11VAC5-11 Public Participation Guidelines

REGULATIONS

Vol. 31 Iss. 3 - October 06, 2014

TITLE 11. GAMING

VIRGINIA LOTTERY BOARD

Chapter 11

Final Regulation

REGISTRAR'S NOTICE: The Virginia Lottery Board is claiming an exclusion from Article 2 of the Administrative Process Act in accordance with § 2.2-4006 A 4 a of the Code of Virginia, which excludes regulations that are necessary to conform to changes in Virginia statutory law where no agency discretion is involved. The Virginia Lottery Board will receive, consider, and respond to petitions by any interested person at any time with respect to reconsideration or revision.

Titles of Regulations: 11VAC5-11. Public Participation Guidelines (amending 11VAC5-11-10, 11VAC5-11-20).

11VAC5-20. Administration Regulations (amending 11VAC5-20-10, 11VAC5-20-60, 11VAC5-20-80, 11VAC5-20-160 through 11VAC5-20-200).

11VAC5-31. Licensing Regulations (amending 11VAC5-31-10 through 11VAC5-31-80, 11VAC5-31-130, 11VAC5-31-140, 11VAC5-31-160 through 11VAC5-31-200).

11VAC5-41. Lottery Game Regulations (amending 11VAC5-41-10, 11VAC5-41-60, 11VAC5-41-80, 11VAC5-41-100 through 11VAC5-41-190, 11VAC5-41-220, 11VAC5-41-230, 11VAC5-41-250, 11VAC5-41-290 through 11VAC5-41-320).

Statutory Authority: §§ 2.2-4007.02 and 58.1-4007 of the Code of Virginia (11VAC5-11-10, 11VAC5-11-20).

§ 58.1-4007 of the Code of Virginia (all other sections).

Effective Date: November 5, 2014.

Agency Contact: Amy Roper, Regulatory Coordinator, Virginia Lottery, 900 East Main Street, 9th Floor, Richmond, VA 23219, telephone [phone], FAX [phone], or email [e-mail].

Summary:

The amendments conform regulations to changes to the Code of Virginia pursuant to (i) Chapter 225 of the 2014 Acts of Assembly, which changes the name of the "State Lottery Department" to the "Virginia Lottery," and (ii) Chapter 224 of the 2014 Acts of Assembly, which establishes a new waiting period for relicensing of retailers under § 58.1-4009 D of the Code of Virginia.

Part I
Purpose and Definitions

11VAC5-11-10. Purpose.

The purpose of this chapter is to promote public involvement in the development, amendment, or repeal of the regulations of the State Virginia Lottery Department. This chapter does not apply to regulations, guidelines, or other documents exempted or excluded from the provisions of the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia).

11VAC5-11-20. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Administrative Process Act" means Chapter 40 (§ 2.2-4000 et seq.) of Title 2.2 of the Code of Virginia.

"Agency" means the State Virginia Lottery Department, which is the unit of state government empowered by the agency's basic law to make regulations or decide cases. Actions specified in this chapter may be fulfilled by state employees as delegated by the agency.

"Basic law" means provisions in the Code of Virginia that delineate the basic authority and responsibilities of an agency.

"Commonwealth Calendar" means the electronic calendar for official government meetings open to the public as required by § 2.2-3707 C of the Freedom of Information Act.

''Negotiated rulemaking panel'' or ''NRP'' means an ad hoc advisory panel of interested parties established by an agency to consider issues that are controversial with the assistance of a facilitator or mediator, for the purpose of reaching a consensus in the development of a proposed regulatory action.

"Notification list" means a list used to notify persons pursuant to this chapter. Such a list may include an electronic list maintained through the Virginia Regulatory Town Hall or other list maintained by the agency.

"Open meeting" means any scheduled gathering of a unit of state government empowered by an agency's basic law to make regulations or decide cases, which is related to promulgating, amending or repealing a regulation.

"Person" means any individual, corporation, partnership, association, cooperative, limited liability company, trust, joint venture, government, political subdivision, or any other legal or commercial entity and any successor, representative, agent, agency, or instrumentality thereof.

"Public hearing" means a scheduled time at which members or staff of the agency will meet for the purpose of receiving public comment on a regulatory action.

"Regulation" means any statement of general application having the force of law, affecting the rights or conduct of any person, adopted by the agency in accordance with the authority conferred on it by applicable laws.

"Regulatory action" means the promulgation, amendment, or repeal of a regulation by the agency.

"Regulatory advisory panel" or "RAP" means a standing or ad hoc advisory panel of interested parties established by the agency for the purpose of assisting in regulatory actions.

"Town Hall" means the Virginia Regulatory Town Hall, the website operated by the Virginia Department of Planning and Budget at www.townhall.virginia.gov, which has online public comment forums and displays information about regulatory meetings and regulatory actions under consideration in Virginia and sends this information to registered public users.

"Virginia Register" means the Virginia Register of Regulations, the publication that provides official legal notice of new, amended, and repealed regulations of state agencies, which is published under the provisions of Article 6 (§ 2.2-4031 et seq.) of the Administrative Process Act.

Part I
General Parameters

11VAC5-20-10. Definitions.

The following words and terms when used in any of the department's agency's regulations shall have the following meanings unless the context clearly indicates otherwise:

"Administrative Process Act" or "APA" means Chapter 40 (§ 2.2-4000 et seq.) of Title 2.2 of the Code of Virginia.

"Agency" means the Virginia Lottery created by the Virginia Lottery Law (Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia).

"Appeal" means a proceeding initiated by a retailer, bidder, or offeror (for a contract negotiated on a sole source basis), contractor or individual for an informal conference or formal hearing contesting the director's decision (i) to refuse to issue or renew, to suspend or to revoke a lottery license; or (ii) regarding a procurement action.

"Bank" means any commercial bank, savings bank, savings and loan association, credit union, trust company, and any other type or form of banking institution organized under the authority of the Commonwealth of Virginia or of the United States of America which that is designated by the State Treasurer to perform functions, activities or services in connection with the operations of the lottery for the deposit, handling and safekeeping of lottery funds, accounting for those funds and the safekeeping of records.

"Board" means the State Virginia Lottery Board established by the State Virginia Lottery Law.

