LTR-42-11-00010-P Jackpot Prize Payments for Multi-Jurisdictional Games and Lotto and Technical Rule Changes

10/19/11 N.Y. St. Reg. LTR-42-11-00010-P

NEW YORK STATE REGISTER

VOLUME XXXIII, ISSUE 42

October 19, 2011

RULE MAKING ACTIVITIES

DIVISION OF THE LOTTERY

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. LTR-42-11-00010-P

Jackpot Prize Payments for Multi-Jurisdictional Games and Lotto and Technical Rule Changes

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Amendment of sections 2806.2, 2806.4, 2806.7(b), 2806.13, 2817.2 and 2817.15; addition of section 2806.4(c); and repeal of section 2817.10(d) of Title 21 NYCRR.

Statutory authority:

Tax Law, sections 1601, 1604, 1612 and 1617

Subject:

Jackpot prize payments for Multi-Jurisdictional Games and Lotto and technical rule changes.

Purpose:

To clarify the options for payment of jackpot prizes and game features to conform with accepted industry standards.

Text of proposed rule:

PART 2806 MULTI-JURISDICTIONAL LOTTERY GAMES

Paragraphs (4) and (9) of subdivision (a) of section 2806.2 are amended to read as follows:

§ 2806.2 Mega Millions definitions

(a) The following definitions shall apply to Mega Millions.

(4) [Cash Option] Lump Sum Option - The manner in which the [on-line] Mega Millions Jackpot Prize may be paid in a single payment.

(9) Mega Millions Play Slip - for the [on-line] Mega Millions game, a computer-readable form, printed and issued by the New York Lottery, used in purchasing a Mega Millions Ticket, having up to five (5) separate play areas. [The Play Slip additionally includes boxes for selection of Cash Option or Annuity Option.] The play slip also provides for multiple drawing wagering up to 26 draws.

Subdivision (a) of section 2806.4 is amended and a new subdivision (c) is added to read as follows:

§ 2806.4 Ticket price

(a) [For the on-line Mega Millions game:] Mega Millions Tickets may be purchased for $ 1.00 per play at the discretion of the Purchaser, in accordance with the number of game panels and inclusive drawings. The Purchaser receives one play for each $ 1.00 wagered in Mega Millions. [Instants will be at the price stated on any such ticket.] Tickets may contain multiple plays. The Division may authorize the sale of Mega Millions tickets at a different purchase price. Such a change in the purchase price shall be announced publicly by the Division prior to the effective date of such change.

(c) A Mega Millions game feature may be added at the discretion of the Director. A game feature is an alternative or additional method for playing the game within the same basic design.

Paragraphs (3) and (4) of subdivision (b) and subparagraph (ii) of paragraph (4) of subdivision (b) of section 2806.7 are amended to read as follows:

§ 2806.7 Prize structure

(b) Jackpot prize payments. For the [on-line] Mega Millions game:

(3) If there are multiple winners of the annuitized Mega Millions jackpot prize from among all participating state lotteries, and if the annuitized amount of prize being awarded to each winner equals or exceeds $ 1 Million, then the winner(s) in New York will be paid in accordance with their selection of lump sum or annuity [made at the time of ticket purchase]. If there are multiple winners of the annuitized Mega Millions jackpot prize from among all participating state lotteries, and if the annuitized amount of the prize being awarded to each winner is less than $ 1 million, then the winner(s) in New York will be paid in a lump sum amount[, notwithstanding purchaser's selection at time of purchase].

(4) Purchasers in New York must select either an annuity jackpot prize or lump sum jackpot prize [at the time of ticket purchase]. A jackpot prize shall be paid, at the election of a player made no later than sixty (60) days after the player becomes entitled to the prize, with either an annuity or lump sum payment. If the payment election is not made by a player within sixty (60) days after the player becomes entitled to the prize, then the prize shall be paid as an annuity prize. An election to take a lump sum payment may be made at the time of the prize claim or within sixty (60) days after the player becomes entitled to the prize. An election made after the winner becomes entitled to the prize is final and cannot be revoked, withdrawn or otherwise changed without the approval of the Division.

