Administrative Rules of the State of Montana

BEFORE THE STATE LOTTERY COMMISSION

DEPARTMENT OF ADMINISTRATION

OF THE STATE OF MONTANA

In the matter of the amendment of ARM 2.63.201, 2.63.203, 2.63.407, 2.63.607, and 2.63.1201 and the repeal of ARM 2.63.601, 2.63.602, 2.63.603, 2.63.608, 2.63.613, and 2.63.1001 pertaining to procedural rules, definitions, retailer commissions, business changes, prizes, license requirements and endorsements, and sale of scratch tickets

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NOTICE OF PROPOSED AMENDMENT AND REPEAL

NO PUBLIC HEARING CONTEMPLATED

TO: All Concerned Persons

1. On February 15, 2014, the State Lottery Commission proposes to amend and repeal the above-stated rules.

2. The State Lottery Commission will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, please contact the State Lottery Commission no later than 5:00 p.m. on February 6, 2014, to advise us of the nature of the accommodation that you need. Please contact Denise Blankenship, State Lottery, 2525 North Montana Avenue, P.O. Box 200544, Helena, Montana 59601; telephone (406) 444-5801; fax (406) 444-5830; TDD/Montana Relay Service (406) 444-9642; or by e-mail at [email protected].

3. The rules proposed to be amended provide as follows, new matter underlined, deleted matter interlined:

2.63.201 PROCEDURAL RULES (1) The commission adopts and incorporates by reference rules 1 through 28 of the Attorney General's Model Procedural Rules found in ARM 1.3.102 through 1.3.210, except for the Attorney General's sample rule notice forms. A copy of these rules may be obtained by contacting the Attorney General's Office, Justice Building, 215 North Sanders, P.O. Box 201401, Helena, MT 59620-1401, telephone (406) 444-2026. the following model rules, which may be found at http://sos.mt.gov/:

(a) the Attorney General's model procedural rules ARM 1.3.201, 1.3.202, 1.3.211 through 1.3.224, and 1.3.226 through 1.3.233, including the appendix of sample forms in effect [effective date of amendment]. These rules provide model rules of practice for contested case hearings and declaratory rulings; and

(b) the Secretary of State's model rules ARM 1.3.101, 1.3.102, 1.3.301, 1.3.302, 1.3.304, 1.3.305, 1.3.307 through 1.3.309, and 1.3.311 through 1.3.313 in effect [effective date of amendment]. These rules define model requirements for rulemaking under the Montana Administrative Procedure Act.

AUTH: 2-4-201, 23-7-202, MCA

IMP: 2-4-201, ~~23-7-101, 23-7-102, 23-7-103, 23-7-110~~, MCA

STATEMENT OF REASONABLE NECESSITY: The commission is proposing to amend the above-stated rule to reflect recent updates to the Attorney General's and Secretary of State's Model Rules so that the current model rules are reflected in the rule. As an alternative, the commission could have crafted its own updates to the model rules. However, since the commission already follows the model rules, the commission believes it makes sense to adopt the Attorney General's and Secretary of State's updates. The commission proposes to add 2-4-201, MCA, to the citation of authority because it is this section that requires agencies to adopt rules describing agency organization and procedures. The commission proposes deleting 23-7-101, 23-7-102, 23-7-103, and 23-7-110, MCA, from the listed implemented citations because these citations do not apply to the commission's organization and procedural rules.

2.63.203 DEFINITIONS (1) through (3) remain the same.

~~(4) "Endorsement" means the seal attached to the license which authorizes a retailer to sell lottery on-line tickets at a fixed place of business.~~

(5) through (9) remain the same, but are renumbered (4) through (8).

~~(10) "Terminal issued ticket" means a lottery ticket printed by a terminal connected to a computer.~~

~~(11)~~(9) "Ticket" means ~~a lottery scratch ticket that has a removable coating covering symbols that determine the amount of prize a player can win~~ a ticket or other tangible evidence of participation used in lottery games authorized by law.

AUTH: 23-7-202, MCA

IMP: 23-7-301, MCA

STATEMENT OF REASONABLE NECESSITY: Changes in the market place and procedures adopted for the sale of lottery products have changed since the original draft of the rule. These rules were adopted when scratch tickets were the predominant tickets that retailers sold. Now, retailers sell a variety of tickets beyond scratch tickets. Specifically, an endorsement applied to "scratch only" retailers. Since such retailers no longer exist, the lottery does not require an endorsement. The commission proposes deleting the definition of "terminal issued ticket" because retailers no longer just sell terminal-issued tickets. Finally, the commission proposes amending the definition of "ticket" to reflect that retailers now sell more than just scratch tickets. In sum, keeping the current definitions would inaccurately portray how retailers sell lottery tickets to the public.

2.63.407 RETAILER COMMISSION (1) Each retailer is entitled to a base commission of a minimum of 5 percent of the face value of scratch tickets activated and not returned. Retailers who sell ~~terminal~~ issued tickets are entitled to a 5 percent commission of the face value of ~~terminal issued~~ tickets printed. However, to further the sale of lottery products, the lottery commission may adopt rules providing additional commissions to sales agents based on incremental sales.

(a) through (e) remain the same.

AUTH: 23-7-202, 23-7-301, MCA

IMP: 23-7-202, 23-7-301, MCA

STATEMENT OF REASONABLE NECESSITY: The commission proposes clarifying that retailers will receive a minimum of 5 percent commission. This change will give the retailers assurance that they will receive 5 percent commission, but will also give the lottery additional flexibility in developing programs to promote sales of lottery tickets. Section 23-7-301(10), MCA, provides that sales agents are entitled to a commission of no more than 10 percent of the face value of tickets. The commission believes that flexibility is needed in determining the commission amount. For example, to promote the sale of higher-priced tickets, it may be appropriate to pay a higher commission for these tickets than lower-priced tickets. In some cases, it may also be appropriate to pay a 10 percent commission for the sale of high-value tickets.

