How to Become a Lottery Retailer in North Dakota

When a lottery bond is required, it’s because the results of the applicant’s credit check and review of the application have raised some concerns about the applicant’s financial status and the possibility of that having a negative financial impact on the North Dakota Lottery.

In purchasing a lottery bond, a lottery retailer is pledging to abide by all applicable statutes and lottery rules and the terms of the Lottery Agreement that must be signed upon approval of the retailer’s license. These all help ensure that the retailer will not engage in any conduct that could cause a monetary loss by the Lottery. But if the retailer does commit a violation that causes the Lottery financial harm (misappropriating lottery funds or failure to remit lottery sales proceeds to the state), the bond can provide compensation for the damages.

There are three parties to a North Dakota lottery bond: 1) the North Dakota Lottery (the “obligee” requiring the bond), 2) the lottery retailer (the “principal” purchasing the bond), and 3) the bond’s guarantor (the “surety”).

Upon receipt of a claim, the surety will conduct an investigation to determine whether it is legitimate and perhaps attempt to negotiate a settlement. The principal is legally obligated to pay all valid claims that can’t be settled amicably. The surety guarantees that payment and has agreed to extend credit to the principal for the purpose of paying claims, if necessary.

Because of that guarantee, the surety typically will pay a claim on the principal’s behalf to expedite resolution of the claim. That payment is, in effect, a loan from the principal to the surety—a loan that the surety is legally obligated to repay. If the loan is not repaid, the surety can take legal action against the principal to recover the funds.