(ii) [Cash option] Lump sum option jackpot prizes shall be paid in a single payment upon completion of internal validation procedures. The [cash option] lump sum option amount offered shall be the amount determined by multiplying the annuitized prize amount by a discount value set by Mega Millions Finance Committee prior to each drawing (the "[cash] lump sum equivalent jackpot prize"), divided by the number of total jackpot prize winners for the Mega Millions game.

Paragraph (7) of subdivision (b), paragraph (1) of subdivision (c), paragraph (1) of subdivision (e), paragraphs (3) and (5) of subdivision (h), and paragraphs (1), (2) and (3) of subdivision (i) of section 2806.13 are amended to read as follows:

§ 2806.13 Powerball

b. Definitions.

The following definitions apply to Powerball:

(7) "[Set] Fixed Prize" means all other prizes except the Jackpot Prize that are advertised to be paid by a single [cash] payment and, except in instances specified in this section, will be equal to the prize amount established for the prize level.

c. Game Description.

(1) Powerball is a five (5) out of fifty-nine (59) plus one (1) out of thirty-nine (39) computerized lottery game which pays the Jackpot Prize, at the election of the player made in accordance with this section or by a default election made in accordance with this section, either on an annuitized pari-mutuel basis or as a [cash] lump sum payment of the total cash held for this prize pool on a pari-mutuel basis. Except as provided in this section, all other prizes are paid on a fixed [set cash] lump sum basis. To play Powerball, a player may select five (5) different numbers, from one (1) through fifty-nine (59) and one (1) additional number from one (1) through thirty-nine (39). The additional number may be the same as one of the first five (5) numbers selected by a player. A player may select a set of five (5) numbers and one additional number by communicating the six (6) numbers to a Lottery Sales Agent, or by marking six (6) numbered spaces in any one panel on a Play Slip and submitting the Play Slip to an Agent or by requesting Quick Pick from an Agent. An Agent will then issue a ticket containing the selected set or sets of numbers, each of which constitutes a game play.

e. Ticket Prices.

(1) A Powerball ticket may be purchased for $1.00 per play in accordance with the number of game panels and inclusive drawings. The purchaser receives one play for each $1.00 wagered in Powerball. Tickets may contain multiple plays. The Division may authorize the sale of Powerball tickets at a different purchase price. Such a change in the purchase price shall be announced publicly by the Division prior to the effective date of such change.

h. Prize Pool, Prize Structure and Probability of Winning.

(3) Expected Prize Payout Percentages. The Jackpot Prize shall be determined on a pari-mutuel basis. Except as provided in this section, all other prizes shall be paid as [set cash] fixed lump sum prizes with the following expected prize payout percentages:

(5) The prize pool percentage allocated to the [set] fixed prizes [the cash prizes of $200,000 or less] shall be carried forward to subsequent drawings if all or a portion of it is not needed to pay the [set] fixed prizes awarded in the current drawing. The Division, in consultation with other state lotteries selling Powerball tickets, may decide that it is necessary to pay a [set] fixed prize as a pari-mutuel prize.

i. Prize Payment.

(1) Jackpot Prizes. Jackpot prizes shall be paid, at the election of a player made no later than sixty (60) days after the player becomes entitled to the prize, with either an annuity or [cash] lump sum payment. If the payment election is not made by a player within sixty (60) days after the player becomes entitled to the prize, then the prize shall be paid as an annuity prize. An election to take a [cash] lump sum payment may be made at the time of the prize claim or within sixty (60) days after the player becomes entitled to the prize. An election made after the winner becomes entitled to the prize is final and cannot be revoked, withdrawn or otherwise changed without the approval of the Division. Shares of the Jackpot Prize shall be determined by dividing the cash available in the Jackpot Prize pool equally among all winners of the Jackpot Prize in all participating lottery states. Winner(s) who elect a [cash] lump sum payment shall be paid their share(s) in a single [cash] lump sum payment upon successful completion of validation procedures. Neither MUSL nor the participating lotteries shall be responsible or liable for changes in the advertised or estimated annuity prize amount and the actual amount determined after the prize payment method is actually known to MUSL. In certain instances announced by MUSL, the Jackpot Prize shall be a guaranteed amount and shall be determined pursuant to paragraph (5) of this subdivision. All annuitized prizes shall be paid annually in thirty (30) payments with the initial payment being made in [cash] a lump sum to be followed by twenty-nine (29) payments, upon successful completion of validation procedures. All annuitized prizes shall be paid annually in thirty (30) graduated payments (increasing each year) by a rate as determined by MUSL. Prize payments may be rounded down to the nearest one thousand dollars ($1,000).