"Conference" or "consultation" means a type of appeal in the nature of an informational or factual proceeding of an informal nature provided for in § 2.2-4019 of the Administrative Process Act.

"Conference officer" means the director, or a person appointed by the director, who is empowered to preside at informal conferences or consultations and to provide a recommendation, conclusion or decision in such matter.

"Consideration" means something of value given for a promise to make the promise binding. It is one of the essentials of a legal contract.

"Contract" means a binding agreement, enforceable by law, between two or more parties for the supply of goods or services.

"Department" means the State Lottery Department created by the State Lottery Law.

"Depository" means any person, including a bonded courier service, armored car service, bank, central or regional offices of the department agency, or any state agency that performs any or all of the following activities or services for the lottery:

1. The safekeeping and distribution of tickets to retailers;

2. The handling of lottery funds;

3. The deposit of lottery funds; or

4. The accounting for lottery funds.

"Director" means the Executive Director of the State Virginia Lottery Department or his designee.

"Electronic funds transfer (EFT)" or "EFT" means a computerized transaction that withdraws or deposits money from or to a bank account.

"Goods" means all material, equipment, supplies, printing, and automated data processing hardware and software.

"Hearing" means agency processes other than those informational or factual inquiries of an informal nature provided in §§ 2.2-4007 and 2.2-4019 of the Code of Virginia and includes only (i) opportunity for private parties to submit factual proofs in formal proceedings as provided in § 2.2-4009 of the Code of Virginia in connection with the making of regulations or (ii) a similar right of private parties or requirement of public agencies as provided in § 2.2-4020 of the Code of Virginia in connection with case decisions.

"Household" means members of a group who reside at the same address.

"Immediate family" means (i) a spouse and (ii) any other person residing in the same household as the officer or employee, who is a dependent of the officer or employee or of whom the officer or employee is a dependent.

"Inspection" means the close and critical examination of goods and services delivered to determine compliance with applicable contract requirements or specifications. It is the basis for acceptance or rejection.

"Legal entity" means an entity, other than a natural person, which has sufficient existence in legal contemplation that it can function legally, sue or be sued and make decisions through agents, as in the case of a corporation.

"Lottery" or "state lottery" means the lottery or lotteries established and operated pursuant to Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia.

"Person" means a natural person and may extend and be applied to groups of persons, as well as a corporation, company, partnership, association, club, trust, estate, society, joint stock company, receiver, trustee, assignee, referee, or any other person acting in a fiduciary or representative capacity, whether appointed by a court or otherwise, and any combination of individuals, as well as all departments, commissions, agencies, and instrumentalities of the Commonwealth, including counties, cities, municipalities, political subdivisions, agencies and instrumentalities thereof.

"Procurement" means the process for obtaining goods or services, including all activities from planning and preparation to processing of a request through the processing of a final invoice for payment.

"Retailer and sales agent" means a person or business licensed by the department agency as an agent to sell lottery tickets or shares.

"Sales," "gross sales," "annual sales" and similar terms mean total ticket sales including any discount allowed to a retailer for his compensation.

"Services" means any work performed by an independent contractor where the service rendered does not consist primarily of acquisition of equipment or materials, or the rental of equipment, materials and supplies.

"Sole source" means that only one source is practicably available to furnish a product or service.

"State Lottery Law" means Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia.

"Surety bond" means an insurance agreement in which a third party agrees to be liable to pay a specified amount of money to the department agency in the event the retailer fails to meet his obligations to the department agency.

"Transaction" means any matter considered by any governmental or advisory agency, whether in a committee, subcommittee, or other entity of that agency or before the agency itself, on which official action is taken or contemplated.

"Vendor" means one who provides goods or services to the department agency.

"Virginia Lottery Law" means Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia.

11VAC5-20-60. Advertising.

A. Advertising may include, but is not limited to, print advertisements; radio and television advertisements; digital, electronic, and video advertisements; billboards; point of purchase materials; point-of-sale display materials; and Internet and social media.

B. Any lottery retailer may use his own advertising materials unless the department agency objects thereto. The department agency shall develop written guidelines for such materials.

C. The department agency may provide information displays or other material to the retailer, who shall position the material so it can be seen easily by the general public.

D. The department agency may produce special posters, brochures or flyers describing various aspects of the lottery and provide these to lottery retailers to post or distribute.

Part II
Banks and Depositories

11VAC5-20-80. Approval of banks.

A. The State Treasurer, with the concurrence of the director, and in accordance with applicable Treasury directives, shall approve a bank or banks to provide services to the department agency.

B. A bank or banks shall serve as agent or agents for electronic funds transfers between the department agency and lottery retailers as required by Chapters 20 (11VAC5-20), 31 (11VAC5-31), and 41 (11VAC5-41) and by contracts between the department agency, the State Treasury, retailers, and the banks.

11VAC5-20-160. Procedure for appealing a licensing decision.

A. Upon receiving a notice that (i) an application for a license or the renewal of a license has been denied by the director, or (ii) the director intends to or has already taken action to suspend or revoke a current license, the applicant or licensed retailer may appeal by filing a written notice of appeal requesting a conference on the licensing action. The notice of appeal shall be submitted within 30 days of receipt of the notice of the licensing action.

1. Receipt of a notice of the licensing action that is mailed in an envelope bearing a United States Postal Service postmark is presumed to have taken place not later than the third day following the day of mailing to the last known address of the applicant or licensed retailer. If the third day falls upon a day on which mail is not delivered by the United States Postal Service, the notice is presumed to have been received on the next business day. The "last known address" means the address shown on the application of an applicant or licensed retailer unless a more current address has been provided to the department agency by the applicant or licensed retailer.

2. The notice of appeal will be timely if it bears a United States Postal Service postmark showing mailing on or before the 30th day prescribed in subdivision 1 of this subsection.

B. A notice of appeal may be mailed or hand delivered to the director at the State Virginia Lottery Department headquarters office.

1. A notice of appeal delivered by hand will be timely only if received at the headquarters of the State Virginia Lottery Department within the time allowed by subsection A of this section.

2. Delivery to any other State Virginia Lottery Department office or to lottery sales personnel by hand or by mail is not sufficient.

