Emergency Sections An agency may adopt a new or amended section or repeal an existing section on an emergency basis if it determines that such action is necessary for the public health, safety, or welfare of this state. The section may become effective immediately upon filing with the Texas Register, or on a stated date less than 20 days after filing, for no more than 120 days. The emergency action is renewable once for no more than 60 days. Symbology in amended emergency sections. New language added to an existing section is indicated by the use of bold text. [Brackets] indicate deletion of existing material within a section. TITLE 34. PUBLIC FINANCE Part I. Comptroller of Public Accounts Chapter 7. Administration of State Lottery Act Subchapter D. Lottery Game Rules 34 TAC sec.7.304 The Comptroller of Public Accounts adopts on an emergency basis new sec.7. 304, concerning on-line game rules (general). The purpose of the new emergency section is to provide general game details and requirements for all Texas Lottery on-line games, including the sale of tickets, drawings, claim procedures, validated requirements, payment of prizes, and settlement procedures. This new section is being adopted on an emergency basis because on-line games are commencing nearly 60 days ahead of schedule. This may result in the generation of additional needed revenue for the state. The new section is adopted on an emergency basis under the State Lottery Act, sec.2.02, which provides the comptroller with the authority to adopt all rules necessary to administer the State Lottery Act. sec.7.304. On-Line Game Rules (General). (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Certified drawing-A drawing in which the lottery drawing supervisor, security representative, and an independent certified public accountant attest that the drawing equipment functioned properly and that a random selection of a winning combination occurred. (2) Claim center-A claims office of the Texas Lottery at which winners may redeem prizes. (3) Claim form-The form provided by the Texas Lottery to be completed by prize winners when claiming a prize. (4) Current draw period-The period of time in which the player selections are accumulated into a pool of plays eligible for winning in a drawing held at the end of the designated period. (5) Direct prize category contribution-A specified percentage of net sales allocated to the prize categories as described in the rules of the specific game being played. (6) Draw break-The period of time on a draw day when tickets cannot be produced on an on-line terminal. (7) Drawing-The procedure by which the lottery randomly selects winning combinations of digits, numbers, or symbols in accordance with the rules of the game as set forth in the rules of the specific game being played and the drawing procedures for the specific game. (8) Drawing pool-The amount of money available for all prize categories for a specific drawing. (9) Duplicate ticket-A ticket produced by photograph, xerography, or any other method other than a ticket generated by an on-line terminal. (10) Indirect prize category contribution-Amounts allocated from the prize reserve fund and roll-over for a specific drawing. (11) Invalid ticket-Any ticket that fails to meet all validation requirements of the Texas Lottery. (12) On-line game-A lottery game which utilizes a computer system to administer plays and in which a player selects a combination of numbers, the type of game, and amount of play for a specified drawing date. The lottery will conduct a drawing to determine the winning combination(s) in accordance with the rules of the specific game being played and the drawing procedures for the specific game. (13) On-line retailer-A lottery retailer authorized by the lottery to sell on- line tickets. On-line retailers shall sell all on-line lottery games and at least two instant ticket games offered by the Texas lottery. (14) On-line system-The lottery's on-line computer system consisting of on- line terminals, central processing equipment, and a communication network. (15) On-line terminal-The computer hardware through which an on-line retailer enters the combination selected by a player and by which on-line tickets are generated and claims are validated. (16) On-line ticket-A computer-generated ticket issued by an on-line retailer generated on an on-line terminal on official Texas Lottery paper stock to a player as a receipt for the combination of numbers a player has selected. That ticket shall be the only acceptable evidence of the combination of digits, numbers, or symbols selected. On-line tickets may be purchased only from on-line retailers. (17) Present at the terminal-A player remains physically present at the on- line terminal from the time the player's order for the purchase of on-line lottery tickets is paid for and accepted by the lottery on-line retailer until the processing of the order is completed and the tickets are delivered to the player at the licensed on-line retailer terminal location. (18) Prize amounts-The amount of money payable to each share or the annuitized future value of each share in a prize category for each drawing. Prize amounts are calculated by dividing the prize category contribution or annuitized future value of the prize category contribution by the number of shares determined for the prize category. (19) Prize breakage-The money which is left over from the rounding down of the pari-mutuel prize levels to the next lowest whole dollar amount or money which is in excess of the amount needed to pay a prize. (20) Prize category-The matching combinations of numbers and their corresponding prize levels as described in rules for the specific game being played. (21) Prize category contributions-Refers to contributions for each drawing to each prize