Part I
General Parameters

11VAC5-20-10. Definitions.

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

"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.

"Award" means a decision to contract with a specific vendor for a specific contract.

"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 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.

"Bid" means a competitively priced offer made by an intended seller, usually in reply to an invitation for bids.

"Bid bond" means an insurance agreement in which a third party agrees to be liable to pay a certain amount of money in the event a specific bidder fails to accept the contract as bid.

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

"Competitive bidding" means the offer of firm bids by individuals or firms competing for a contract, privilege, or right to supply specified services or goods.

"Competitive negotiation" means a method for purchasing goods and services, usually of a highly complex and technical nature where qualified individuals or firms are solicited by using a Request For Proposals. Discussions are held with selected vendors and the best offer, as judged against criteria contained in the Request For Proposals, is accepted.

"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 executive 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.

"Contract administration" means the management of all facets of a contract to assure that the contractor's total performance is in accordance with the contractual commitments and that the obligations of the purchase are fulfilled.

"Contracting officer" means the person(s) authorized to sign contractual documents which obligate the State Lottery Department and to make a commitment against State Lottery Department funds.

"Contractor" means an individual or firm which has entered into an agreement to provide goods or services to the State Lottery Department.

"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, 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 Director of the State Lottery Department or his designee.

"Electronic funds transfer (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 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 in connection with case decisions.

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

"Informalities" means defects or variations of a bid from the exact requirements of the Invitation for Bids which do not affect the price, quality, quantity, or delivery schedule for the goods or services being purchased.

"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.

"Invitation for Bids (IFB)" means a document used to solicit bids for buying goods or services. It contains or references the specifications or scope of work and all contractual terms and conditions.

"Kickbacks" means gifts, favors or payments to improperly influence procurement decisions.

"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.

"Letter contract" means a written preliminary contractual instrument that authorizes a contractor to begin immediately to produce goods or perform services.

"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.

"Negotiation" means a bargaining process between two or more parties, each with its own viewpoints and objectives, seeking to reach a mutually satisfactory agreement on, or settlement of, a matter of common concern.

"Noncompetitive negotiations" means the process of arriving at an agreement through discussion and compromise when only one procurement source is practicably available or competitive procurement procedures are otherwise not applicable.

"Nonprofessional services" means personal services not defined as "professional services."

"Notice of Award" means a written notification to a vendor stating that the vendor has received a contract with the department.

"Notice of Intent to Award" means a written notice which is publicly displayed, prior to signing of a contract, that shows the selection of a vendor for a contract.

"Performance bond" means a contract of guarantee executed in the full sum of the contract amount subsequent to award by a successful bidder to protect the department from loss due to his inability to complete the contract in accordance with its terms and conditions.

"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 unless the context indicates otherwise. In the context of the licensing of lottery sales agents, "person" also means all departments, commissions, agencies and instrumentalities of the Commonwealth, including counties, cities, municipalities, political subdivisions, agencies and instrumentalities  thereof.

"Personal services contract" means a contract in which the department has the right to direct and supervise the employee(s) of outside business concerns as if the person(s) performing the work were employees of the department or a contract for personal services from an independent contractor.

"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.

"Professional services" means services within the practice of accounting, architecture, behavioral science, dentistry, insurance consulting, land surveying, landscape architecture, law, medicine, optometry, pharmacy, professional engineering, veterinary medicine and lottery on-line and instant ticket services.

"Protest" means a written complaint about a procurement action or decision brought by a bidder or offeror to the department with the intention of receiving a remedial result.

"Purchase order" (signed by the procuring activity only) means the form which is used to procure goods or services when a bilateral contract document, signed by both parties, is unnecessary, particularly for small purchases. The form may be used for the following:

1. To award a contract resulting from an Invitation For Bids (IFB).

2. To establish a blanket purchase agreement.

3. As a delivery order to place orders under state contracts or other requirements-type contracts which were established for such purpose.

"Request for Information (RFI)" means a document used to get information from the general public or potential vendors on a good or service. The department may act upon the information received to enter into a contract without issuing an IFB or an RFP.

"Request for Proposals (RFP)" means a document used to solicit offers from vendors for buying goods or services. It permits negotiation with vendors (to include prices) as compared to competitive bidding used in the invitation for bids.