2.63.607 BUSINESS CHANGES (1) A licensee ~~must~~ shall notify the director of any of the following changes in the licensed business:

(a) any change of business structure;

(b) material change of ownership;

(d) changes in the officers;

(e) changes in the board of directors; ~~and~~

(f) change of business address; and

(g) change, move, or removal of lottery terminal, equipment, and/or peripherals.

AUTH: 23-7-202, MCA

IMP: 23-7-301, MCA

STATEMENT OF REASONABLE NECESSITY: The purpose of this proposed change is to alert the lottery to the specified changes so that the lottery may help the retailer avoid problems down the road.

History has shown that misplacement of lottery equipment can have a significant negative effect on a retailer's sales. Moving a terminal from a visible location to a location with minimal access for customers will decrease sales and commissions for lottery retailers. Also, removal, moving, and reinstallation of equipment by someone other than a qualified system vendor may cause damage and significant delays to the retailer's sales. The proposed change from "must" to "shall" is consistent with legislative drafting convention.

2.63.1201 PRIZES (1) through (4) remain the same.

(5) The lottery may deny a claim for a winning scratch or terminal issued ticket if the ticket:

(a) ~~the ticket~~ was not legally issued;

(b) ~~the ticket~~ was stolen;

(6) through (13) remain the same.

(14) The owner(s) or employees of licensed lottery retailers shall identify themselves as such to lottery officials when claiming a prize. This information must be recorded on the claim form presented to the lottery either by mail or in person.

AUTH: 23-7-202, MCA

IMP: 23-7-202, 23-7-211, MCA

STATEMENT OF REASONABLE NECESSITY: The proposed addition of (14) will satisfy the 2012 Montana Lottery Security Audit finding and provide justification for requesting employment information from a claimant. The finding requires retailer owners and employees to identify themselves as such when making a claim as an added security measure. This is currently done in other states, and the auditors thought it was appropriate for the Montana lottery to do the same. The commission agrees with the auditors' recommendation. The proposed changes to (5) simplify the rule.

4. The commission proposes to repeal the following rules:

2.63.601 LICENSE APPLICATION FEE, found on ARM page 2-6525.

AUTH: 23-7-202, MCA

IMP: 23-7-301, MCA

STATEMENT OF REASONABLE NECESSITY: Section 2-4-305(2), MCA, states that rules may not unnecessarily repeat statutory language. The commission proposes deletion of this rule because it adds nothing substantive to the statutory language.

2.63.602 PROVISIONAL LICENSE, found on ARM page 2-6525.

AUTH: 23-7-202, 23-7-211, MCA

IMP: 23-7-211, 23-7-301, MCA

2.63.603 DISPLAY OF LICENSE, found on ARM page 2-6525.

AUTH: 23-7-301, MCA

IMP: 23-7-301, MCA

2.63.608 ASSIGNMENT OR TRANSFER OF LICENSE PROHIBITED, found on ARM page 2-6526.

AUTH: 23-7-202, MCA

IMP: 23-7-301, MCA

2.63.613 ENDORSEMENT, found on ARM page 2-6528.

AUTH: 23-7-202, MCA

IMP: 23-7-202, 23-7-301, MCA

STATEMENT OF REASONABLE NECESSITY: As noted, the endorsement requirement applied when retailers sold only scratch tickets. The commission no longer requires an endorsement because "scratch only" retailers no longer exist.

2.63.1001 SALE OF SCRATCH TICKETS, found on ARM page 2-6541.

AUTH: 23-7-202, MCA

IMP: 23-7-202, MCA

STATEMENT OF REASONABLE NECESSITY: This rule applied when the lottery had "scratch only" retailers. As explained, this is no longer the case.

5. Concerned persons may present their data, views, or arguments concerning the proposed actions to John Tarr, Security Director for the Montana Lottery at 2525 North Montana Avenue, Helena, Montana 59601; telephone (406) 444-5804; fax (406) 444-5830; or by e-mail to [email protected], and must be received no later than 5:00 p.m. on February 13, 2014.

6. If persons who are directly affected by the proposed actions wish to express their data, views, or arguments orally or in writing at a public hearing, they must make written request for a hearing and submit this request along with any written comments to John Tarr, Security Director of the Montana Lottery at the above address no later than 5:00 p.m., on February 13, 2014.

7. If the commission receives requests for a public hearing on the proposed actions from either 10 percent or 25, whichever is less, of the persons directly affected by the proposed actions; from the appropriate administrative rule review committee of the Legislature; from a governmental subdivision or agency; or from an association having not less than 25 members who will be directly affected, a hearing will be held at a later date. Notice of the hearing will be published in the Montana Administrative Register. Ten percent of those directly affected has been determined to be 80 persons based on the number of lottery retailers in the state.

8. The State Lottery Commission maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name, e-mail, and mailing address of the person to receive notices and specifies for which program the person wishes to receive notices. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the contact person in 5 above or may be made by completing a request form at any rules hearing held by the commission.

9. An electronic copy of this proposal notice is available through the department's web site at http://doa.mt.gov/administrativerules.mcpx. The department strives to make the electronic copy of the notice conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that if a discrepancy exists between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered. In addition, although the department works to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.

10. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.

11. With regard to the requirements of 2-4-111, MCA, the commission has determined that the proposed rule amendments and repeals will not significantly and directly impact small businesses.

By: /s/ Wilbur Rehmann By: /s/ Michael P. Manion

Wilbur Rehmann, Chair Michael P. Manion, Rule Reviewer

Montana Lottery Commission Department of Administration

Certified to the Secretary of State December 16, 2013.