category including direct and indirect prize category contributions. (22) Prize pool-The total amount of money available for prizes as a percentage of the total sales for the current draw period. (23) Roll-over-The amount not won (no matching combinations) or prize breakage from the previous drawing in a prize category. The amount not won will be carried forward for the next drawing for that specific prize category. (24) Shares-The total number of matching combinations within each prize category as determined for each drawing. (25) Sign-on slip-The receipt produced by the on-line terminal when the retailer signs on to the system. (26) Ticket bearer-The person who has signed the on-line ticket or who has possession of an unsigned ticket. (27) Valid ticket-Any ticket that meets all of the validation requirements of the Texas Lottery. (28) Validation-The process of determining whether an on-line ticket presented for payment is a winning ticket. (29) Validation number-The 16-digit number printed on the front of each on- line ticket which is used for validation. (30) Void ticket-Any ticket that is stolen, unissued, illegible, mutilated, altered, counterfeit in whole or part, misregistered, defective, incomplete, printed or produced in error, multiply printed, or fails any of the Texas Lottery's confidential validation tests. (31) Winning combination-One or more digits, numbers, or symbols randomly selected by the lottery in a drawing which has been certified. (b) Price of tickets and prizes. (1) The purchase price of each on-line ticket shall be as set forth in the rules of the specific game being played. (2) The total amount of prize money allocated to the prize pool for on-line games from total of on-line sales shall be a minimum of 50%. (3) The prize pool for on-line games shall have contributions to prize categories as set forth in the rules of the specific game being played. (c) Sale of tickets. (1) On-line tickets shall be sold during all normal business hours of the lottery on-line retailer during on-line game operating hours unless the lottery director approves otherwise. On-line retailers must give prompt service to lottery customers present and waiting at the on-line terminal to purchase tickets for on-line games. Prompt service includes interrupting processing of on-line ticket orders for which the customer is not present at the terminal. (2) On-line tickets shall be sold only at the location listed on each retailer's license from the lottery. For purposes of this section, the sale of an on-line lottery ticket at the licensed location means a lottery transaction in which all elements of the sale between the licensee and the purchaser must take place at the retailer location using their on-line terminal including the exchange of consideration, the exchange of the playslip if one is used, and the exchange of the on-line ticket. No part of the sale may take place away from the on-line terminal. (d) Drawings and end of sales prior to drawings. (1) The manner and frequency of drawings shall be as set forth in the rules of the specific game being played and the drawing procedures for the specific game. (2) The drawings shall be conducted at times and locations to be announced by the lottery director. (3) The director shall determine for each type of on-line game the time for the end of sales prior to the drawings. On-line terminals will not process on- line tickets for that drawing after the time established by the director. (4) The director shall designate the type of drawing equipment to be used and shall establish drawing procedures to randomly select the winning combination for each type of on-line game. Drawing procedures shall include provisions for the substitution of backup drawing equipment in the event the primary drawing equipment malfunctions or fails for any reason. (5) The lottery director shall designate a drawing supervisor who shall oversee each drawing. The drawing supervisor, along with a lottery security representative and an independent certified public accountant shall be responsible for conducting the drawing in compliance with the lottery's drawing procedures. The drawing supervisor, along with a lottery security representative and an independent certified public accountant, shall attest whether the drawing was conducted in accordance with proper drawing procedures at the end of each drawing. (e) Procedures for claiming on-line prizes. (1) All apparent winning tickets presented for payment to the lottery or an on-line retailer must meet the lottery's validation requirements as set forth in subsection (f) of this section. (2) To claim an on-line game prize of $599 or less the claimant shall present the winning on-line ticket to an on-line retailer or to a lottery claim center. All tickets validated by a retailer must be paid by that retailer. (3) If a claim of $599 or less is presented to an on-line retailer, the on- line retailer must validate the claim, and, if determined to be a winning ticket, make payment of the amount due the claimant. If the on-line retailer attempts to validate and cannot validate the claim, the claimant shall submit a completed claim form, if required for submission, with the ticket to the lottery by mail or in person. Upon determination that the ticket is a winning ticket, the lottery shall present or mail a check to the claimant in payment of the amount due. If the ticket is determined to be a non-winning ticket, the claim shall be denied and the claimant shall be promptly notified. Winning or non- winning tickets will not be returned to the claimant. (4) If the claim is presented to the lottery, the claimant shall fill out a claim form, if required, and submit it with the apparent winning ticket to the lottery by mail or in person. Upon determination that the ticket is a