3. The appellant assumes full responsibility for the method chosen to file the notice of appeal.

C. The notice of appeal shall state:

1. The decision of the director that is being appealed;

2. The legal and factual basis for the appeal;

3. The retailer's license number; and

4. Any additional information the appellant may wish to include concerning the appeal.

11VAC5-20-170. Procedures for conducting informal fact-finding licensing conferences.

A. The conference officer will conduct an informal fact-finding conference with the appellant for the purpose of resolving the licensing action at issue.

B. The conference officer will hold the conference as soon as possible but not later than 30 days after the notice of appeal is filed, unless an alternate date is designated by the conference officer or his designee and accepted by the appellant. A notice setting out the conference date, time, and location will be sent to the appellant, by certified mail, return receipt requested, at least 10 days before the day set for the conference, unless a shorter time is agreed to by the appellant.

C. A conference may be conducted by telephone, at the option of the appellant.

D. The conferences shall be informal.

1. The conferences will be electronically recorded. The recordings will be kept until the time limit for any subsequent appeal has expired.

2. A court reporter may be used. The court reporter shall be paid by the person who requested him. If the appellant elects to have a court reporter, a transcript shall be provided to the department agency. The transcript shall become part of the department's agency's records.

3. The appellant may appear in person or may be represented by counsel to present his facts, argument, or proof in the matter to be heard and may request other parties to appear to present testimony.

4. The department agency will present its facts in the case and may request other parties to appear to present testimony.

5. Questions may be asked by any of the parties at any time during the presentation of information subject to the conference officer's prerogative to regulate the order of presentation in a manner which that, in his sole discretion, best serves the interest of fairly developing the facts.

6. The conference officer may exclude information at any time that he believes, in his sole discretion, is not germane or that repeats information already received.

7. The conference officer shall declare the conference completed when the time established by the conference officer has expired.

E. Normally, the conference officer shall issue his decision within 15 days after the conclusion of an informal conference. However, for a conference with a court reporter, the conference officer shall issue his decision within 15 days after receipt of the transcript of the conference. In all cases the agency shall comply with the APA. The decision will be in the form of a letter to the appellant summarizing the case and setting out his decision on the matter. The decision will be sent to the appellant by certified mail, return receipt requested.

F. After receiving the conference officer's decision on the informal conference, the appellant may elect to appeal to the board for a formal hearing on the licensing action. The request for appeal shall:

1. Be submitted in writing within 15 days of receipt of the conference officer's decision on the informal conference.

2. Be mailed or hand delivered to the chairman of the board at the headquarters of the State Virginia Lottery Department.

3. Be governed by the same procedures in 11VAC5-20-160 B for filing the original notice of appeal.

4. State:

a. The decision of the conference officer that is being appealed;

b. The legal and factual basis for the appeal;

c. The retailer's license number; and

d. Any additional information the appellant may wish to include concerning the appeal.

11VAC5-20-180. Procedures for conducting formal licensing hearings.

A. The board will conduct a formal hearing at its next regularly scheduled meeting following the receipt of a notice of appeal on a licensing action if the date of the scheduled meeting permits the required 10 days notice to the appellant or at a date to be determined by the chairman of the board and accepted by the appellant.

B. A majority of members of the board is required to hear an appeal. If the chairman and vice chairman of the board are not present, the members present shall choose one from among them to preside over the hearing.

C. The board chairman, at his discretion, may designate a committee of the board to hear licensing appeals and act on its behalf. Such committee shall have at least three members who will hear the appeal on behalf of the board. If the chairman of the board is not present, the members of the committee shall choose one from among them to preside over the hearing.

D. A notice setting the hearing date, time, and location will be sent to the appellant by certified mail, return receipt requested, at least 10 days before the day set for the hearing, unless a shorter time is agreed to by the appellant.

E. The hearing shall be conducted in accordance with the provisions of Article 3 (§ 2.2-4018 et seq.) of the APA and shall be open to the public.

1. The hearing will be electronically recorded and the recording will be kept until any time limits for any subsequent court appeals have expired.

2. A court reporter may be used. The court reporter shall be paid by the person who requested him. If the appellant elects to have a court reporter, a transcript shall be provided to the department agency. The transcript shall become part of the department's agency's records.

3. The provisions of §§ 2.2-4020 through 2.2-4023 of the APA shall apply with respect to the rights and responsibilities of the appellant and of the department agency.

F. Normally, the board will issue its written decision within 21 days of the conclusion of the hearing. However, for a hearing with a court reporter, the board will issue its written decision within 21 days of receipt of the transcript of the hearing. In all cases the agency shall comply with the APA.

1. A copy of the board's written decision will be sent to the appellant by certified mail, return receipt requested. The original written decision shall be retained by the department agency and become a part of the case file.

2. The written decision will contain:

a. A statement of the facts to be called "Findings of Facts";

b. A statement of conclusions to be called "Conclusions" and to include as much detail as the board feels is necessary to set out the reasons and basis for its decision; and

c. A statement, to be called "Decision and Order," which sets out the board's decision and order in the case.

G. After receiving the board's decision on the case, the appellant may elect to pursue court review as provided for in the APA.

Part IV
Procurement

11VAC5-20-200. Procurement in general.

The State Virginia Lottery Department will purchase goods or services in accordance with procedures established by the board, after consultation with the director, pursuant to Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia.

11VAC5-31-10. Definitions.

The following words and terms when used in any of the department's agency's regulations shall have the same meanings as defined in this chapter unless the context clearly indicates otherwise:

"Agency" means the Virginia Lottery created by the Virginia Lottery Law (Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia).

"Board" means the State Virginia Lottery Board established by the State Virginia Lottery Law (Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia).

"Department" means the State Lottery Department created by the State Lottery Law (Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia).

"Director" means the Executive Director of the State Virginia Lottery Department or his designee.

"License" means the certificate issued by the department agency to a retailer who has met the requirements established by the department agency to sell lottery products.

"Lottery retailer," "lottery sales agent" or "retailer" means a person licensed by the director to sell and dispense lottery tickets or products and act as the department's agency's representative to collect, preserve, and account for Commonwealth of Virginia trust funds.

"Person," for purposes of licensing, means an individual, association, partnership, corporation, club, trust, estate, society, company, joint stock company, receiver, trustee, assignee, referee, or any other person acting in a fiduciary or representative capacity, whether appointed by a court or otherwise, and any combination of individuals, as well as all departments, commissions, agencies and instrumentalities of the Commonwealth, including its counties, cities, municipalities, political subdivisions, agencies and instrumentalities thereof.

