1.1                          A bill for an act 
  1.2             relating to the state lottery; regulating lottery 
  1.3             service businesses; proposing coding for new law in 
  1.4             Minnesota Statutes, chapter 349A. 
  1.5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.6      Section 1.  [349A.17] [LOTTERY SERVICE BUSINESS.] 
  1.7      Subdivision 1.  [DEFINITION.] For purposes of this section: 
  1.8      (a) A "lottery service business" is a commercial enterprise 
  1.9   that for a fee or commission purchases lottery tickets on behalf 
  1.10  of customers or subscribers. 
  1.11     (b) "Division" means the Division of Alcohol and Gambling 
  1.12  Enforcement in the Department of Public Safety. 
  1.13     (c) "Commissioner" means the commissioner of public safety 
  1.14  acting through the division. 
  1.15     (d) "Disqualifying offense" means any felony, gross 
  1.16  misdemeanor, and any criminal offense involving fraud, 
  1.17  misrepresentation, or deceit. 
  1.18     Subd. 2.  [REGISTRATION REQUIRED.] (a) No person may 
  1.19  operate a lottery service business unless the business has 
  1.20  registered with the commissioner and the business's registration 
  1.21  is in effect.  Registration is in effect for one year unless 
  1.22  suspended or revoked. 
  1.23     (b) Registration must be on a form that the commissioner 
  1.24  prescribes by rule.  The form may require any information that 
  1.25  the commissioner determines is necessary to carry out the 
  2.1   purposes of this section.  The form must contain a provision in 
  2.2   which the applicant for registration attests that no officer, 
  2.3   director, or employee of the business has been convicted of a 
  2.4   disqualifying offense.  The form must contain a provision in 
  2.5   which the business agrees to comply with the provisions of this 
  2.6   section and provide access to the commissioner as required under 
  2.7   subdivision 9. 
  2.8      (c) Notwithstanding section 16A.1283, the commissioner 
  2.9   shall by rule provide for a fee for registration sufficient to 
  2.10  provide for the division's annual costs in administering this 
  2.11  section. 
  2.12     (d) The director may investigate all applicants for 
  2.13  registration under this subdivision to determine the accuracy of 
  2.14  the attestation under paragraph (b).  The director may charge a 
  2.15  fee for such investigation and deposit the fee in the general 
  2.16  fund. 
  2.17     Subd. 3.  [REVOCATION OF REGISTRATION.] (a) The 
  2.18  commissioner may revoke the registration of a lottery service 
  2.19  business if the commissioner finds that: 
  2.20     (1) the business made a materially false statement in its 
  2.21  application for registration; 
  2.22     (2) an officer, director, or employee of the business has 
  2.23  been convicted of a disqualifying offense; 
  2.24     (3) an officer, director, or employee of the business has 
  2.25  violated this section or another section of law governing 
  2.26  gambling or a rule or order of the commissioner, or has had a 
  2.27  license to conduct business revoked in Minnesota or another 
  2.28  jurisdiction; 
  2.29     (4) has engaged in any activity that adversely affects 
  2.30  public confidence in the lottery or the integrity of gaming, or 
  2.31  that defrauds the business's customers or subscribers. 
  2.32     (b) The commissioner may not take action under this 
  2.33  subdivision unless the commissioner has provided the business 
  2.34  with notice of intent to revoke together with the reasons for 
  2.35  the action and the effective date of the revocation.  The notice 
  2.36  must provide the business with an opportunity for a public 
  3.1   hearing on the revocation before the director within 30 days of 
  3.2   the date on which the notice was sent.  After the hearing the 
  3.3   director may revoke the registration.  A revocation of 
  3.4   registration is a contested case under sections 14.57 to 14.69. 
  3.5      Subd. 4.  [CEASE AND DESIST ORDER.] Whenever it appears to 
  3.6   the commissioner that a lottery service business or an officer, 
  3.7   director, or employee thereof has engaged in any act or practice 
  3.8   constituting a violation of this chapter or any rule or order of 
  3.9   the commissioner, the commissioner may issue and cause to be 
  3.10  served upon the business, officer, director, or employee an 
  3.11  order requiring the person to cease and desist from violations 
  3.12  of this chapter or the commissioner's rule or order.  The order 
  3.13  must give reasonable notice of the rights of the business or 
  3.14  person named in the order to request a hearing and must state 
  3.15  the reason for the entry of the order.  Unless otherwise agreed 
  3.16  between the parties, a hearing shall be held not later than 
  3.17  seven days after the request for the hearing is received by the 
  3.18  commissioner after which and within 20 days after the receipt of 
  3.19  the administrative law judge's report and subsequent exceptions 
  3.20  and argument the commissioner shall issue an order vacating the 
  3.21  cease and desist order, modifying it, or making it permanent as 
  3.22  the facts require.  If no hearing is requested within 30 days of 
  3.23  the service of the order, the order becomes final and remains in 
  3.24  effect until modified or vacated by the commissioner.  All 
  3.25  hearings shall be conducted in accordance with the provisions of 
  3.26  chapter 14.  If the business or person to whom a cease and 
  3.27  desist order is issued fails to appear at the hearing after 
  3.28  being duly notified, the business or person shall be deemed in 
  3.29  default, and the proceeding may be determined against the 
  3.30  business or person upon consideration of the cease and desist 
  3.31  order, the allegations of which may be deemed to be true. 