(2) Low-Tier [Cash] Prize Payments. All low-tier [cash] prizes [(all prizes except the Jackpot Prize)] shall be paid in one payment.

(3) Prizes Rounded. Annuitized payments of the Jackpot Prize or a share of the Jackpot Prize may be rounded to facilitate the purchase of an appropriate funding mechanism. Amounts remaining after rounding on an annuitized Jackpot Prize shall be added to the [first cash] initial payment to the winner or winners. Prizes other than the Jackpot Prize, which, under these rules, may become single-payment, pari-mutuel prizes, may be rounded down so that prizes can be paid in multiples of whole dollars. Amounts remaining after rounding shall be carried forward to the prize pool for the next drawing.

Part 2817 LOTTO

Paragraph (1) of subdivision (b) of section 2817.2 is amended to read as follows:

§ 2817.2 Payment of Prizes

(b) Each first prize payment shall be subject to the following provisions of this subdivision.

(1) If, pursuant to paragraph (a) (1) of this section, the calculated share for each game panel qualifying for a first prize in a particular LOTTO drawing would provide annual payments of $10,000 or more, a winner shall receive [a first] an initial payment in an amount as similar as possible [equal] to the first [of the annual payments as is practicable] annuity payment. After providing for such a first payment, the division, as authorized by the comptroller, shall invest the remaining first prize money in securities authorized by the State Finance Law for the investment of state funds at current rates payable over a period of years. From the returns of principal and earnings on such investment, the division shall pay annual prize installments to each first prize winner. Such annual prize installments shall be payable for a term of years to be determined by the division. The number of years in the term payment schedule may be changed by the division from time to time. Any such change will be publicly announced by the division. Such announcement may be made in a news release, an advertisement, on the division's website, or in such other form as the director, in his or her discretion, may prescribe to maximize public awareness. [At the time of purchase,] LOTTO players may elect whether a first prize shall be payable in installments over a term of years in accordance with the foregoing provisions of this paragraph or, alternatively, whether a first prize shall be payable in a lump sum. If a prize is awarded in a lump sum as a result of a player having elected that option, the amount of the lump sum payment shall be equal to the first prize discounted to present value based upon market rates on the business day following the drawing, divided by the number of game panels qualifying for a first prize. A jackpot prize shall be paid, at the election of a player made no later than sixty (60) days after the player becomes entitled to the prize, with either an annuity or lump sum payment. If the payment election is not made by a player within sixty (60) days after the player becomes entitled to the prize, then the prize shall be paid as an annuity prize. An election to take a lump sum payment may be made at the time of the prize claim or within sixty (60) days after the player becomes entitled to the prize. An election made after the winner becomes entitled to the prize is final and cannot be revoked, withdrawn or otherwise changed without the approval of the Division.

Subdivision (d) of section 2817.10 is repealed.

Subdivision (d) of section 2817.15 is amended to read as follows:

§ 2817.15 Determination of prizes for variations of the LOTTO game.

(d) In addition to the announced prize structure, the division may offer special prizes from time to time[, in the form of either cash or other valuable consideration, if such additional special prizes are authorized by the director at her or his discretion].

Text of proposed rule and any required statements and analyses may be obtained from:

Julie B. Silverstein Barker, Associate Attorney, New York Lottery, One Broadway Center, PO Box 7500, Schenectady, NY 12301-7500, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

1. Statutory authority: The amendments to 21 NYCRR Parts 2806 and 2817are proposed pursuant to Tax Law, Sections 1601, 1604, 1612 and 1617.

Tax Law § 1601 describes the purpose of the New York State Lottery for Education Law (Tax Law Article 34) as being to establish a lottery operated by the State, the net proceeds of which are applied exclusively for aid to education. Tax Law § 1604 authorizes the Division of the Lottery (the Lottery) "to promulgate rules and regulations governing the establishment and operation thereof." Tax Law § 1612 (a) describes the distribution of revenues for any joint, multi-jurisdiction, and out -of-state lottery and the Lotto game. Tax Law Section 1617 authorizes the Lottery Director to "enter into an agreement with a government-authorized group of one or more other jurisdictions providing for the operation and administration of a joint, multi-jurisdiction, and out-of-state lottery."

