WSR 98-03-068

PROPOSED RULES

GAMBLING COMMISSION

[Filed January 20, 1998, 4:00 p.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 98-01-090 dated December 15, 1997.

Title of Rule: Raffle rules, WAC 230-20-325 Manner of conducting a raffle and 230-20-335 Members-only raffles--Procedures--Restrictions.

Purpose: Change raffle rules to allow Class C or Class D raffle license holders to offer a single discount scheme for each raffle; ensure that discount schemes have proper internal controls and audit system.

Other Identifying Information: Organizations that sell tickets at a discount are required to submit their discount scheme and audit system to the agency director for approval, prior to sale of tickets.

Statutory Authority for Adoption: RCW 9.46.070 (3), (8), (11), and (14).

Summary: See Purpose above.

Reasons Supporting Proposal: Rule change would allow nonprofits to sell raffle tickets at a discount, thereby stimulating sales without compromising the agency's ability to audit activities and ensure that the public is not defrauded.

Name of Agency Personnel Responsible for Drafting: Soojin Kim, Lacey, (360) 438-7654 ext. 310; Implementation: Ben Bishop, Lacey, (360) 438-7654 ext. 302; and Enforcement: Carrie Tellefson, Lacey, (360) 438-7654 ext. 373.

Name of Proponent: Staff, private.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: See Purpose and Reasons Supporting Proposal above.

Proposal Changes the Following Existing Rules: Currently, only organizations holding a Class E or higher raffle license are allowed to give discounts on raffle tickets. The amendment to WAC 230-20-325 allows Class C or Class D raffle license holders to offer a single discount scheme for each raffle, provided that the discount is set prior to beginning the sale of raffle tickets. The discounted tickets will be bundled into booklets and labeled with the sales scheme, including the number of tickets and the total cost of the booklet.

The amendment to WAC 230-20-335 applies to members-only raffles. It would require organizations that sell raffle tickets at a discount to submit their pricing discount scheme and an audit system for internal controls to the director for approval, prior to the sale of tickets. The discount scheme will remain valid until modified by the licensee or approval is revoked by the director. The discount scheme cannot be changed during the raffle. The price of a single ticket will be imprinted on each ticket and the discounted price will be imprinted on the package of tickets. The price of a single ticket shall not exceed two dollars and a package of discounted tickets shall not exceed twenty-five dollars.

No small business economic impact statement has been prepared under chapter 19.85 RCW. Proposal is exempt under RCW 19.85.025(2); therefore, a small business economic impact statement is not required.

RCW 34.05.328 does not apply to this rule adoption. This agency does not choose to make section 201, chapter 403, Laws of 1995 apply to this rule adoption.

Hearing Location: Holiday Inn Sea-Tac, 17338 International Boulevard, SeaTac, WA 98188, (206) 248-1000, on March 13, 1998, at 10:00 a.m.

Assistance for Persons with Disabilities: Contact Susan Green by March 1, 1998, TDD (360) 438-7638, or (360) 438-7654, ext. 302.

Submit Written Comments to: Soojin Kim, Mailstop 42400, Olympia, Washington 98504-2400, FAX (360) 438-8652, by February 28, 1998.

Date of Intended Adoption: March 13, 1998.

Soojin Kim

Rules and Policy Coordinator

AMENDATORY SECTION (Amending Order 303, filed 11/21/96, effective 12/22/96)

WAC 230-20-325 Manner of conducting a raffle.

What are the general requirements for conducting a raffle?

(1) All raffles shall be conducted by selling individual chances for not more than twenty-five dollars and awarding prizes by selecting winners by a random drawing from among all chances sold((;)). The following operating procedures apply:

(2) All raffle chances shall be consecutively numbered tickets or other objects imprinted with letters or symbols that are not repeated within the population of all chances sold for a specific raffle;

(3) No person shall be required to obtain more than one chance to enter a raffle;

What additional requirements apply to raffles offered to the general public and raffles that do not require the winner to be present at the drawing?