"Responsible vendor" means a person or firm who has the capability in all respects to fully satisfy the requirements of a contract as well as the business integrity and reliability to assure good faith performance. In determining a responsible vendor, a number of factors including but not limited to the following are considered. The vendor should:

1. Be a regular dealer or supplier of the goods or services offered;

2. Have the ability to comply with the required delivery or performance schedule, taking into consideration other business commitments;

3. Have a satisfactory record of performance; and

4. Have the necessary facilities, organization, experience, technical skills, and financial resources to fulfill the terms of the contract.

"Responsive vendor" means a person or firm who has submitted a bid, proposal, offer or information which conforms in all material respects to the solicitation.

"Retailer" means a person or business licensed by the department 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.

"Solicitation" means an Invitation for Bids (IFB), a Request for Proposals (RFP), a Request for Information (RFI) or any other document issued by the department or telephone calls by the department to obtain bids or proposals or information for the purpose of entering into a contract.

"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 in the event the retailer fails to meet his obligations to the department.

"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.

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; and point-of-sale display materials; internet and social media.

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

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

11VAC5-20-70. Operations of the department.

A. The department will conduct business with the public, lottery retailers, vendors and others with integrity and honesty.

B. Apportionment of moneys received from the sale of tickets or shares shall be divided approximately as follows:

The percentages may vary from year to year based upon the amount of prize payouts games offered, amount of prize payouts and operating expenses.

C. The State Lottery Fund will be established as an account in the Commonwealth's accounting system. The account will be established following usual procedures and will be under regulations and controls as other state accounts. Funding will be from gross sales.

1. Within the State Lottery Fund, there shall be a "Lottery Prize Special Reserve Fund" subaccount created in the State Lottery Fund account which will be used when lottery prize payouts exceed department cash on hand. Unless otherwise provided in the Appropriation Act, 5.0% of monthly gross sales shall be transferred to the Lottery Prize Special Reserve Fund until the amount of the Lottery Prize Special Reserve Fund reaches 5.0% of the gross lottery revenue from the previous year's annual sales or $5 million, whichever is less.

a. The calculation of the 5.0% will be made for each instant or on-line game.

b. The funding of this subaccount may be adjusted at any time by the board.

2. Other subaccounts may be established in the State Lottery Fund account as needed at the direction of the board upon the request of the director with concurrence of the State Comptroller and the Auditor of Public Accounts.

3. In accordance with the Appropriation Act, the State Comptroller provides an interest-free line of credit not to exceed $25,000,000 to the department. This line of credit is in lieu of the Operations Special Reserve Fund required to be established by the Comptroller in accordance with § 58.1-4022 B of the Code of Virginia. Draw-downs against this line of credit are available immediately upon request of the department.

D. The board and director may address matters not mentioned in Chapters 20 (11VAC5-20), 31 (11VAC5-31), and 41 (11VAC5-41) that are needed or desired for the efficient and economical operation and administration of the lottery.

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.

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

Part III
Lottery Board Procedures

11VAC5-20-120. Officers of the board.

A. The board shall have a chairman and a vice chairman who shall be elected by the board members.

B. The board will elect its officers annually at its January meeting, or as soon thereafter as reasonably possible, to serve for the calendar year.

11VAC5-20-130. Board meetings.

A. The board will hold regular public meetings to receive information and recommendations from the director on the operation and administration of the lottery and to take official action. The board may also request information or comment from the public.

B. The board may hold special meetings as may be necessary to carry out its work. The chairman may call a special meeting at any time and shall call a special meeting when requested to do so by at least two board members or at the request of the director. Public notice of special meetings shall be given contemporaneously with the notice provided to all board members. Written notice is preferred but telephonic notice may be accepted by any board member in lieu of written notice.

C. A majority of board members shall constitute a quorum for the conduct of business at both regular and special meetings of the board. The chairman is eligible to vote at all meetings.

11VAC5-20-140. Committees of the board.

A. The board chairman may, at his discretion, appoint such committees as he deems necessary to assist the board in its work.

B. A committee may be established to advise the board on a matter referred to it. A committee established to act in an advisory capacity to the board may include members of the general public. At least two members of the committee shall be board members and the chairman shall be a board member appointed by the board chairman.

1. A majority of the members appointed to an advisory committee shall constitute a quorum.

2. Recommendations of an advisory committee may be adopted by a majority vote of those present and voting. The chairman of an advisory committee shall be eligible to vote on all recommendations.

3. All actions of advisory committees shall be presented to the board in the form of recommendations.

11VAC5-20-150. Conferences on denial, suspension or revocation of a retailer's license.

