not promising this, but this is an example: You have the opportunity to work with a movie studio, let’s say. In the previous world, you would have to say, “All right, I’m going to work with this movie studio, we’re going to find a great property, we’re going to print X number of millions of tickets and market the hell out of it, and we’re going to cross our fingers.” Maybe there’s an opportunity to work with that same studio and say, “Can we do something smaller and more frequently, but for something really cool? Can we have someone win a role in your next movie that comes out of the studio?” Maybe that’s something that we could have … that’s recurring and that players know that it’s really cool and it’s going to come. We do it through our iLottery platform, our online platform, and therefore, we don’t have as much liability of printing tickets.

VB: On two occasions this spring, a coalition of lottery retailers temporarily stopped selling lottery tickets to protest Gov. Glenn Youngkin’s proposed changes to a Virginia bill on skill games, which included capping the number of machines allowed statewide. How does that impact the Virginia Lottery’s relationship with those retailers?

Jones: I know that that’s been an issue that’s been ongoing before I got here. I think it’s finding a way to, first of all, have a conversation. We absolutely take no position on the skill games themselves, but we obviously are going to support our retailers in any way we can, both before and after. I think that’s a large chunk of that answer.

Potentially, we would have to regulate the skill games as well, which makes us a part of their business in that sense from a regulatory standpoint. We’ll be with them no matter what. We’ll continue to build those relationships. They’ll continue to know how important that they are to us.

VB: Virginia Lottery’s branding has stayed fairly consistent since it launched in the late 1980s, even though the agency has recently taken on new responsibilities like regulating casinos. Do you plan to change up any of that branding?

Jones: “Stay tuned” maybe is the answer.

VB: Is there anything else you want Virginians to know about the change in leadership at the lottery?

Jones: It’s not surprising that Virginia Lottery sits where it’s at. I feel really fortunate to come into this. This is not a reclamation project. It’s not a rebuilding project. This is not anything like that. We get to ride a stallion that’s in full gallop and just making sure that it continues on that.