(4) Raffle chances sold to the general public or for raffles that do not require the winner to be present at the drawing shall consist of a ticket that includes a stub or other detachable section bearing a duplicate number, letter, or symbol corresponding to the number, letter, or symbol on the ticket or object representing the player's chance. The portion retained by the raffle operator shall include the participant's name, complete address, telephone number, and/or other information necessary to notify the winner;

What information must be provided to raffle participants and when must such information be provided?

(5) All participants in a raffle must be informed of all rules by which such prizes may be won at the time of sale of a chance. This information shall be provided by either imprinting such on the participant's portion of the ticket or otherwise providing such to each participant in writing. The following information shall be provided to each participant:

(a) The cost of each chance;

(b) All prizes available, whether cash or merchandise;

(c) Date and time of drawing;

(d) Location of drawing;

(e) Whether an entrant is required to be present at a raffle drawing in order to be eligible to win a prize; and

(f) Name of organization conducting raffle;

What are the restrictions on raffle entry fees and ticket prices?

(6) No person shall be required to pay, directly or indirectly, more than twenty-five dollars in order to enter any raffle: Provided, That the sale of more than a single ticket to a single participant or the sale of a booklet of tickets under approval of the director, as authorized by subsection (7) of this section, shall not be deemed a violation of this section;

(7) Each raffle ticket must be sold for the same price as every other raffle ticket being used for that particular raffle: Provided, That the director may authorize a licensee to sell tickets at a discount if:

(a) A petition for approval for discount sales is received at the Lacey headquarters office at least thirty days prior to beginning the raffle for which such approval is requested. Each petition for approval to sell discounted raffle tickets shall include at least the following:

(i) A full description of the discount scheme;

(ii) The accounting controls and records to be used; and

(iii) A facsimile of the tickets and booklet cover planned for the raffle.

(b) Any licensee requesting approval for this activity shall reimburse the commission for all costs in reviewing and approval of such under the guidelines set forth in WAC 230-08-017;

(c) The organization has a Class E or higher raffle license: Provided, That organizations that are licensed to conduct raffles at Class C or Class D may participate in this activity if all requirements of WAC 230-08-070 are followed;

(d) Participants must be allowed to purchase a single ticket;

(e) A single discount scheme is allowed for each raffle. The amount of the discount must be set prior to beginning sales for the raffle and shall not be changed during any raffle. The following restrictions apply to such discounted tickets:

(i) Discounted tickets must be bundled into booklets that((:

(i) Contain not more than five tickets;

(ii) Are not)) contain the number of tickets set forth in the scheme (i.e., ten tickets if tickets are sold for two dollars a piece or ten for fifteen dollars, three tickets if tickets are sold for five dollars a piece or three for ten dollars, five tickets if tickets are sold for five dollars a piece or five for twenty dollars, etc.);

(ii) Tickets bundled into booklets shall not be removed from the booklet and sold individually; and

(iii) The booklet cover of each ticket booklet ((is)) shall be imprinted with a description of the sales scheme that includes the number of tickets included and the total cost of the booklet and a control number that meets the requirements of subsection (((1))) (2) of this section((.

(f) The maximum discount for a ticket bundled into a booklet is twenty percent of the single ticket price;

(g) The value of each ticket sold, net of the discount, shall be imprinted on the ticket; and

(h))); and

(f) Accounting procedures must be established that provide controls necessary to allow commission staff the ability to audit gross gambling receipts from such tickets;

What are the limits on what may be offered as a prize or reward for either selling or purchasing tickets?

(8) No free tickets, or any opportunity to participate in the drawing of any raffle, shall be awarded or given to a person as a prize or reward for selling raffle tickets or for purchasing a certain number of raffle tickets: Provided, That noncash incentive awards may be provided to members selling tickets if:

(a) Individual awards do not exceed a fair market value of ten dollars;

(b) The awards are based on the number of chances sold; and

(c) The fair market value of the total amount awarded for an individual raffle does not exceed two percent of the gross gambling receipts of the raffle;

What are the procedures for handling sold tickets?

