Lottery Bonds for Retail Licensing

Since you’re reading about lottery bonds, it’s probably safe to assume you may be considering applying for a license to sell lottery tickets in a retail establishment you currently own or are thinking about opening.

Lottery retailers (or lottery sales agents, as they are called in some states) earn commissions based on sales volume and bonuses for selling winning tickets—the bigger the win, the bigger the bonus. They also see an increase in the traffic to their shop when they sell lottery tickets. People passing by who notice the lottery signage and come in to buy lottery tickets may make some other purchases and even become regular customers. And customers who came in occasionally before lottery tickets were sold may come in more frequently.

So lottery retailers not only gain additional income streams from lottery ticket sales, but also enjoy higher sales of their regular products and services.

Every state has its own licensing process for lottery retailers. In some states, license applications are submitted online, while other states require the submission of paper applications by mail. In general, the application review process is designed to assess:

• the establishment’s location and suitability for lottery ticket sales, and
• the owner’s character and integrity and ability and willingness to comply with the state’s lottery statutes and the terms of the lottery retailer contract.

The state’s intent, to ensure the establishment meets certain standards, is to make sure an adequate lottery sales volume to justify the state’s investment in the site; without infringing on the business of neighboring retailers selling lottery tickets. Additionally, the state must verify the applicant’s location complies with the Americans with Disabilities Act so no adult is denied the opportunity to take part in the state lottery.

The state also has a vested interest in ensuring only people who meet certain ethical standards are granted a lottery retailer license. Submitting a signed lottery retailer license application authorizes the state to conduct criminal records checks and credit checks on the applicant(s) and to ascertain whether any back taxes are owed to the state. The intent is to screen out any applicants who have a criminal history or who don’t meet the state’s standards for financial responsibility–either of which suggests the potential for future unlawful or unethical behavior that could cause a monetary loss to the state or the public.

Most criminal convictions will disqualify an applicant, but failing to meet financial responsibility standards is not necessarily disqualifying. State lottery commissions often impose a bonding requirement to mitigate any financial risk to the state.

When a state requires a lottery bond from all license applicants or only from certain applicants, the purpose is to protect the state against losses caused by a lottery retailer’s noncompliance with state laws, Lottery Commission regulations, or the terms of the lottery retailer contract or of the surety bond agreement. A lottery bond provides a way to compensate the state or any other party injured by the unlawful, unethical, or negligent acts of the licensed lottery retailer, such as not remitting lottery sales proceeds to the state or not reporting lost or stolen tickets. Bonding also helps maintain the lottery’s reputation for integrity and the public’s confidence in it.