"Vacuum fluorescent display" means a player display unit that, when connected to the lottery terminal, presents messages to the customer, such as customer transaction totals, validation and cancellation amounts, and jackpot drawing messages.

11VAC5-31-20. Eligibility.

Any person who is 18 years of age or older may submit an application for licensure as a lottery retailer in accordance with the provisions and requirements of the department's agency's licensing procedures, except no person may submit an application for licensure:

1. Who will be engaged primarily in the business of selling lottery tickets;

2. Who is a board member, officer, or employee of the State Virginia Lottery Department or who resides in the same household as a board member, officer, or employee of the department agency; or

3. Who is a board member, officer, or employee of any vendor to the department agency of lottery ticket goods or services, working directly on a contract with the department agency, or whose business owns, is owned by or controlled by, or affiliated with that vendor.

11VAC5-31-30. Application procedure.

A. Any eligible person shall first file an application with the department agency by completing all information requested on forms supplied for that purpose, along with submitting any required fees.

B. The submission of application forms or data for licensure does not in any way entitle any person to receive a license to act as a lottery retailer.

C. In the event an applicant is a former lottery sales agent whose license was suspended, revoked, or refused renewal pursuant to § 58.1-4009 or 58.1-4012 of the Code of Virginia, no application for a new license to sell lottery tickets or shares shall be considered for a minimum period of 90 days following the suspension, revocation, or refusal to renew.

D. The person shall submit all required forms and information to the department agency to be considered for licensing. Failure to submit required forms within the department's agency's licensing procedures may result in the loss of opportunity to become or remain a licensed retailer.

11VAC5-31-40. General standards for licensing.

A. The director or his designee may license those persons who, in his opinion, will best serve the public interest and convenience and public trust in the lottery and promote the sale of lottery tickets. Before issuing or renewing a license, the director may consider factors including, but not limited to, the following:

1. Those factors set out in § 58.1-4009 of the Code of Virginia, these regulations, and the department's agency's licensing procedures;

2. The ability to offer a high level of customer service to lottery players;

3. The person's prior history, record, and performance with the department agency;

4. Whether the place of business caters to or is frequented predominately by persons under 18 years of age;

5. Whether the nature of the business constitutes a threat to the health or safety of prospective patrons;

6. Whether the nature of the business is consonant with the probity of the Commonwealth; and

7. Whether the person or retailer has (i) committed any act of fraud, deceit, misrepresentation, moral turpitude, or illegal gambling or (ii) engaged in conduct prejudicial to public confidence in the state lottery.

B. Special retailer licensing.

1. The director may license special lottery retailers subject to such conditions or limitations as the director may deem prudent and if the director finds there is a need to develop alternative business models to engage in partnerships with certain retailers that are consistent with the laws of the Commonwealth of Virginia and these regulations. These limitations or conditions may include, but are not limited to:

a. Length of license period;

b. Hours or day of sale;

c. Selling of only limited products;

d. Specific persons who are allowed to sell lottery tickets;

e. Specific sporting, charitable, social, or other special events where lottery tickets may be sold if in conformity with law; or

f. Different commission and payment structures and bonding requirements.

2. Special licensed agents will be subject to these regulations.

11VAC5-31-50. Bonding of lottery retailers.

A. A lottery retailer shall have and maintain a surety bond from a surety company entitled to do business in this Commonwealth. The surety bond shall be in an amount as deemed necessary to secure the interests of the Commonwealth and the department agency, in the sole discretion of the director, and shall be payable to the department agency and conditioned upon the faithful performance of the lottery retailer's duties.

B. The department agency may establish a sliding scale for surety bonding requirements based on the average volume of lottery ticket sales by a retailer to ensure that the Commonwealth's interest in tickets to be sold by a licensed lottery retailer is adequately safeguarded.

C. Prior to issuance of a license, every lottery sales agent shall either (i) be bonded by a surety company entitled to do business in this Commonwealth in such amount and penalty as may be prescribed by the regulations of the department or (ii) provide such other surety as may be satisfactory to the director, payable to the department agency, and conditioned upon the faithful performance of his duties. Such alternate surety instruments or arrangements may include, but not be limited to, a combination of surety instruments, including cash.

11VAC5-31-60. Lottery bank accounts and electronic funds transfer (EFT) authorization.

A. A lottery retailer shall have and maintain a separate bank account in a bank participating in the Automatic Clearing House (ACH) system. This account shall be styled in the name of the retailer followed by "Virginia Lottery Trust" and shall be used exclusively for lottery business.

B. The lottery account shall be used by the retailer to make funds available to permit withdrawals and deposits initiated by the department agency through the EFT process to settle a retailer's account for funds owed by or due to the retailer from the sale of tickets and the payment of prizes. All retailers shall make payments to the department agency through the EFT process in accordance with the department's agency's licensing procedures, unless the director designates another form of payment and settlement under terms and conditions he deems appropriate.

C. The retailer shall be responsible for payment of any fees or service charges assessed by the bank for maintaining the required account.

D. The director will establish a schedule for processing the EFT transactions against retailers' lottery trust accounts and issue instructions regarding the settlement of accounts.

11VAC5-31-70. License term and periodic review.

A. A general license for an approved lottery sales agent shall be issued for a specific term and is thereafter subject to a periodic determination of continued retailer eligibility and the payment of any fees fixed by the board.

B. The director may issue special licenses to persons for specific events and activities in accordance with the requirements of the department's agency's licensing procedures.

11VAC5-31-80. License fees.

An initial licensing fee up to $100 and an annual license fee up to $70 shall be collected from each lottery sales agent and shall be paid in accordance with the department's agency's licensing procedures. These fees are nonrefundable, unless otherwise determined by the director in his sole discretion or specified in the department's agency's procedures. The license fees shall be paid for each location.

11VAC5-31-130. Retailers' conduct.

A. Each retailer shall comply with all applicable state and federal laws and regulations, as well as all rules, policies and procedures of the department agency, license terms and conditions, specific rules for all applicable lottery games, directives and instructions that may be issued by the director, and licensing and equipment agreements and contracts signed by the retailer.