winning ticket, the lottery shall present or mail a check to the claimant in payment of the amount due. If the ticket is determined to be a non-winning ticket, the claim shall be denied and the claimant shall be promptly notified. Winning or non-winning tickets will not be returned to the claimant. (5) To claim an on-line prize of $600 or more, the claimant shall obtain and complete a claim form, sign the back of the ticket, and submit the form with the apparent winning ticket to the lottery by mail or in person. Upon determination that the ticket is a winning ticket, the lottery shall present or mail a check to the claimant in payment of the amount due, less the withholding required by the Internal Revenue Code and any offsets or other withholdings required by law. If the ticket is determined to be a non-winning ticket, the claim shall be denied and the claimant shall be promptly notified. Winning or non-winning tickets will not be returned to the claimant. (6) The director shall recognize only one person as claimant of a particular prize. A claim may be made in the name of a person other than an individual only if the person possesses a federal employer identification number (FEIN) issued by the Internal Revenue Service and such number is shown on the claim form. Groups, family units, clubs, organizations, or other persons without an FEIN shall designate one individual in whose name the claim is to be filed. If a claim is erroneously entered with multiple claimants, the claimants shall designate one of them as the individual recipient of the prize. The claim shall then be considered as if it were originally entered in the name of the designated individual and payment of any prizes won shall be made to that single individual. (f) Validation requirements. (1) To be a valid winning on-line ticket, all of the following conditions must be met. (A) All printing on the ticket shall be present in its entirety, be legible, and correspond, using the computer validation file, to the combination and data printed on the ticket. The ticket must have been produced prior to the drawing. (B) The ticket shall be intact. (C) The ticket shall not be mutilated, altered, reconstituted, misregistered, defective, incomplete, or tampered with in any manner. (D) The ticket shall not be counterfeit or an exact duplicate of another winning ticket. (E) The ticket must have been issued by an authorized on-line retailer in an authorized manner on official Texas lottery paper stock. (F) The ticket must not have been stolen. (G) The ticket must not have been previously paid. (H) The ticket data shall have been recorded on the central computer system prior to the drawing, and the ticket data must match the computer record data in every respect. (I) The ticket shall pass all other confidential security checks of the lottery. (2) The lottery may pay the prize for a ticket that is partially mutilated or not intact if the on-line ticket can still be validated by the other validation requirements. (3) Liability for void tickets, if any, limited to replacement of ticket or refund of sales price. (4) A ticket shall be the only valid receipt for claiming a prize. A copy of a ticket or a playslip has no pecuniary or prize value and shall not constitute evidence of ticket purchase or of numbers selected. (5) In submitting an official on-line ticket for validation, the player agrees to abide by applicable laws, all Texas lottery rules, regulations, policies, directives, instructions, conditions, and final decisions of the lottery director. (6) All prizes shall be subject to tax withholdings, offsets, and other withholdings as provided by law. (g) Payment of prizes by on-line retailers. (1) An on-line retailer shall pay to the ticket bearer on-line game prizes of $599 or less for any valid claims presented to that on-line retailer. All tickets validated by a retailer must be paid by that retailer. These prizes shall be paid during hours as specified in writing by the lottery director, provided, the on-line system is operational and claims can be validated. The on- line retailer shall not charge the claimant any fee for payment of the prize or for cashing a business check drawn on the licensed retailer's account. (2) An on-line retailer may pay prizes in cash or by certified check, money order, or by business check if acceptable by the claimant. An on-line retailer that pays a prize with a check which is dishonored may be subject to suspension or revocation of its license. (h) Retailer settlement, obligations, and compensation. (1) Each on-line retailer shall provide authorization for an account with EFT (Electronic Funds Transfer) capability to be used for weekly billing of all lottery products. This EFT account must be the same account as that currently being swept for instant ticket sales. (2) Each on-line retailer shall maintain an account balance sufficient to cover monies due the lottery for the established invoice period. The lottery shall withdraw by EFT the amount due the lottery on the day specified by the lottery director. In the event the day specified for withdrawal occurs on a legal holiday, withdrawal shall occur on the following business day. (3) Retailers shall receive credit on their lottery account for redeeming winning on-line tickets. (4) On-line retailers shall receive 5.0% compensation on all sales from on- line games. On-line retailers may not accept any compensation for the sale of lottery tickets other than compensation approved under this section, regardless of the source. (5) If an on-line retailer fails to maintain a sufficient account balance to cover monies due the lottery for the established billing period, the retailer's license shall be summarily suspended. If an on-line retailer is suspended three times in a 12-month period for insufficient funds, the retailer's license shall be revoked. If a retailer's license is revoked, it shall not be reissued for at least 12 months from the date all monies due the lottery are paid. (6) A retailer must retain all sign-on slips for a minimum of seven weeks from the date the sign-on slip is produced. Sign-on slips must be surrendered to lottery security personnel upon request. Issued in Austin, Texas, on November 6, 1992. TRD-9215005 Tres Lorton Senior Legal Counsel Comptroller of Public Accounts Effective date: November 6, 1992 Expiration date: March 6, 1993 For further information, please call: (512) 463-4028 34 TAC sec.7.305 The Comptroller of Public Accounts adopts on an emergency basis new sec.7. 