The conduct of license appeal conferences will conform to the provisions of § 2.2-4018 Article 3 (§ 2.2-4018 et seq.) of Chapter 40 of Title 2.2 of the Code of Virginia relating to case decisions.

1. An initial conference consisting of an informal fact finding process will be conducted by the conference officer to attempt to resolve the issue to the satisfaction of the parties involved.

2. If an appeal is not resolved through the informal fact finding process, at the request of the appellant, a formal hearing will be conducted by the board in public. Following the close of the evidence, the board may consider its decision in closed session. The board will then issue its decision on the case.

3. Upon receipt of the board's decision on the case, the appellant may elect to pursue court action in accordance with the provisions of the Administrative Process Act (APA) relating to court review.

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 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 subsection A.1 of this section.

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

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

2. Delivery to any other State Lottery Department office a State Lottery Department regional 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 which is being appealed;

2. The legal and factual basis for the appeal;

3. The retailer's license number; and or the Retailer License Application Control 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. The transcript shall become part of the department'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 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, in his sole discretion, best serves the interest of fairly developing the facts.

6. The conference officer may exclude information at any time which he believes, in his sole discretion, is not germane or which 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 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 which is being appealed;

b. The legal and factual basis for the appeal;

c. The retailer's license number or the Retailer License Application Control 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 of the APA (§ 2.2-4018 et seq.) 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. The transcript shall become part of the department'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.

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 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 Lottery Department will purchase goods or services in accordance with procedures established by the board, after consultation with the director, pursuant to chapter 40 of title 58.1 of the Code of Virginia. contained in The Virginia Lottery Purchasing Manual.

FORMS (11VAC5-20) (Repealed.)

Informal Conference Request,1996.

Formal Administrative Hearing Request, 1996.

DOCUMENT INCORPORATED BY REFERENCE (11VAC5-20) (Repealed.)

The Virginia Lottery Purchasing Manual, Release 1, October 2005, Virginia Lottery Department.

11VAC5-31-10. Definitions.

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

"License" means the certificate issued by the department to a retailer who has met the requirements established by the department 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 shares products, and act as the Lottery'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.

A. Any person who is 18 years of age or older and who is bondable may submit an application for licensure as a lottery retailer in accordance with the provisions and requirements of the department'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; or

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

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

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

11VAC5-31-30. Application procedure.

A. Any eligible person shall first file an application with the department by completing all information requested on forms supplied for that purpose, along with submitting the 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. The retailer shall submit all required forms and information to the department to be considered for licensing. Failure to submit required forms within the department'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. The financial responsibility and security of the applicant and his business or activity;

2. The accessibility of his place of business or activity to the public;

3. The sufficiency of existing lottery retailers to serve the public convenience;

4. The volume of expected lottery ticket sales;

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

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

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

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

9. Whether the applicant or retailer has committed any act of fraud, deceit, misrepresentation, or conduct prejudicial to public confidence in the state lottery.

1. Those factors set out in § 58. 1-4009 of the Code of Virginia, these regulations and in the department'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 lottery;

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 committed any act of fraud, deceit, misrepresentation, moral turpitude, illegal gambling or conduct prejudicial to public confidence in the state lottery.

B. The director may develop and, by director's order, publish additional criteria which, in his judgment, are necessary to serve the public interest and public trust in the lottery.

C. After notification of selection as a lottery retailer, the retailer shall submit all required forms and information to the department to be considered for licensing. Failure to submit required forms and information within the times specified by the department's licensing procedures may result in the loss of the opportunity to become or remain a licensed retailer.

B. Special retailer licensing

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 which 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.

f. Different commission and payment structures and bonding requirements.

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 Virginia this Commonwealth. The surety bond shall be in the amount and penalty of up to $50,000 for instant game retailers and $100,000 per clerk-activated terminal for on-line game retailers and shall be payable to the State Lottery Department and conditioned upon the faithful performance of the lottery retailer's duties an amount as deemed necessary to secure the interests of the Commonwealth and the lottery, in the sole discretion of the director, and shall be payable to the State Lottery Department and conditioned upon the faithful performance of the lottery's retailer's duties.

B. The department 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 State Lottery Department 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 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 through the EFT process in accordance with the department'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 retailer 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 licensing procedures.

C. Licenses issued pursuant to this regulation shall comply with the terms of the consent decree entered by the Circuit Court for the City of Richmond on January 27, 2011, regarding retailer accessibility.