B. No retailer or his employee or agent shall attempt through any means whatsoever to identify or otherwise determine whether any unsold ticket creates a winning play. This includes, but is not limited to, trying to determine the numbers or symbols appearing under the removable latex or electronically produced coverings or otherwise attempting to identify unsold winning tickets. However, this shall not prevent the removal of the covering over the validation code or validation number after the ticket is sold.

C. No retailer or his employee or agent shall impose a fee or additional charge for selling a lottery game ticket or for cashing a winning lottery game ticket.

D. No retailer or his employee or agent shall purchase a winning lottery game ticket from a player at a discounted price.

11VAC5-31-140. Deposit of lottery receipts; interest and penalty for late payment; dishonored EFT transactions or checks.

A. Payments shall be due from retailers as specified by the director in accordance with department agency policies.

B. Any retailer who fails to make payment when payment is due will be contacted by the department agency and instructed to make immediate deposit of the funds due. If the retailer is not able to deposit the necessary funds or if the item is returned to the department unpaid for a second time, the retailer's license may be inactivated. If inactivated, the license will not be reactivated until payment is made by cashier's check, certified check or EFT transaction, and if the retailer is deemed a continuing credit risk by the department agency, not until an informal conference is held to determine if the licensee is able and willing to meet the terms of his retailer contract. Additionally, interest may be charged on the moneys due plus a $25 penalty. The interest charge will be equal to the "Underpayment Rate" established pursuant to § 58.1-15 of the Code of Virginia. The interest charge will be calculated beginning the date following the retailer's due date for payment through the day preceding receipt of the late payment by the department agency for deposit.

C. In addition to the penalty authorized by subsection B of this section, the director may assess a $25 service charge against any retailer whose payment through EFT transaction or by check is dishonored.

D. The service charge, interest, and penalty charges may be waived if it is determined by the department agency that the event that otherwise would result in the assessment of a service charge, interest, or penalty is not in any way the fault of the lottery retailer.

11VAC5-31-160. Denial, suspension, revocation or noncontinuation of license.

A. The director may refuse to issue a license to a person if the person does not meet the eligibility criteria and standards for licensing as set out in § 58.1-4009 of the Code of Virginia, these regulations, and in the department's agency's licensing procedures, or if:

1. The person's place of business caters to or is frequented predominantly by persons under 18 years of age, but excluding family-oriented businesses;

2. The nature of the person's business constitutes a threat to the health or safety of prospective lottery patrons;

3. The nature of the person's business is not consonant with the probity of the Commonwealth;

4. The person has committed any act of fraud, deceit, misrepresentation, moral turpitude, or illegal gambling or engaged in conduct prejudicial to public confidence in the state lottery;

5. The person falsifies or misrepresents a material fact on any application, form, document, or data submitted during the licensure process;

6. The person has an unsatisfactory prior history, record, or performance with the lottery;

7. The person's place of business represents a substantial risk for the collection, deposit, preservation, accounting, or safeguarding of Commonwealth of Virginia Trust Funds, irrespective of the bond or surety provided by the person;

8. The person has been suspended permanently from a federal or state licensing or authorization program and that person has exhausted all administrative remedies pursuant to the respective agency's regulations or procedures; or

9. The proposed retailer's licensed location or locations does not comply with the requirements of the department's Retailer Accessibility Guidelines effective January 1, 2011, as applicable.

B. The director may suspend, revoke, or refuse to continue a license for any of the reasons enumerated in § 58.1-4012 of the Code of Virginia, in subsection A of this section, in the department's agency's procedures, or for any of the following reasons:

1. Failure to maintain the required lottery trust account;

2. Failure to comply with lottery game rules;

3. Failure to properly care for, or prevent the abuse of, the department's agency's equipment, or failure to properly position and display the vacuum fluorescent display or LED device;

4. Failure to meet minimum point-of-sale standards;

5. Failure to continue to meet the eligibility criteria and standards for licensing; or

6. Failure to comply with (i) any applicable law or statute, rule, policy, or procedure of the department agency; (ii) license terms and conditions; (iii) specific rules for all applicable department agency games; (iv) directives and instructions that may be issued by the director; and (v) licensing and equipment agreements and contracts signed by the retailer.

C. Any person refused a license under subsections A or B of this section may appeal the director's decision in the manner provided by 11VAC5-20-150.

D. Before taking action under subsection A or B of this section, the director will notify the retailer in writing of his intent to suspend, revoke or deny continuation of the license. The notification will include the reason or reasons for the proposed action and will provide the retailer with the procedures for requesting a conference. Such notice shall be given to the retailer in accordance with the provisions of the department's agency's regulations.

E. If the director deems it necessary in order to serve the public interest and maintain public trust in the lottery, he may temporarily suspend a license without first notifying the retailer. Such suspension will be in effect until any prosecution, hearing, or investigation into alleged violations is concluded.

F. A retailer shall surrender his license to the director by the date specified in the notice of revocation or suspension. The retailer shall also surrender the lottery property in his possession and give a final lottery accounting of his lottery activities by the date specified by the director.

11VAC5-31-170. License termination by retailer.

The licensed retailer may voluntarily terminate his license with the department agency by first notifying the department agency in writing at least 15 calendar days before the proposed termination date. The department agency will then notify the retailer of the date by which settlement of the retailer's account will take place. The retailer shall maintain his bond and the required accounts and records until settlement is completed and all lottery property has been surrendered.

11VAC5-31-180. Inspection of premises.

Each lottery retailer shall provide access during normal business hours or at such other times as may be required by the director or department agency representatives to enter the premises of the licensed retailer. The premises include the licensed location where lottery tickets are sold or any other location under the control of the licensed retailer where the director may have good cause to believe lottery materials, equipment, or tickets are stored or kept in order to inspect the licensed premises and inspect, or if necessary remove lottery materials, equipment, or tickets.

11VAC5-31-190. Examination of records and equipment; seizure of records and equipment.

A. Each lottery retailer shall make all books and records pertaining to his lottery activities available for inspection, auditing and copying, and make all equipment related to his lottery activities available for inspection, as required by the director or department agency representatives during normal business hours of the licensed retailer.