305, concerning "Lotto Texas" on-line game rule. The purpose of the new emergency section is to provide specific game details and requirements for the Texas Lottery's on-line game "Lotto Texas," such as type of play, prizes, method of selecting winning numbers, drawings, and the allocation of revenues. This new section is being adopted on an emergency basis because on-line games are commencing nearly 60 days ahead of schedule. This may result in the generation of additional needed revenue for the state. The new section is adopted on an emergency basis under the State Lottery Act, sec.2.02, which provides the comptroller with the authority to adopt all rules necessary to administer the State Lottery Act. sec.7.305. "Lotto Texas" On-Line Game Rule. (a) Lotto Texas. A Texas Lottery on-line game to be known as "Lotto Texas" is authorized to be conducted by the director under the following rules and under such further instructions and directives as the director may issue in furtherance thereof. If a conflict arises between this section and sec.7.304 of this title (relating to On-Line Game Rules (General)), this section shall have precedence. (b) Definitions. In addition to the definitions provided in sec.7.304 of this title (relating to On-Line Game Rules (General)), and unless the context in this section otherwise requires, the following definitions apply. (1) Number-Any play integer from one through 50 inclusive. (2) Play-The six numbers selected on each play board and printed on the ticket. (3) Play board-A field of the 50 numbers found on the playslip. (4) Playslip-An optically readable card issued by the Texas lottery used by players of Lotto Texas to select plays. There shall be five play boards on each play slip identified at A, B, C, D, and E. A playslip has no pecuniary value and shall not constitute evidence of ticket purchase or of numbers selected. (c) Price of ticket. The price of each Lotto Texas play shall be $1.00. A player may purchase up to five plays on one ticket. Multiple draws are available for up to 10 consecutive draws beginning with the current draw. (d) Play for Lotto Texas. (1) Type of play. A Lotto Texas player must select six numbers in each play. A winning play is achieved only when three, four, five, or six of the numbers selected by the player match, in any order, the six winning numbers drawn by the lottery. (2) Method of play. The player will use playslips to make number selections. The on-line terminal will read the playslip and issue ticket(s) with corresponding plays. If a playslip is not available, the on-line retailer may enter the selected numbers via the keyboard. However, the retailer shall not accept telephone or mail-in requests to manually enter selected numbers. If offered by the lottery, a player may leave all play selections to a random number generator operated by the computer, commonly referred to as "quick pick." (3) One prize per play. The holder of a winning ticket may win only one prize per play in connection with the winning number drawn and shall be entitled only to the highest prize category won by those numbers. (e) Prizes for lotto. (1) Prize amounts. The prize amounts, for each drawing, paid to each lotto player who selects a matching combination of numbers will vary due to a pari- mutuel calculation, with the exception of the fourth prize, which is a guaranteed $3.00. The calculation of a prize shall be rounded down so that prizes can be paid in multiples of whole dollars. Each prize category breakage, with the exception of the fourth prize breakage, will carry forward to the next drawing for each respective prize category. The fourth prize category breakage will be placed in the reserve fund. No prize amount shall be less than $3.00. The prize amounts are based on the total amount in the prize category for that Lotto Texas drawing distributed equally over the number of matching combinations in each prize category. [graphic] (2) Prize pool.-The prize pool for Lotto Texas prizes shall be a minimum of 50% of lotto sales. (3) Prize categories. (A) First prize (jackpot)-To determine the annuitized future value of each share (prize amount), the annuitized future value of the prize category is divided by the shares. A share is the matching combination, in one play, of all six numbers drawn (in any order). Each share will be paid in 20 installments. The initial payment shall be paid only upon completion of all internal validation procedures. The subsequent 19 payments shall be paid annually by monies generated by the purchase of securities which shall be purchased through the Treasurer, State of Texas, after each drawing for which lottery records reflect the sale of one or more winning Lotto Texas six of six plays, and the value of the 19 installments shall be determined by the face or market value of said securities at purchase. Annual installment payments shall be based on the annual maturity value of the securities purchased. The payment of annual annuities will be made on the anniversary of the month in which the ticket won. If the cash value of each share is equal to or