Session of 1999
         
SENATE BILL No. 330
         
By Committee on Federal and State Affairs
          
2-22
          
  9             AN  ACT concerning the Kansas lottery; relating to video lottery machine
10             games; concerning revenue from games; amending K.S.A. 41-308, 74-
11             8701, 74-8702, 74-8704, 74-8708, 74-8711, 74-8712, 74-8720 and 74-
12             8721 and K.S.A. 1998 Supp. 21-4302, 38-1602, 74-8710, 74-8717, 74-
13             8718 and 74-8719 and repealing the existing sections; also repealing
14             K.S.A. 1998 Supp. 38-1602a.
15      
16       Be it enacted by the Legislature of the State of Kansas:
17             New Section  1. (a) A video lottery machine vendor shall enter into
18       a contract with the Kansas lottery and receive a certificate from the ex-
19       ecutive director before such vendor manufactures, distributes, sells,
20       maintains or places any video lottery machine or associated equipment
21       for public use in this state.
22             (b) The commission shall establish by rules and regulations an annual
23       fee for each certificate issued to a video lottery machine vendor. Such
24       certificate shall be renewed annually if the applicant complies with K.S.A.
25       74-8708, and amendments thereto, and upon timely payment of the an-
26       nual fee. Such fee shall not exceed:
27             (1) For a video lottery machine manufacturer, $20,000.
28             (2) For a video lottery machine distributor, $5,000.
29             (3) For a video lottery machine operator or video lottery machine
30       leasing company, $150 per machine or $5,000, whichever is greater.
31             (c) In addition to the annual fee provided by this section, the exec-
32       utive director may charge a one-time application fee to video lottery ma-
33       chine vendors. Such fee shall be established by rules and regulations of
34       the commission in an amount not to exceed $500.
35             (d) All moneys from fees collected pursuant to this section shall be
36       deposited into the state treasury and credited to the lottery operating
37       fund.
38             (e) Financial institutions providing loans to video lottery machine
39       vendors secured by video lottery machines shall secure the financial in-
40       stitution's interest in accordance with the provisions of the uniform com-
41       mercial code.
42             (f) If a financial institution or vendor takes possession of video lottery
43       machines to protect its interests, such financial institution or vendor shall

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  1       notify the executive director by telephone and confirm in writing within
  2       72 hours after its agent has taken possession, the following for each such
  3       machine:
  4             (1) The name of the entity that owns or has leased the machine;
  5             (2) the financial institution's or vendor's name, address and repre-
  6       sentative to contact;
  7             (3) the serial number, model number and license number of the
  8       machine and the name of the manufacturer of the machine;
  9             (4) the name of the agent holding the machine;
10             (5) the location where the machine is being held;
11             (6) the plan for disposition of the machine; and
12             (7) any change in the above.
13             (g) The financial institution or vendor, or agent thereof, shall not
14       operate the video lottery machine, other than for testing or repair, while
15       the machine is in its possession. The financial institution or vendor, or
16       agent thereof, shall permit the executive director or the executive direc-
17       tor's representative and any Kansas law enforcement agency to enter the
18       financial institution's or vendor's premises at any time to inspect the
19       machine.
20             (h) The financial institution or agent thereof, shall not be required
21       to obtain a certificate from the Kansas lottery for:
22             (1) Providing loans for the financing of video lottery machines;
23             (2) taking possession of and holding video lottery machines to protect
24       the security or financial interest of the financial institution in the video
25       lottery machine;
26             (3) holding indicia of ownership of video lottery machines primarily
27       to protect the financial institution's security interest in the machines if
28       such financial institution does not participate in the management of the
29       video lottery machine vendor; or
30             (4) the sale, lease or other lawful disposition of video lottery ma-
31       chines following the taking of possession.
32             New Sec.  2. (a) A video lottery machine manufacturer shall not re-
33       ceive a certificate as, or own, manage, control or have any financial in-
34       terest in, any other video lottery machine vendor or a video lottery re-
35       tailer. A video lottery machine distributor shall not receive a certificate
36       as, or own, manage, control or have any financial interest, in any other
37       video lottery machine vendor or a video lottery retailer. A video lottery
38       machine operator shall not receive a certificate as, or own, manage, con-
39       trol or have any financial interest in, any other video lottery machine
40       vendor or a video lottery retailer. A video lottery retailer or an owner or
41       manager of a video lottery retailer shall not receive a certificate as, or
42       own, manage, control or have any financial interest in, a video lottery
43       machine vendor. A video lottery machine leasing company shall not re-