(9) Each ticket seller shall return to the licensee the stubs or other detachable section of all tickets sold. The licensee shall then place each stub or other detachable section of each ticket sold into a receptacle from which the winning tickets are to be drawn;

What are the procedures for conducting a raffle drawing?

(10) The raffle license issued by the commission or a copy of the license shall be posted in plain view at the location at all times during the occasion when a drawing is being conducted.

(11) The ticket collection receptacle shall be designed so that each ticket has an equal opportunity to be drawn: Provided, that an alternative drawing format to determine the winner may be utilized if such format is approved by the director before tickets are sold and the following requirements are complied with:

(a) The organization must have a current raffle license;

(b) The alternate format must meet the definition of a drawing as defined by WAC 230-02-500;

(c) The random selection process used in the alternative format shall be fully disclosed to each player prior to selling a ticket;

(d) Any alternate format utilized to determine the winners must be closely controlled by the licensee; and

(e) The written request to utilize an alternative drawing format shall contain, at a minimum, the following information:

(i) The time, date and location of the drawing;

(ii) The type of random selection process to be used and complete details of its operation;

(iii) The name and telephone number of the raffles manager; and

(iv) The signature of the organization's chief executive officer.

[Statutory Authority: RCW 9.46.070, 9.46.0209, 9.46.0237, 9.46.0205 and 9.46.075. 96-24-008 (Order 303), 230-20-325, filed 11/21/96, effective 12/22/96. Statutory Authority: RCW 9.46.0277 and 9.46.070. 96-07-077, 230-20-325, filed 3/19/96, effective 7/1/96. Statutory Authority: RCW 9.46.070. 95-07-093, 230-20-325, filed 3/17/95, effective 7/1/95. Statutory Authority: RCW 34.05.220(4), [34.05].230 and 9.46.070 (11) and (14). 90-05-032 (Order 205), 230-20-325, filed 2/14/90, effective 3/17/90. Statutory Authority: RCW 9.46.070 (11), (14) and 9.46.0218 [9.46.0281]. 89-05-024 (Order 186), 230-20-325, filed 2/13/89. Statutory Authority: RCW 9.46.070. 88-19-038 (Order 183), 230-20-325, filed 9/13/88. Statutory Authority: RCW 9.46.070 (8), (11) and (14). 88-07-059 (Order 175), 230-20-325, filed 3/15/88. Statutory Authority: RCW 9.46.070 (1), (2), (4), (5), (6), (9), (11), (14) and (17) and 9.46.020 (19) and (23). 85-17-015 (Order 153), 230-20-325, filed 8/12/85. Statutory Authority: RCW 9.46.070 (3), (8) and (11). 85-09-040 (Order 149), 230-20-325, filed 4/15/85. Statutory Authority: RCW 9.46.070 (8) and (11). 83-11-034 (Order 133), 230-20-325, filed 5/16/83.]

AMENDATORY SECTION (Amending WSR 96-07-077, filed 3/19/96, effective 7/1/96)

WAC 230-20-335 Members-only raffles--Procedures--Restrictions. Organizations may conduct members-only raffles utilizing simplified procedures. For purposes of this section, "members-only raffle" means a raffle conducted by selling chances only to members of the organization and a limited number of guests, and determining the winners from among those members and guests that have purchased chances. The following procedures and restrictions supplement or modify WAC 230-08-070 and 230-20-325 and apply only to members-only raffles:

(1) In order to conduct raffles utilizing these simplified procedures, all phases of the raffle must be completed during a meeting of the members, and the meeting must be completed on the same day and at the same location without interruption;

(2) If guests are allowed to participate, the total number of guests, as a percentage of the total attendance of the meeting, shall not exceed twenty-five percent. Records shall be maintained that will allow commission staff to determine compliance with this requirement;

(3) All disclosures required to be imprinted on a raffle ticket or chance may be provided to participants by posting a sign at each ticket sales point;

