Titles of Regulations: 11VAC5-31. Licensing Regulations (amending 11VAC5-31-10, 11VAC5-31-160).

11VAC5-41. Lottery Game Regulations (amending 11VAC5-41-10, 11VAC5-41-60, 11VAC5-41-80, 11VAC5-41-100, 11VAC5-41-130, 11VAC5-41-320).

Statutory Authority: § 58.1-4007 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: November 4, 2015.

Effective Date: December 21, 2015.

Agency Contact: Amy Roper, Regulatory Coordinator, Virginia Lottery, 900 East Main Street, 9th Floor, Richmond, VA 23219, telephone (804) 692-7133, FAX (804) 692-7325, or email aroper@valottery.com.

Basis: Section 58.1-4007 of the Code of Virginia authorizes the Virginia Lottery Board to adopt regulations governing the establishment and operation of a lottery, after consultation with the Director of the Virginia Lottery.

Purpose: The purpose of the regulatory action is to amend terminology or definitions in an effort to ensure terminology synchronicity between regulations, Lottery game or promotion rules, and the agency website.

Rationale for Using Fast-Track Process: The proposed changes are only amendments, do not contain new regulations, are nonsubstantive, do not require any change in the actions of lottery retailers or players, and are noncontroversial in nature.

Substance: The amendments update terminology or definitions.

Issues: The amendments provide (i) for all matters necessary or desirable for the efficient, honest, and economical operation and administration of the lottery and (ii) for the convenience of the purchasers of tickets or shares and the holders of winning tickets or shares. There are no disadvantages to the public or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Virginia Lottery Board proposes to update regulatory terminology to be consistent with the terminology used in practice and in the game rules, promotions, and the agency website.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. The Virginia Lottery Board proposes to update regulatory terminology to be consistent with the terminology used in practice and in the game rules, promotions, and the agency website. According to Virginia Lottery, none of the proposed terminology changes will have substantive effect in practice. Thus, no significant economic effect is expected from the proposed changes other than improving the consistency among the game rules, promotions, and the agency website.

Businesses and Entities Affected. These regulations apply to 5,100 licensed retailers. Additionally, there are approximately 2.1 million adults who play lottery in a given month.

Localities Particularly Affected. The proposed regulations apply throughout the Commonwealth.

Projected Impact on Employment. No effect on employment is expected.

Effects on the Use and Value of Private Property. No effect on the use and value of private property is expected.

Small Businesses: Costs and Other Effects. The proposed amendments do not create cost and other effects on small businesses.

Small Businesses: Alternative Method that Minimizes Adverse Impact. The proposed amendments do not create adverse impact on small businesses.

Real Estate Development Costs. No effect on real estate development costs is expected.

Legal Mandate.

General: The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Code of Virginia and Executive Order Number 17 (2014). Section 2.2-4007.04 requires that such economic impact analyses determine the public benefits and costs of the proposed amendments. Further the report should include but not be limited to:

• the projected number of businesses or other entities to whom the proposed regulation would apply,

• the identity of any localities and types of businesses or other entities particularly affected,

• the projected number of persons and employment positions to be affected,

• the projected costs to affected businesses or entities to implement or comply with the regulation, and

• the impact on the use and value of private property.

Small Businesses: If the proposed regulation will have an adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include:

• an identification and estimate of the number of small businesses subject to the proposed regulation,

• the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the proposed regulation, including the type of professional skills necessary for preparing required reports and other documents,

• a statement of the probable effect of the proposed regulation on affected small businesses, and

• a description of any less intrusive or less costly alternative methods of achieving the purpose of the proposed regulation.

Additionally, pursuant to § 2.2-4007.1, if there is a finding that a proposed regulation may have an adverse impact on small business, the Joint Commission on Administrative Rules is notified at the time the proposed regulation is submitted to the Virginia Register of Regulations for publication. This analysis shall represent DPB's best estimate for the purposes of public review and comment on the proposed regulation.

Agency's Response to Economic Impact Analysis: The Virginia Lottery has reviewed the economic impact analysis prepared by the Department of Planning and Budget. The Lottery is satisfied with the analysis and has no additional comments.

Summary:

The amendments update terminology and definitions for consistency with the lottery game and promotion rules.

11VAC5-31-10. Definitions.

The following words and terms when used in any of the 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 Virginia Lottery Board established by the Virginia 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 Virginia Lottery or his designee.

"Enterprise Series MultiMedia (ESMM) display" means a player display unit that, when connected to the lottery terminal, displays messages to the customer pertaining to lottery products, drawing messages, and other lottery-related messages.

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

11VAC5-31-160. 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 this chapter, and in the 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 do 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 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 agency's equipment, or failure to properly position and display the vacuum fluorescent display or LED device Enterprise Series MultiMedia (ESMM) display;

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 agency; (ii) license terms and conditions; (iii) specific rules for all applicable 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 subsection 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 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.

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

The following words and terms when used in any of the 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 Virginia Lottery Board established by the 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 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 agency that supports the sale, redemption, or validation of lottery tickets or wagers.

"Computer-generated game" means a game that is dependent upon the use of a terminal in direct communication with a game mainframe computer.

"Computer-generated ticket" means an 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.

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

"Director" means the Executive Director of the Virginia Lottery 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.

"Entry" means a method, whether in electronic or paper form, by which a person enters a drawing or promotion.

"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.

"Play" means one wager for a chance to win a prize. There may be multiple plays on a single ticket.

"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 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" 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 agency from which a unique lottery ticket is generated displaying the selected items or numbers.

"Scratch ticket "Scratcher" means a printed instant win ticket with a covering coating over the play area that, when scratched off, reveals a specific result instant game play results.

"Scratch game" means a game that, when played, reveals or informs the player immediately whether he has won (i) a prize, (ii) entry into a prize drawing, (iii) prize points, or (iv) any combination thereof as specified in game rules.

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

"Terminal" means a device that is authorized by the agency to function in an interactive mode with the 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 agency.

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

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

11VAC5-41-80. Scratch ticket Scratcher returns.

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

B. Once tickets are accepted by a retailer, the 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 agency's procedures.

11VAC5-41-100. Validation requirements.

To receive payment for Prior to awarding a prize, a Virginia lottery game ticket or play the retailer or agency shall be validated by the retailer or the agency validate the ticket or play 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 game 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 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 agency or by a licensed lottery retailer in an authorized manner;

b. The terminal ticket or play shall not have been 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 game 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.

11VAC5-41-130. Terminal-generated Computer-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 agency shall not redeem prizes for tickets that would have been winning tickets but for the fact that they have been canceled by the retailer unless specifically authorized by the director.

C. When the 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 agency.

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 that caused the ticket to be a winning entry, or, in the case of an instant game ticket a scratcher, 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 scratch game shall revert to the State Virginia's 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 computer-generated 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 60th day. This section does not apply to the redemption of free tickets awarded through the subscription program.

D. Any instant scratch 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 scratch game, shall revert to the 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 agency for payment within the prize redemption period as established by the game rules, the agency will transfer that portion of the prize to the State Virginia's 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.