B. All books, records and equipment pertaining to the licensed retailer's lottery activities may be seized with good cause by the director or department agency representatives without prior notice.

11VAC5-31-200. Audit of records.

The director may require a lottery retailer to submit to the department agency an audit report conducted by an independent certified public accountant on the licensed retailer's lottery activities. The retailer shall be responsible for the cost of only the first such audit in any one license term.

NOTICE: The following forms used in administering the regulation were filed by the agency. The forms are not being published; however, online users of this issue of the Virginia Register of Regulations may click on the name of a form with a hyperlink to access it. The forms are also available from the agency contact or may be viewed at the Office of the Registrar of Regulations, General Assembly Building, 2nd Floor, Richmond, Virginia 23219.

FORMS (11VAC5-31)

Retailer License Application, SLD-0062 (rev. 10/07).

Retailer Contract (rev. 5/10).

Retailer License Application, VAL-0062 (rev. 9/14)

Retailer Contract (rev. 1/14)

11VAC5-41-10. Definitions for lottery games.

The following words and terms when used in any of the department's agency's regulations shall have the same meanings as defined in this chapter unless the context clearly indicates otherwise:

"Agency" means the Virginia Lottery created by Virginia Lottery Law (Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia).

"Altered ticket" means a lottery ticket that has been forged, counterfeited, or tampered with in any manner.

"Board" means the State Virginia Lottery Board established by the State Virginia Lottery Law (Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia).

"Breakage" means the money accumulated from the rounding down of the pari-mutuel prize levels to the next lowest whole dollar amount.

"Cashing retailer" means a department an agency licensed retailer that sells lottery products and is authorized to pay prizes.

"Computer gaming system" means any computer system owned, operated, or contracted by the department agency that supports the sale, redemption, or validation of lottery tickets or wagers.

"Coupon" is a device (electronic or paper or otherwise) that is approved by the department agency for redemption.

"Department" means the State Lottery Department created by State Lottery Law (Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia).

"Director" means the Executive Director of the State Virginia Lottery Department or his designee.

"Drawing" means a formal process of randomly selecting numbers, names, or items in accordance with the specific game or promotion rules for games or promotions requiring the random selection of numbers, names, or items.

"Game" means any individual or particular type of lottery authorized by the board.

"Instant game" means a game that, when played, reveals or informs the player immediately whether he has won a prize, entry into a prize drawing, prize points, or any or all of the aforementioned as specified in game rules.

"Misprinted ticket" means a lottery ticket or play that contains a manufacturing, programming, or printing defect that causes the game to no longer play as defined in game rules or does not properly validate against the game's validation files.

"Natural person" means a human being, and not a corporation, company, partnership, association, trust or other entity.

"Prize" means any cash or noncash award to a holder of a winning entry or play.

"Prize structure" means the number, value, and odds of winning prizes for a game and the prize tiers within a game and the chances of winning a prize in each tier in an individual game as determined by the department agency and as specified in the game rules.

"Probability game" means a game in which all of the tickets sold are potentially winning tickets and the outcome of the game depends entirely upon the player's choice or choices during game play.

"Promotion" is defined as means an "added value" offer to consumers or licensed retailers sanctioned by the director or approved by the board when required.

"Roll stock" or "ticket stock" means the paper roll issued or approved for use by the department agency from which a unique lottery ticket is generated displaying the selected items or numbers.

"Scratch ticket" means a printed instant win ticket with a covering over the play area that when scratched reveals a specific result.

"Share" means a percentage of ownership in a winning ticket, play, or subscription plan.

"Terminal" means a device that is authorized by the department agency to function in an interactive mode with the department's agency's computer gaming system or systems for the purpose of issuing tickets, plays, or an electronic facsimile thereof, and entering, receiving, and processing game-related transactions.

"Terminal ticket" means a computer-generated or electronically-produced ticket issued through the computer gaming system by a retailer to a player as a receipt for the number, numbers, or items or combination of numbers or items the player has selected.

"Ticket number" means the preassigned unique number or combination of letters and numbers or barcode that identifies that particular ticket as one within a particular game or drawing.

"Validation" means the process of reviewing and certifying a lottery ticket to determine whether it is a winning ticket.

"Validation barcode" means the unique number or number-and-letter code or barcode used to determine whether a lottery ticket is a winning ticket.

"Winning ticket," "winning wager," or "winning play" means the ticket, wager, or play that meets the criteria and specific rules for winning prizes as published for each game by the director.

11VAC5-41-60. Drawing and selling times.

A. Drawings shall be conducted at times and places designated by the director and publicly announced by the department agency.

B. Retailers may sell tickets from new instant games upon receipt of the tickets from the department agency, but shall not sell tickets for an instant game after the announced end of that game.

C. Retailers may sell terminal tickets up to a designated time prior to the drawing as specified in the terminal game rules. That time will be designated by the director.

11VAC5-41-80. Scratch ticket returns.

A. Ticket sales to retailers are final. The department agency will not accept returned, unsold tickets for credit except as specifically authorized by and provided for in the department's agency's procedures.

B. Once tickets are accepted by a retailer, the department agency:

1. May hold the retailer financially responsible for the replacement of mutilated, damaged, or otherwise unaccounted for tickets.

2. Will not be responsible for lost, stolen, destroyed, or otherwise unaccounted for tickets, unless specifically authorized and provided for in the department's agency's procedures.

11VAC5-41-100. Validation requirements.

To receive payment for a prize, a Virginia lottery game ticket or play shall be validated by the retailer or the department agency as set out in this chapter and in any other manner that the director may prescribe in the specific rules for the lottery game, which shall include but not be limited to the following:

1. If the game's rules specify that the physical ticket must be presented for validation then:

a. The original ticket must be presented for validation;

b. The ticket shall not be mutilated, altered, or tampered with in any manner. If a ticket is partially mutilated or if the ticket is not intact and cannot be validated through normal procedures but can still be validated by other validation tests, the director may pay the prize for that ticket;

c. The ticket may not be misregistered or defectively printed to an extent that it cannot be processed by the department;

d. The ticket shall pass all other confidential security checks of the department agency;

e. The ticket validation number shall be present in its entirety; and

f. The ticket shall not be counterfeited, forged, fraudulently made, or a duplicate of another winning ticket.