11VAC5-31-80. License fees.

The initial general license fee shall be $50 and the periodic review fee shall be $35, or as otherwise determined from time to time by the board, and shall be paid in accordance with the department's licensing procedures. The license fees, where applicable, shall be paid for each location An initial licensing fee and an annual license fee in the amounts fixed by the board shall be collected from each lottery sales agent and shall be paid in accordance with the departments licensing procedures. These fees are nonrefundable, unless otherwise determined by the Director, in his sole discretion or specified in the department's procedures. The license fees shall be paid for each location.

11VAC5-31-90. Transfer of license prohibited.

A license issued by the director authorizes a specified person to act as a lottery retailer sales agent at a specified location as set out in the license or locations. The license is not transferrable or assignable to any other person or persons, or location or locations.

11VAC5-31-100. Display of license.

Each licensed lottery retailer shall conspicuously display his lottery license in an area visible to the general public where lottery tickets are sold upon request by any member of the general public.

11VAC5-31-110. Reporting requirements and settlement procedures. (Repealed.)

Before a retailer may begin lottery sales, the director will issue to him instructions and report forms that specify the procedures for (i) ordering tickets; (ii) paying for tickets purchased; (iii) reporting receipts, transactions and disbursements pertaining to lottery ticket sales; and (iv) settling the retailer's account with the department.

11VAC5-31-120. Training of retailers and their employees. (Repealed.)

Each retailer or his designated representative or representatives and anyone that operates an on-line terminal at the retailer's location is required to participate in training. The director may consider nonparticipation as grounds for suspending or revoking the retailer's license.

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, 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. Retailers shall sell lottery tickets at the price fixed by the board. 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 attempt 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. Tickets shall be sold during all normal business hours of the lottery retailer and when the equipment is available, unless the director approves otherwise. 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. Tickets shall be sold only at the location listed on each retailer's license from the department. No retailer or his employee or agent shall purchase a winning lottery game ticket from a player at a discounted price.

E. Retailers shall not exchange instant ticket packs or tickets or on-line ticket stock with one another, but may transfer instant ticket packs or tickets between or among locations under the same ownership.

F. No retailer or his employee or agent shall try to determine the numbers or symbols appearing under the removable latex or electronically-produced coverings or otherwise attempt 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.

G. Unsupervised retailer employees who sell or otherwise vend lottery tickets must be at least 18 years of age. An employee not yet 18 years of age, but who is at least 16 years of age, may sell or otherwise vend lottery tickets at the retailer's place of business so long as the employee is supervised by the manager or supervisor in charge at the location where the tickets are being sold.

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 policies.

B. Any retailer who fails to make payment when payment is due will be contacted by the department 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, 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 monetary penalty, in an amount up to the maximum allowed by Virginia law. 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 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. The amount of such service charge shall be established by the director, and retailers shall be informed through normal communications, which may include but are not limited to training materials, website and newsletters.

D. The service charge, interest and penalty charges may be waived if it is determined by the department 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.

11VAC5-31-150. Licensed retailers' compensation.

A. A licensed retailer shall receive up to 5.0% compensation based on his net ticket sales and up to 1.0% of the cash value of all prizes which the retailer paid.

B. The Except as provided pursuant to the State Lottery Law (§ 58.1-4000 et seq. of the Code of Virginia), the board shall approve any bonus or incentive system for payment to retailers. The director may then award such cash bonuses or other incentives to retailers.

C. Retailers may not accept any compensation for the sale of lottery tickets other than compensation approved under this section, regardless of the source.

D. Nothing in this regulation shall be inconsistent with § 58.1-4006 D and § 58.1-4007 A (11) of the Code of Virginia.

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 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, illegal gambling or conduct prejudicial to public confidence in the state lottery; or

5. 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. 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 persons or the person's place of business represents a substantial risk for the collection, deposit, preservation, accounting, and/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. Licenses issued pursuant to this regulation shall comply with the terms of the consent decree entered by the Circuit Court for the City of Richmond on January 27, 2011, regarding retailer accessibility.

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 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 equipment, or failure to properly position and display the vacuum fluorescent display or LED device;

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

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

6. Failure to comply with any applicable law or statute, rule, policy, or procedure of the department, 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.

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 C 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 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 by first notifying the department in writing at least 15 calendar days before the proposed termination date. The department 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 state lottery 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 and the licensed premises.