2. Legislative objectives: The purpose of operating Lottery games is to generate earnings for the support of education in the State. Amendment of this regulation is expected to advance the Lottery's ability to generate earnings for education by offering winners of the Mega Millions and Lotto jackpot prizes a more convenient jackpot prize payment option by permitting players to elect lump sum payments or annuity payments within sixty days of claiming such prizes. Previously, players were required to make such elections at the time of ticket purchase. This jackpot prize election time frame was already available for the Powerball jackpot prize. Therefore, this change makes Mega Millions and Lotto consistent with the Powerball jackpot prize election option. Additionally, technical changes were made to terminology to more accurately describe such terms. Lastly, a provision was added to the rules of the Powerball and Mega Millions games to provide the flexibility to offer tickets for such games at different purchase prices to promptly accommodate any changes in the purchase prices of such games as may be approved by the consortium of states that participate in such games.

3. Needs and benefits: Amendments to the multi-jurisdictional game regulations and the Lotto game regulations will allow the Lottery to continue its effort to keep and enlarge its market share of players (from within New York State and other states) who play lottery games and bring more consistency to its three jackpot draw games.

4. Costs:

a. Costs to regulated parties for the implementation and continuing compliance with the rule: None.

b. Costs to the agency, the State, and local governments for the implementation and continuation of the rule: None.

c. Sources of cost evaluations: The foregoing cost evaluations are based on the Lottery's experience in operating State Lottery games for more than 40 years.

5. Local government mandates: None. No local government is authorized or required to do any act, apply any effort, expend any funds, or use any other resources in connection with the operation of the Mega Millions, Powerball or Lotto games. All necessary actions will be carried out by the Lottery or licensed Lottery retailers who will be completely responsible for all aspects of game operations at the local retail level. The Lottery has no authority and no need to impose any mandate on any local government. Consequently, no provision of the rule imposes any burden on any local government in the State.

6. Paperwork: There are no changes in paperwork requirements, except for an additional form that jackpot winners in the Mega Millions, Lotto and Powerball games will be asked to complete to elect lump sum payment or annuity payments. Game information will be issued by the New York Lottery for public convenience on the Lottery's website and through point of sale advertising materials at retailer locations.

7. Duplication: None.

8. Alternatives: The alternative to amending the Powerball, Mega Millions and Lotto game regulations is to not make all the jackpot draw games consistent for the convenience and benefit of Lottery players. Additionally, any alternative to making the proposed technical changes to terminology in the Powerball, Mega Millions and Lotto games would result in less accurate and less clear regulatory language for such games.

The proposed amendments to the Powerball, Mega Millions and Lotto games will ensure that the Lottery will be able to offer the best possible or games, which will appeal to more customers and result in maximum sales and revenue for aid to education in New York State.

9. Federal standards: None.

10. Compliance schedule: None.

Regulatory Flexibility Analysis and Rural Area Flexibility Analysis

The proposed rulemaking does not require a Regulatory Flexibility Analysis or a Rural Area Flexibility Analysis. There will be no adverse impact on rural areas, small business or local governments.

The proposed amendments to the New York Lottery’s Powerball, Mega Millions and Lotto game regulations will not impose any adverse economic or reporting, recordkeeping or other compliance requirements on small businesses or local governments. Small businesses will not have any additional recordkeeping requirements as a result of the proposed amendments. Additionally, the proposed amendments are anticipated to have a positive affect on the revenue of small businesses that sell lottery tickets because such amendments are being made for the convenience and benefit of Lottery players. Revenue from such games may increase which will increase sales commissions paid to retailers as players find the amendments being made to be more convenient and beneficial. Local governments are not regulated by the New York Lottery or its regulations nor are any economic or recordkeeping requirements imposed on local governments as a result of the proposed amendments to such regulations.

Job Impact Statement

The proposed amendment of 21 NYCRR Parts 2806 and 2817 does not require a Job Impact Statement because there will be no adverse impact on jobs and employment opportunities in New York State.

The amendments are being made to update certain technical aspects of the Mega Millions, Powerball and Lotto games. Some of the technical changes are being made for the convenience of Lottery players. The changes will not adversely impact jobs and employments opportunities within New York State.