2. Where a winning ticket or play has been issued by a terminal:

a. The ticket or play shall have been issued by the department agency or by a licensed lottery retailer in an authorized manner;

b. The terminal ticket or play shall not have been cancelled canceled or previously paid;

c. The terminal ticket or play shall be validated in accordance with procedures for claiming and paying prizes as set out in the game rules; and

d. The terminal ticket or play data shall have been recorded in the computer gaming system before the drawing or the instant game ticket sale, and the ticket data shall match this computer record in every respect.

3. If the games rules specify that a physical ticket, play, or record of play is not required for validation there may be other lottery requirements, as defined by the director, for winners to collect prizes.

11VAC5-41-110. Use of playslips.

A. A playslip issued by the department agency may be used to select a player's choice or choices to be played in a department-authorized an agency-authorized computer gaming system. If a playslip is used to select the player's choice or choices for use in a computer gaming system, the playslip selections shall be manually or electronically marked as authorized by the department's agency's game rules and not marked by any electro-mechanical, electronic printing, or other automated device, except for play utilizing materials or systems developed by the department agency.

B. Any playslip marked by methods other than those authorized by this chapter is invalid and subject to seizure by the department if presented for play at any lottery terminal. Any tickets produced from the use of invalid playslips are also invalid and subject to seizure by the department agency.

C. Nothing in this chapter shall be deemed to prevent a person with a physical handicap who is unable to mark a playslip manually from using any device intended to permit such person to make such a mark for his sole personal use or benefit.

11VAC5-41-120. Replacement of ticket.

If a misprinted or otherwise defective ticket is purchased, the department's agency's only liability or responsibility shall be to replace the misprinted ticket with an unplayed ticket of equal price from the same or another current game or to refund the purchase price of the defective ticket.

11VAC5-41-130. Terminal-generated winning tickets.

A. When more than one ticket containing the winning numbers is issued for the same drawing of the same game, the holder of each ticket is entitled only to his share of the prize, regardless of whether the other holders of tickets with the winning numbers actually claim their share of the prize.

B. The department agency shall not redeem prizes for tickets that would have been winning tickets but for the fact that they have been cancelled canceled by the retailer unless specifically authorized by the director.

C. When the department's agency's internal controls indicate that a winning ticket was issued but no claim is made for the prize, there shall be a rebuttable presumption that such ticket was in fact issued and the prize shall be paid in accordance with the provisions of § 58.1-4020 of the Code of Virginia and regulations of the department agency.

11VAC5-41-140. Where prizes claimed.

Winners may claim game prizes as specified in this chapter or in the game rules, including:

1. At department agency headquarters;

2. At a department an agency customer service center;

3. From a cashing retailer;

4. By mail; or

5. At any other location specifically authorized by the department agency.

11VAC5-41-150. Retailers' prize payment procedures.

Procedures for prize payments by retailers are as follows:

1. Retailers may pay cash prizes in cash, by certified check, cashier's check, business check, money order, other cash equivalent or by any combination of these methods.

2. If a check for payment of a prize by a retailer to a claimant is denied for any reason, the retailer is subject to the same service charge, interest and penalty payments for referring a debt to the department agency for collection that would apply if the check were made payable to the department agency. A claimant whose prize check is denied shall notify the department agency to obtain the prize.

3. During normal business hours of the lottery retailer with operational validation equipment by which the ticket claim can be validated, a lottery retailer shall pay any lottery prize of $600 or less, unless otherwise determined by the director, regardless of the location from which the winning ticket was purchased.

4. A prize claim shall be paid only at the location specified on the retailer's license or at a lottery office.

5. The department agency will reimburse a retailer for all valid prizes paid by the retailer within the specified prize redemption period for the game from which the prize resulted.

6. In no case shall a retailer impose a fee, additional charge or discount for cashing a winning lottery game ticket.

7. Retailers who pay claims without validating the tickets do so at their own financial risk.

11VAC5-41-160. No reimbursement for retailer errors.

Unless otherwise determined by the director, the department agency shall not reimburse retailers for prize claims a retailer has paid in error or for which a retailer failed to properly and completely validate the lottery game tickets in accordance with department agency procedures.

11VAC5-41-170. When prize shall be claimed from the department agency.

A. The department agency will pay prizes in any of the following circumstances:

1. If a retailer cannot validate a claim which that the retailer otherwise would pay, the ticket holder shall present the original signed ticket to any department agency office including the department's agency's headquarters or mail the signed ticket to the department's agency's headquarters;

2. If a ticket holder is unable to return to any retailer to claim a prize that the retailer otherwise would pay, the ticket holder may present the original signed ticket at any department agency office or mail the signed ticket to the department's agency's headquarters;

3. If the prize amount is more than $600, the ticket holder may present the original signed ticket at any department agency office or mail the signed ticket to the department agency headquarters; or

4. Where an electronic entry or an electronic record of a ticket is permitted, a presentation of a physical ticket may not be required to claim a prize.

B. The department agency may require a claim form.

C. A player shall bear all risk of loss or damage by sending the ticket through the mail.

11VAC5-41-180. Department Agency action on claims for prizes submitted to department agency.

A. The department agency shall validate the winning ticket claim according to procedures contained in this chapter.

B. If the claim cannot be validated, the department agency will promptly notify the ticket holder.

C. If the claim is mailed to the department agency and the department agency validates the claim, a check for the prize amount, merchandise, or experiential prizes will be presented or mailed to the winner.

D. If an individual presents a claim to the department agency in person and the department agency validates the claim, a check for the prize amount, merchandise, or experiential prizes will be presented to the winner.

11VAC5-41-190. Withholding, notification of prize payments.

A. When paying any prize in excess of $600, the department agency shall:

1. File the appropriate income reporting forms with the Virginia Department of Taxation and the federal Internal Revenue Service; and

2. Withhold federal and state taxes from any winning ticket in accordance with the tax regulation in effect at the time.

B. Additionally, when paying any cash prize of $100 or more, the department agency shall withhold any moneys due for delinquent debts as provided by the Commonwealth's Setoff Debt Collection Act, Article 21 (§ 58.1-520 et seq.) of Chapter 3 of Title 58.1 of the Code of Virginia.

11VAC5-41-220. How prize claim entered.