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 representatives, between the hours of 8 a.m. and 5 p.m. Mondays through Fridays during the normal business hours of the licensed retailer 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 representatives without prior notice.

11VAC5-31-200. Audit of records.

The director may require a lottery retailer to submit to the department 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.

FORMS (11VAC5-31)

Retailer License Application, SLD-0062 (rev. 8/97 10/07).

Retailer Location Form, SLD-0055 (rev. 9/07).

Personal Data Form, SLD-0061 (rev. 10/07).

On-Line Game Survey, SLD-0120.

Licensed Retailer Certificate (rev. 9/94).

Instant Ticket Game/Contest Product Licensing Application (rev. 7/96).

Retailer Contract (rev.12/99 5/10).

Retailer Contract Addendum (rev. 12/00).

Authorization Agreement for Preauthorized Payments, SLD-0035A.

A/R Online Accounting Transaction Form, X-0105 (eff. 11/00).

Retailer Activity Form, SLD-0081 (rev.2/95).

On-Line Weekly Settlement Envelope, SLD-0127.

Cash Tickets Envelope, SLD-0125.

Cancelled Tickets Envelope, SLD-0124.

Ticket Problem Report, SLD-0017 (eff. 9/92).

Weekly Settlement Form, SLD-0128 (eff. 2/89).

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

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

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

"Barcode" means the individual coded number assigned to a lottery ticket for the purpose of electronic scanning, validation, redemption or other tracking purpose.

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

"Certified drawing" means a drawing in which lottery officials and an independent certified public accountant attest that the drawing equipment functioned properly and that a random selection of a winning combination occurred.

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

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

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

"Drawing" means a formal process of randomly selecting numbers, names or items in accordance with the specific game or promotion rules for those games 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 the player has won a prize or entry into a prize drawing, or both 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 that contains a manufacturing or printing defect or play that contains a manufacturing, programming or printing defect that causes the game to no longer play as defined in game rules and/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.

"On-line system" means the department's on-line computer system consisting of on-line terminals, central processing equipment, and a communication network.

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

"On-line ticket" means a computer-generated or electronically-produced ticket on lottery stock issued by an on-line lottery retailer to a player as a receipt for the number, numbers, or items or combination of numbers or items the player has selected.

"Pack" means a set quantity of consecutively numbered scratch tickets that all bear an identical pack number unique to that pack among all the tickets manufactured for that particular game.

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

"Prize structure" means the percentage of sales that is dedicated to prizes 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 lottery 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 scratch choice of a limited number of play spots choice or choices during game play.

"Promotion" is defined as 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 placed into the lottery retailer terminal from which a unique lottery ticket is generated by the computer, displaying 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. means an instant game ticket with a latex or electronically produced covering over the game symbols located in the play area. Each ticket has a unique barcode, validation number and ticket number.

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

"Terminal" means a device that is authorized by the department to function in an  interactive mode with the department's computer gaming system(s) 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 pre-assigned unique number or combination of letters and numbers or barcode which identifies that particular ticket as one within a particular game or drawing. means the preassigned unique number or combination of letters and numbers which 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 number" means the unique number or number-and-letter code used to determine whether a lottery ticket is a winning ticket.

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

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

11VAC5-41-20. Development of lottery games.

The director shall select, operate, and contract for the operation of lottery games that meet the general criteria set forth in this chapter and in applicable game rules.

11VAC5-41-30. Prize structure.

A. The prize structure for each lottery game shall be approved in advance by the board and may be adjusted in accordance with policy adopted by the board.

B. Prizes may be cash or noncash awards, including game tickets.

11VAC5-41-40. Chances of winning.

The director shall publicize the overall chances of winning a prize in each lottery game. The chances may be both printed on the ticket or contained in informational materials, or both and/or in electronic form.

11VAC5-41-50. Ticket price.

A. The sale price of a lottery ticket for each game will be determined by the board. The ticket price shall not operate to prevent the sale of more than one lottery play on a single ticket. Unless authorized by the board, lottery retailers may not discount the sale price of tickets or provide free lottery tickets as a promotion with the sale of tickets. This section shall not prevent a licensed retailer from providing free game tickets with the purchase of other goods or services customarily offered for sale at the retailer's place of business; provided, however, that such promotion shall not violate any law.

B. This section shall not apply to the redemption of a winning ticket, the prize for which is one or more free tickets Retailers shall sell tickets at the prices fixed by the board.

C. This section shall not apply to the redemption of a winning ticket, the prize for which is one or more free tickets.

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.