  3.32     Subd. 5.  [REQUIRED STATEMENTS.] All print advertising in 
  3.33  any medium published by or on behalf of a lottery service 
  3.34  business, and all print communications intended to solicit 
  3.35  members, including internet solicitations, for each lottery pool 
  3.36  or subscription service offered, must contain a clear and 
  4.1   prominent statement which lists the cost of a lottery ticket 
  4.2   provided through the lottery service business compared with the 
  4.3   actual costs of a lottery ticket purchased from a lottery 
  4.4   retailer.  Before a required statement may be published, the 
  4.5   format, font size, placement, clarity, and prominence of a 
  4.6   required statement must be approved by the commissioner.  In 
  4.7   each instance when a lottery service business changes its costs 
  4.8   such that the per lottery ticket price changes, the business 
  4.9   must submit a draft of the required statement for approval by 
  4.10  the commissioner.  The business's per-ticket price for tickets 
  4.11  purchased for a pool must be calculated by multiplying the 
  4.12  member costs paid to a lottery service business by the number of 
  4.13  persons in the pool and dividing the product by the total number 
  4.14  of lottery tickets purchased on behalf of the lottery pool.  The 
  4.15  per-ticket price for a lottery ticket purchased from a lottery 
  4.16  retailer is the price set for that ticket by the director. 
  4.17     (b) All advertising and solicitation described in paragraph 
  4.18  (a) must contain the following statement in clear and readable 
  4.19  type:  "This business is not affiliated with and is not an agent 
  4.20  of the Minnesota state lottery.  The Minnesota state lottery is 
  4.21  not responsible for paying any prize to any person other than 
  4.22  the possessor of a winning ticket." 
  4.23     Subd. 6.  [PROHIBITIONS.] (a) A lottery service business 
  4.24  may not accept any form of payment for any service it offers 
  4.25  other than cash, check, or money order. 
  4.26     (b) A lottery service business may not accept as a customer 
  4.27  or subscriber any person under age 18, or make a payment of 
  4.28  lottery winnings to a person under age 18. 
  4.29     (c) A lottery service business and any officer, director, 
  4.30  or employee of the business may not have any stake or own any 
  4.31  shares in any lottery pool it creates for customers or 
  4.32  subscribers. 
  4.33     Subd. 7.  [LOTTERY PRIZE ACCOUNT.] A lottery service 
  4.34  business must deposit all money received as winnings from 
  4.35  lottery tickets bought for or on behalf of customers or 
  4.36  subscribers into a lottery prize account that it maintains 
  5.1   separately from all other accounts of the business.  The 
  5.2   business may expend money from the account, including interest 
  5.3   thereon, only to pay winnings to customers or subscribers and to 
  5.4   make payments required under subdivision 8. 
  5.5      Subd. 8.  [UNCLAIMED PRIZES.] (a) A lottery service 
  5.6   business must make all good-faith efforts to distribute money in 
  5.7   its lottery prize account to customers and subscribers entitled 
  5.8   thereto. 
  5.9      (b) Any money deposited in the lottery prize account that 
  5.10  has not been distributed to customers or subscribers as winnings 
  5.11  within one year after the date of deposit becomes an unclaimed 
  5.12  prize.  A lottery service business must transmit all unclaimed 
  5.13  prizes, including all interest earned thereon while the prize 
  5.14  was in the lottery prize account, to the commissioner within ten 
  5.15  days of the prize becoming unclaimed.  The commissioner shall 
  5.16  deposit all payments under this subdivision in the general fund. 
  5.17     Subd. 9.  [BOOKS AND RECORDS; AUDIT.] A lottery service 
  5.18  business must keep a complete set of books of account, 
  5.19  correspondence, and all other records necessary to show fully 
  5.20  the lottery service business's lottery transactions.  The 
  5.21  commissioner and all employees of the Department of Public 
  5.22  Safety shall have access to these materials at any time.  The 
  5.23  commissioner may require a lottery service business to furnish 
  5.24  information the commissioner deems necessary to carry out the 
  5.25  purposes of this section and any other law relating to 
  5.26  gambling.  The commissioner may require an audit to be made of 
  5.27  the books, accounts, and records of a lottery service business, 
  5.28  select an auditor to perform the audit, and require the lottery 
  5.29  service business to pay the costs of the audit.  The auditor 
  5.30  selected to perform the audit has the same right of access to 
  5.31  the books, accounts, correspondence, and records of the business 
  5.32  as the commissioner. 
  5.33     Subd. 10.  [VIOLATION.] A violation of subdivisions 2, 
  5.34  paragraph (a); 5; 6, paragraphs (a) and (c); 7; 8; or 9; or of 
  5.35  an order issued under subdivision 4, is a gross misdemeanor.  A 
  5.36  violation of subdivision 6, paragraph (b), is a misdemeanor. 
  6.1      <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2004.