A prize claim shall be entered in the name of a natural person as prescribed by § 58.1-4019 B of the Code of Virginia. In all cases, the identity and social security number of all natural persons who receive a prize or share of a prize greater than $100 from a winning ticket redeemed at any department agency office shall be provided.

1. A nonresident alien shall furnish his Immigration and Naturalization Service (INS) Number.

2. Two or more natural persons claiming a single prize may file IRS Form 5754, "Statement by Person(s) Receiving Gambling Winnings," with the department agency. This form designates to whom winnings are to be paid and the person or persons to whom winnings are taxable.

3. Two or more natural persons wishing to divide a jackpot prize shall complete an "Agreement to Share Ownership and Proceeds of Lottery Ticket" form. The filing of this form is an irrevocable election that may only be changed by an appropriate judicial order.

11VAC5-41-230. Delay of payment allowed.

A. Subject to the provisions in § 58.1-4013 D of the Code of Virginia, the director may refrain from making payment of a prize pending a final determination by the director under any of the following circumstances:

1. If a dispute arises, or it appears that a dispute may arise, relative to any ownership of a winning ticket or any prize;

2. If there is any question regarding the identity of the claimant;

3. If there is any question regarding the validity of any ticket presented for payment;

4. If there is any question whether a claimant has made a valid cash option election; or

5. If the claim is subject to any set off for delinquent debts owed to any agency eligible to participate in the Setoff Debt Collection Act (Article 21 (§ 58.1-520 et seq.) of Chapter 3 of Title 58.1 of the Code of Virginia) if the agency has registered such debt with the Virginia Department of Taxation and timely notice of the debt has been furnished by the Virginia Department of Taxation to the department.

B. The director may, at any time, delay any periodic or installment payment in order to review a change in circumstance relative to the prize awarded, the payee, the claim, or any other matter that has been brought to the department's agency's attention. All delayed installments shall be brought up to date immediately upon the director's confirmation. Delayed installments shall continue to be paid according to the original payment schedule after the director's decision is given.

C. No liability for interest for any delay of any prize payment in accordance with subsections A and B of this section, or any delay beyond the department's agency's control, shall accrue to the benefit of the claimant pending payment of the claim. The department agency is neither liable for nor has it any responsibility to resolve disputes between or among competing claimants.

11VAC5-41-250. Using winners' names and information.

The department agency can use a winner's name and the city, town, or county in which a winner lives, as well as the prizes won, for public information purposes and to foster the integrity of the games. The department agency may require prize winners to participate in news conferences. The department agency can use the winner's information described in this section and winner's photographs for public information or promotional purposes in mediums such as, but not limited to, the department's agency's website (www.valottery.com), social media, in-store, television, Internet, and radio. No consideration shall be paid by the department agency for these purposes.

11VAC5-41-290. Liability ends with prize payment.

All liability of the Commonwealth, its officials, officers and employees, and of the department agency, the board, the director and employees of the department agency, terminates upon final payment of a lottery prize, or sooner if so provided in the game rules or these regulations.

11VAC5-41-300. Marking tickets prohibited; exceptions.

Marking of tickets in any way is prohibited except by a player to play a game according to the rules of that specific game or to claim a prize or by the department agency or a retailer to identify or to void the ticket.

11VAC5-41-310. Lost, stolen, or destroyed tickets.

The department agency is not liable for lost, stolen, or destroyed tickets. The director may honor a prize claim of an apparent winner who does not possess the original ticket if the claimant is in possession of information that demonstrates that the original ticket meets the following criteria and can be validated through other means. Such information may include, but is not limited to, the following:

1. The claim form, if required, and a photocopy of the ticket, or photocopy of the original claim form, if required, and ticket, are timely filed with the department agency;

2. The prize for which the claim is filed is a winning prize that has not been claimed, as verified in the department's agency's records.

3. The claim is filed within the redemption period, as established by the game rules; and

4. Except in extenuating circumstances or for just cause as the director may deem appropriate, the redemption period for claims has expired.

11VAC5-41-320. Unclaimed prizes.

A. Except for a free ticket prize, a claim for a lottery game winning ticket must be mailed in an envelope bearing a postmark of the United States Postal Service or another sovereign nation or received for payment as prescribed in this chapter within either 180 days after the date of the drawing for which the ticket was purchased, or of the event which that caused the ticket to be a winning entry, or, in the case of an instant game ticket, within 180 days after the announced end of the game. In the event that the 180th day falls on a Saturday, Sunday, or legal holiday, the winning ticket will be accepted for validation on the next business day only at a lottery office.

B. Any lottery cash prize that remains unclaimed after either 180 days following the drawing that determined the prize or 180 days after the announced end of the instant game shall revert to the State Literary Fund. Cash prizes do not include free ticket prizes or other noncash prizes such as merchandise, vacations, admission to events and the like.

C. All claims for terminal game winning tickets for which the prize is a free ticket must be mailed in an envelope bearing a postmark of the United States Postal Service or another sovereign nation or received for redemption as prescribed in this chapter within 180 days after the date of the drawing for which the ticket was purchased. In the event the 180th day falls on a Saturday, Sunday, or legal holiday, a claimant may only redeem his winning ticket for a free ticket at a cashing retailer on or before the 180th day.

Except for claims for free ticket prizes mailed to lottery headquarters and postmarked on or before the 180th day, claims for such prizes will not be accepted at any lottery office after the sixtieth 60th day. This section does not apply to the redemption of free tickets awarded through the subscription program.

D. Any instant game winning ticket of $25 or less that has been purchased, but that is not claimed within 180 days after the announced end of the instant game, shall revert to the State Virginia Lottery Fund.

E. In case of a prize payable over time, if such prize is shared by two or more winning tickets, one or more of which is not presented to the department agency for payment within the prize redemption period as established by the game rules, the department agency will transfer that portion of the prize to the State Literary Fund in accordance with procedures approved by the State Treasurer.

F. In accordance with the provisions of the Servicemembers Civil Relief Act of 1940 (50 USC App § 526), any person while in active military service may claim exemption from the 180-day ticket redemption requirement. Such person, however, must claim his winning ticket or share as soon as practicable, and in no event later than 180 days after discharge from active military service.

VA.R. Doc. No. R15-4146; Filed September 4, 2014, 2:41 p.m.