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

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

11VAC5-41-70. Ticket Terminal ticket cancellation.

A ticket may be canceled in accordance with the procedures contained in the rules for each game.

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

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

B. Once tickets are accepted by a retailer, the department: will not replace mutilated or damaged tickets, or be responsible for lost, stolen or destroyed tickets, unless specifically authorized by the director.

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

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

11VAC5-41-90. End of game; suspension.

Each lottery game will end on a date announced in advance by the director. The director may suspend or terminate any lottery game without advance notice if he finds that this action will best serve and protect the public interest.

11VAC5-41-100. Validation requirements.

A. To receive payment for a prize, a Virginia lottery game ticket or play shall be validated by the retailer or the department 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. The original ticket must be presented for validation;

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

3. 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;

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

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

6. The ticket shall not have been cancelled or previously paid;

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

8. The ticket data shall have been recorded in the central computer system before the on-line game drawing or the instant game ticket sale, and the ticket data shall match this computer record in every respect;

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

10. The ticket shall pass all other confidential security checks of the department.

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;

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 or by a licensed lottery retailer in an authorized manner;

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

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 is not required for validation there may be other lottery requirements, as defined by the director, for winners to collect prizes.

B. Any lottery cash prize or free ticket (at its equivalent value) resulting from a ticket that is purchased or claimed by a person ineligible to play the lottery game is invalid and reverts to the State Lottery Fund.

11VAC5-41-110. Use of playslips.

A. A playslip issued by the department may be used to select a player's number or numbers to be played in an on-line game. If a playslip is used to select the player's number or numbers for an on-line game, the playslip number selections shall be manually marked and not marked by any electro-mechanical, electronic printing or other automated device. choice or choices to be played in a department-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 game rules and not marked by any electro-mechanical, electronic printing or other automated device, except for play utilizing materials and/or systems developed by the department.

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.

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 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. Winning 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 shall not redeem prizes for tickets that would have been winning tickets but for the fact that they have been cancelled by the retailer unless specifically authorized by the director.

C. When the department'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.

11VAC5-41-140. Where prizes claimed.

Winners may claim game prizes from any licensed lottery retailer or from the department in the manner specified in this chapter or in the game rules in a manner specified in this chapter or in the game rules which includes:

1. At lottery headquarters;

2. At a lottery customer service center; or

3. From a cashing retailer; or

4. By mail; or

5. Any other location specifically authorized by the lottery.

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 for collection that would apply if the check were made payable to the department. A claimant whose prize check is denied shall notify the department to obtain the prize.

3. During normal business hours of the lottery retailer when the validations equipment is operational and the ticket claim can be validated with operational validation equipment by which the ticket claim can be validated, a lottery retailer shall pay any lottery prize of $601 $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 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.

8. Federal Internal Revenue Code, 26 USC § 6050I requires lottery retailers who receive more than $10,000 in cash in one transaction or two or more related transactions in the aggregate, from a single player or his agent, to file a return or such information with the Internal Revenue Service (IRS). The IRS encourages retailers to report all suspicious transactions, even if they do not meet the $10,000 threshold. For purposes of this requirement only, "cash" includes coin and currency only and does not include bank checks or drafts, traveler's checks, wire transfers, or other negotiable or monetary instruments.

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

Unless otherwise determined by the director, the department 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 procedures.  

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

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

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

3. If the prize amount is more than $601 $600, the ticket holder may present the original signed ticket at any department office or mail the signed ticket to the department headquarters.

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 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 action on claims for prizes submitted to department.

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

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

C. If the claim is mailed to the department and the department 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 in person and the department 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 $6001 or more, the department 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 excess of $5,001 in accordance with the tax regulation in effect at the time.

B. Additionally, when paying any cash prize of $100 or more, the department 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.

11VAC5-41-200. Ticket is bearer instrument.

A ticket that has been legally issued by a licensed lottery retailer is a bearer instrument until the ticket has been signed. The person who signs the ticket or enters through an electronic validation process is considered the owner of the ticket.

11VAC5-41-210. Payment made to bearer.

Payment of any prize will be made to the bearer of a validated winning ticket for that prize upon submission of the ticket and a prize claim form, if one is required, unless otherwise delayed in accordance with this chapter. If a validated winning ticket has been signed, the bearer may be required to present proper identification. one or more of the following, as required by the game rules:

1. The ticket.

2. Validation information.

3. Prize claim form, unless otherwise delayed in accordance with this chapter.

4. The bearer may be required to present proper identification.

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 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. 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), T 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 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, or any delay beyond the department's control, shall accrue to the benefit of the claimant pending payment of the claim. The department is neither liable for nor has it any responsibility to resolve disputes between or among competing claimants.

