There is always the risk that a lottery retailer could violate the terms of the Retailer Contract, resulting in financial harm to the state and/or the public. For example, a retailer might not remit proceeds from ticket sales to MSL. Misappropriation of lottery funds is another major concern. The bonding requirement helps hold a lottery retailer (known as the bond’s “principal”) to a high standard of conduct and provides a way to recover monetary damages caused by the retailer. If no violations occur within six months of licensing, MSL has the option of dropping the requirement for a lottery bond.
How to Get a Lottery Retailer License in Minnesota
At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about lottery retailer licensing in Minnesota. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.
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Who Licenses Lottery Retailers?
In Minnesota, lottery retailer licenses are issued by the Minnesota State Lottery (MSL). You’ll need to obtain one if you want to sell lottery tickets in your retail establishment.
Why Is a Surety Bond Required?
How Do They Work?
In purchasing a lottery bond, the principal agrees to comply with the terms of the Retailer Contract and all regulations governing the Minnesota lottery. In the event of a violation by MSL (the “obligee” requiring and protected by the bond) or other injured party can seek compensation for damages by filing a claim against the bond.
The terms of the surety bond agreement make the principal solely responsible for paying valid claims. However, there is a third party to the bond (known as the “surety”), and the surety has guaranteed the principal’s payment of valid claims. Because of that guarantee, the surety will pay a valid claim initially, as an extension of credit to the principal. That shifts the principal’s obligation to repaying the surety rather than paying the claimant directly. If not repaid, the surety can take legal action against the principal to recover the claim amount.
What Are the Steps in the Licensing Process?
The Minnesota Lottery website allows you to download the lottery retailer application along with the instructions for completing and submitting it to MSL, along with two copies of the Retailer Contract and an application fee of $100 per retail location.
Be aware that in signing the application, you are authorizing background checks into your credit history, criminal records, and any overdue state or local taxes. If a review of your credit history reveals that you do not meet MSL’s financial responsibility standards, you will be instructed to furnish MSL with a $3,000 surety bond as a condition for licensure.
After approving your license application, MSL will return a signed copy of the Retailer Contract to you.
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What Do They Cost?
The surety’s underwriters will review the bond application and other relevant information to determine an appropriate premium rate. The primary underwriting consideration is the risk of the surety not being repaid for claims paid on behalf of the principal. The principal’s personal credit score is the key risk indicator.
With a high credit score, the assumption is that the risk to the surety is low, as the principal has demonstrated a high level of financial responsibility. Low risk results in a low premium rate, potentially 1% or even a bit lower. The opposite is also true. A low credit score is associated with higher risk and results in a higher premium rate.
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How Do Minnesota Lottery Bonds Work?
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