Requiring conditionally licensed lottery retailers to provide the Lottery Authority with a surety bond helps ensure that they comply with applicable state laws, lottery regulations, and the terms of the Lottery Retailer Contract. And in the event of a violation, such as failing to remit ticket sales proceeds as required or misappropriating lottery funds, the bond provides a way for the Lottery Authority to recover monetary damages.
How to Become a Lottery Retailer in New Mexico
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 New Mexico. 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 New Mexico, a lottery retailer license is referred to as a certificate of authority, and is issued by the New Mexico Lottery Authority.
Why Is a Surety Bond Required?
How Do They Work?
A New Mexico lottery bond is a three-party contract among:
- The New Mexico Lottery Authority (the “obligee” requiring the bond),
- The lottery retailer (the “principal” purchasing the bond), and
- The party guaranteeing the bond (known as the “surety”).
While the principal is legally obligated to pay all valid claims, the surety has guaranteed their payment and will investigate each claim received to make sure that it is legitimate. The surety’s guarantee is in the form of an agreement to lend money to the principal if the principal can’t pay a valid claim without that assistance. But the surety doesn’t simply issue a check to the principal. Rather, the surety pays the claimant directly, creating a debt that the principal must subsequently repay. The surety, like any other creditor, can take legal action if the principal fails to repay the debt.
What Are the Steps in the Licensing Process?
The Lottery Retailer Application and the Lottery Retailer Contract both can be downloaded from the New Mexico Lottery website page for prospective retailers. The application packet consists of multiple forms, each of which must be completed in its entirety; two of the forms must be notarized to authorize the required background checks.
After reviewing the completed application and supporting documents and the results of the background checks, the applicant’s certificate of authority will be approved (sometimes conditionally) or disapproved. Conditional approval occurs when an applicant has some questionable or unresolved credit issues, such as a court judgment not yet satisfied. Conditionally approved retailers must furnish a lottery agent bond. The New Mexico Lottery Authority will establish the required bond amount based on projected lottery sales.
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What Do They Cost?
The annual premium for a New Mexico lottery bond is a small percentage of the required bond amount. The surety determines the premium rate for each applicant based largely on the individual’s personal credit score, which is considered to be a good measure of the risk of not being repaid for claims paid on behalf of the principal.
There is a positive correlation between a high credit score and a low risk level and between a low credit score and a high risk level. Low risk should result in a low premium rate, perhaps even lower than 1%. And high risk warrants a high premium rate.
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How Do New Mexico Lottery Bonds Work?
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