11VAC5-41-240. No accelerated payments.

Unless the cash option payment is selected by the player, or unless otherwise permitted by federal or state law, the director shall not accelerate payment of a prize for any reason.

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

The department may require prize winners to participate in press conferences and to use the names and photographs of such prize winners and the city, town or county in which they live, as well as the prize amounts won for public information purposes and to foster the integrity of the games. No consideration shall be paid by the department for this purpose, unless authorized by the director. The Virginia lottery can use winner names and the city, town or county in which they live, as well as the prizes won, for public information purposes and to foster the integrity of the games. The lottery may require prize winners to participate in news conferences. The lottery can use the above winner's information and winner's photographs for public information or promotional purposes in mediums such as, but not limited to, www.valottery.com, social media, in-store, television, Internet and radio. No consideration shall be paid by this department for this purpose.

11VAC5-41-260. Grand prize event. (Repealed.)

If a lottery game includes a grand prize event, the following general criteria shall be used:

1. Entrants in the event shall be selected from tickets that meet the criteria stated in specific game rules set by the director;

2. Participation in the drawings shall be limited to those tickets that are actually purchased by the entrants on or before the date announced by the director;

3. If, after the event is held, the director determines that a ticket should have been entered in the event, the director may place that ticket into a grand prize drawing for the next equivalent event, which action shall be the extent of the department's liability; and

4. The director shall determine the dates, times and procedures for selecting grand prize winners for each on-line game, and the proceedings for selection of the winners shall be open to the public.

11VAC5-41-270. When prize payable over time.

When a prize or share is to be paid over time, except for the first payment, the director may round the actual amount of the prize or share to the nearest $1,000 to facilitate purchase of an appropriate funding mechanism.

11VAC5-41-280. When prize payable for "life."

If a prize is advertised as payable for the life of the winner, unless there is a cash option available selected by the winner or winners at the time a claim is made, the prize will be payable in installments, as provided by specific game rules in accordance with the rules for the specific game, for the lifetime of the winner. and will cease upon the death of the winner. When the prize is won by two or more persons on a single ticket, each winner's share of the prize shall expire upon his death, unless otherwise specified in the game rules.

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

All liability of the Commonwealth, its officials, officers and employees, and of the department, the board, the director and employees of the department, 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 or a retailer to identify or to void the ticket.

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

The department 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;

2. The prize for which the claim is filed is a winning prize that has not been claimed within the required redemption period, as verified in the department's records. In no case will the claim be paid within the redemption period; and

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

4. Except in extenuating circumstances and/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 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 on-line 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 60 180 days after the date of the drawing for which the ticket was purchased. In the event the sixtieth 180th day falls on a Saturday, Sunday or legal holiday, a claimant may only redeem his winning ticket for a free ticket at an on-line lottery cashing retailer on or before the sixtieth 180th day.

Except for claims for free ticket prizes mailed to lottery headquarters and postmarked on or before the sixtieth 180th day, claims for such prizes will not be accepted at any lottery office after the sixtieth 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 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 for payment within the prize redemption period as established by the game rules, the department will transfer that portion of the prize to the Literary Fund in accordance with procedures approved by the State Treasurer.

F. In accordance with the provisions of the Service members Civil Relief Act Soldiers' and Sailors' Civil Relief Act of 1940 as re-enacted and amended (50 USCA USC Appx § 525) 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.

11VAC5-41-330. Director may postpone drawing.

The director may postpone any drawing at any time and publicize the postponement if he finds that the postponement will best serve and protect the public interest.

11VAC5-41-340. Director's decision final.

All decisions of the director regarding ticket validation shall be final.

FORMS (11VAC5-41)

Pick 3 Playslip (3/01).

Pick 4 Playslip (3/01).

Cash 5 Playslip (2/99).

Lotto South Playslip (7/01).

Mega Millions Playslip (2/02).

Winner Claim Form, SLD-0007 (rev. 7/97).

Agreement to Share Ownership and Proceeds of Lottery Ticket, . (8/05).

Lotto South and Mega Millions Payout Election Form (5/02).

Prizewinner Designation of Beneficiary(ies).