(4) Chances to enter a raffle may be included as a part of a package that includes dues, entertainment, or other fund-raising activities if the value of each component of the package is disclosed to the purchaser and the value of each individual raffle chance does not exceed twenty-five dollars: Provided, That initial applications for membership and any fees paid for such shall not include chances to enter raffles or to participate in any gambling activities;

(5) The director may authorize an organization to deviate from the "same price" requirements of WAC 230-20-325(5). Approval for such schemes must be in writing and received prior to beginning ticket sale utilizing such sales. Approval of such schemes remain valid until the scheme is modified by the licensee or the approval is revoked by the director. The following pricing schemes may be approved:

(a) Chances to enter a raffle may be sold for different values, ranging from one cent to a maximum of ten dollars, if the following conditions are met:

(((a))) (i) The scheme for assigning the cost of the ticket must be disclosed to the player before selling them a chance to participate. This disclosure shall include the total number of tickets in the population and the number of tickets at each price level;

(ii) Participants must be allowed to randomly select their ticket from the population of remaining tickets. Participants pay the amount imprinted upon the ticket they select;

(iii) The scheme provides an adequate audit trail that will allow commission staff and taxing authorities to determine gross gambling receipts;

(iv) The total gross gambling receipts available from raffles utilizing such schemes are limited to five thousand five dollars each drawing;

(v) No more than two such drawings are conducted during a meeting of the members.

(b) ((Participants must be allowed to randomly select their ticket from the population of remaining tickets. Participants pay the amount imprinted upon the ticket they select;

(c) The scheme provides an adequate audit trail that will allow commission staff and taxing authorities to determine gross gambling receipts;

(d) The total gross gambling receipts available from raffles utilizing such schemes are limited to five thousand five dollars each drawing;

(e) No more than two such drawings are conducted during a meeting of the members; and

(f) Approval must be obtained in writing from the director. Such approval shall be valid until revoked by commission staff;)) Chances may be sold for a discounted price that is based on the number of tickets a player purchases if:

(i) Participants are allowed to purchase a single ticket;

(ii) A single discount scheme is allowed for each raffle. The amount of the discount must be set prior to beginning sales for the raffle and shall not be changed during the raffle;

(iii) The cost of a single ticket, without a discount, does not exceed two dollars;

(iv) The total cost of a discount package does not exceed twenty-five dollars;

(v) The cost of a single ticket shall be imprinted on each ticket (i.e., one dollar a piece or twelve for ten dollars; or two dollars a piece or fifteen for twenty dollars); and

(vi) The licensee shall establish an audit system that includes controls and procedures that will allow commission agents and taxing authorities the ability to determine gross gambling receipts from the sale of tickets utilizing discounts. Such system shall be submitted to the director as a part of the approval request;

(6) The following sales schemes may be used for members-only raffles:

(a) Multiple tickets to enter one or more drawings may be sold as a package as long as the total price of the package does not exceed twenty-five dollars; and

(b) Alternative sales methods may be used if specifically authorized by the commission. This authority will be issued on an individual basis and will require a detailed written request;

(7) Alternative drawing formats approved for members-only raffles shall be valid until revoked by the commission staff, if all the information required by this subsection is reported to the commission at least ten days before any drawing using such schemes. Notification for members-only raffles may be signed by the designated raffle manager;

(8) The limitations on noncash incentive awards for an individual raffle, set forth in WAC 230-20-325 (((6))) (8)(a) and (c), are modified to allow awards that do not exceed five percent of the combined gross gambling receipts for all raffles conducted during a membership meeting if a record of the name, address, and telephone number is maintained for all persons receiving awards valued in excess of fifty dollars;

(9) Raffle records, as required by WAC 230-08-070, are modified as follows:

(a) The threshold value for maintaining a record of the name, address, and telephone number of each winner of a prize is increased to include only prizes valued in excess of fifty dollars;

(b) Ticket disbursement records are not required; and

(c) Minimum record retention period is reduced to a period that is not less than one year following the date of each individual raffle drawing.