greater than the amount required to pay an initial first-year cash installment and 19 subsequent annuitized annual installments yielding total payments of $2 million or greater, each share shall be paid in 20 installments in the same manner as described in this paragraph. If the cash value of each share is less than the amount required to pay an initial first year cash installment and 19 subsequent annuitized annual installments yielding total payments of $2 million each share shall be paid the cash value of each share in one payment. The six of six jackpot prize must be claimed at the Austin claim center. The total prize category contribution for a drawing will include the following. (i) The direct prize category contribution shall be 64% of the prize pool for the drawing. (ii) The indirect prize category contribution, which may be increased by the lottery director, will include the roll-over from the previous drawing, if any. (B) Second prize-The prize amount shall be calculated by dividing the prize category contributions by the number of shares for the prize category. A share is the matching combination, in one play, of any five of the six numbers drawn (in any order). The total prize category contribution will include the following. (i) The direct prize category contribution shall be 5.0% of the prize pool for the drawing. (ii) The indirect prize category contribution, which may be increased by the lottery director, will include the roll-over from the previous drawing, if any. (C) Third prize-The prize amount shall be calculated by dividing the prize category contributions by the number of shares for the prize category. A share is the matching combination, in one play, of any four of the six numbers drawn (in any order). The total prize category contribution will include the following. (i) The direct prize category contribution shall be 18% of the prize pool for the drawing. (ii) The indirect prize category contribution, which may be increased by the lottery director, will include the roll-over from the previous drawing, if any. (D) Fourth prize-The prize amount is a guaranteed $3.00 but shall not exceed $3.00. Any roll-over amounts shall be added to the prize reserve fund. The total prize category contribution will include the following. (i) The direct prize category contribution shall be 11% of the prize pool for the drawing. (ii) The indirect prize category contribution as determined by the lottery director. (4) Prize reserve fund. (A) The Lotto Texas prize reserve is 2.0% of the prize pool. (B) The Lotto Texas prize reserve fund may be increased or decreased by any amounts allocated to the prize pool and not paid to winners. For example, rounding down, prizes not claimed within the 180-day claim period, and roll-over amounts from the fourth prize. (C) In the event any player who has a valid winning ticket does not claim the prize within 180 days after the drawing in which the prize was won, the prize amount shall be added to the prize reserve and all rights to the prize shall terminate. (D) The lotto prize reserve may be increased or decreased by any amounts allocated to the prize pool and not paid to winners. For example, rounding down, prizes not claimed within the 180-day claim period, and roll-over amounts from the fourth prize. (f) Ticket purchases. (1) Lotto tickets may be purchased only at a licensed location from a lottery retailer authorized by the lottery director to sell on-line tickets. (2) Lotto tickets shall show the player's selection of numbers, boards played, drawing date, and validation and reference numbers. (3) It shall be the exclusive responsibility of the player to verify the accuracy of the player's selection(s) and other data printed on the ticket. A ticket is a bearer instrument until signed. (4) Except as provided in subsection (d)(2) of this section, Lotto Texas tickets must be purchased using official Lotto Texas playslips. Playslips which have been mechanically completed are not valid. Lotto Texas tickets must be printed on official Texas lottery paper stock and purchased at a licensed location through an authorized Texas lottery retailer's on-line terminal. (g) Drawings. (1) The Lotto Texas drawings shall be held each week on Wednesday and Saturday evenings at 9:58 p.m. Central Time except that the drawing schedule may be changed by the director, if necessary. (2) Lotto Texas tickets will not be sold from 9:45 p.m. Central Time until 10 p.m. Central Time on Wednesday and Saturday nights. (3) The drawings will be conducted by lottery officials. (4) Each drawing shall determine, at random, six winning numbers in accordance with Lotto Texas drawing procedures. Any numbers drawn are not declared winning numbers until the drawing is certified by the lottery in accordance with the drawing procedures. The winning numbers shall be used in determining all lotto winners for that drawing. (5) Each drawing shall be witnessed by an independent certified public accountant. All drawing equipment used shall be examined by at least one lottery security representative, the drawing supervisor, and the independent certified public accountant immediately prior to a drawing and immediately after the drawing. (6) A drawing will not be invalidated based on the financial liability of the lottery. (h) Announcement of incentive or bonus program. The lottery director shall announce each incentive or bonus program prior to its commencement. The announcement shall specify the beginning and ending time, if applicable, of the incentive or bonus program and the value for the award(s). Issued in Austin, Texas, on November 6, 1992. TRD-9215006 Tres Lorton Senior Legal Counsel Comptroller of Public Accounts Effective date: November 6, 1992 Expiration date: March 6, 1993 For further information, please call: (512) 463-4028