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  1       ceive a certificate as, or own, manage, control or have any financial in-
  2       terest in, any other video lottery machine vendor or a video lottery re-
  3       tailer. A financial institution shall not receive a certificate as, or own, a
  4       video lottery machine vendor or retailer.
  5             (b) A video lottery machine vendor or video lottery retailer shall be
  6       deemed in violation of the prohibitions of this section if its owner or any
  7       of its substantial owners, directly or indirectly, also is the owner or sub-
  8       stantial owner of any entity which the video lottery machine vendor or
  9       video lottery retailer is prohibited by this section from owning, managing
10       or controlling or in which such vendor or retailer is prohibited by this
11       section from having any financial interest. A substantial owner is a person
12       who owns more than 5% of the stock of a corporation, owns more than
13       5% of the interest of a limited liability company or is a partner in a part-
14       nership and entitled to more than 5% of the net profits of the partnership.
15             New Sec.  3. (a) The executive director may enter into contracts for
16       the placement of video lottery machines with any lottery retailer who is:
17       (1) Licensed as a club or drinking establishment under the club and drink-
18       ing establishment act or licensed to serve cereal malt beverages and has
19       been so licensed for not less than four years at the same location; (2)
20       licensed to conduct games of bingo and has been so licensed for not less
21       than four years at that location; (3) an organization licensed to conduct
22       parimutuel dog or horse racing games; (4) an organization determined by
23       the executive director to be a bona fide nonprofit organization operating
24       a historical tourist attraction; or (5) the state fair board and if such games
25       are placed on the state fair grounds at locations established by rules and
26       regulations adopted by the commission.
27             The executive director shall allow no more than 5 video lottery ma-
28       chines per facility, plus one additional machine for every 1,000 square
29       feet of the overall operating premises, as defined by rules and regulations.
30       All such machines shall be placed in an area of the facility where the
31       admission of minors would be restricted.
32             (b) No person shall place a video lottery machine on the premises
33       of a video lottery retailer or licensed establishment or on premises used
34       for the operation and conduct of bingo unless the executive director first
35       issues a certificate for such machine. Such certificate shall be prominently
36       displayed on each machine. Any machine on which is not displayed the
37       certificate required by this section is contraband and a public nuisance
38       and shall be subject to confiscation by any law enforcement officer. Any
39       sale of contraband shall be subject to any lawful ownership or security
40       interest of a financial institution or video lottery machine vendor in the
41       video lottery machine. A violation of this subsection is a severity level 8,
42       nonperson felony.
43             (c) Only video lottery machines certified by the Kansas lottery shall

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  1       be placed on the premises of a licensed establishment or on premises
  2       used for the operation and conduct of bingo.
  3             (d) A video lottery machine may not accept more than $2 to be
  4       played on a single game or award free games or credits in excess of the
  5       value of $1,000 per game.
  6             (e) The Kansas lottery shall examine prototypes of video lottery ma-
  7       chines and associated equipment prior to certification pursuant to this
  8       section. The Kansas lottery shall require the person seeking the exami-
  9       nation and certification of a video lottery machine or associated equip-
10       ment to pay in advance the estimated costs of the examination. After the
11       completion of the examination, the Kansas lottery shall refund overpay-
12       ments or charge and collect amounts sufficient to reimburse the Kansas
13       lottery for underpayments of actual costs. The Kansas lottery may contract
14       for the examination of video lottery machines and associated equipment
15       as required by this subsection, and may rely upon testing done by or for
16       other states regulating video lottery machines, if it deems such testing to
17       be reliable and in the best interests of the state of Kansas.
18             (f) Video lottery machine games shall pay out an average of not less
19       than 85% and not more than 95% of the amount wagered when played
20       at the level of skill that will provide the greatest return to the player over
21       a period of continuous play. The precise percentages shall be established
22       by the commission by rules and regulations.
23             New Sec.  4. Each video lottery machine certified under section 3,
24       and amendments thereto, shall:
25             (a) Offer only games authorized by the Kansas lottery;
26             (b) not have any means of manipulation that affect the random prob-
27       abilities of winning credits;
28             (c) have one or more mechanisms that accept tokens, coins or cash
29       in the forms of bills, the mechanisms of which shall be designed to prevent
30       obtaining credits without payment by stringing, slamming, drilling or
31       other means and if those attempts involve physical tampering, the ma-
32       chine shall suspend itself from operation until reset;
33             (d) have nonresettable meters housed in any readily accessible
34       locked machine area that keeps a permanent record of all cash inserted
35       into the machine, all refunds of winnings made by the machine's printer,
36       credits played for games and credits won by players;
37             (e) be capable of awarding tokens or printing a ticket stating the
38       value of the prize for the player at the completion of each video lottery
39       machine game, the time of day in a 24-hour format showing hours and
40       minutes, the date, the machine serial number, the sequential number of
41       the ticket vouchers and an encrypted validation number from which the
42       validity of the prize may be determined;
43             (f) have accounting software that keeps an electronic record which

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  1       includes, but is not limited to, the total cash inserted into the machine,
  2       the value of winning tickets printed by the machine, the total credits
  3       played and the total credits awarded;
  4             (g) be linked through a central communications system to provide
  5       auditing program and other information as required by the commission;
  6       and
  7             (h) not use any word or name suggesting any form of lottery or
  8       gambling, any gambling establishment or any city, county, state, country
  9       or other governmental entity to describe any video lottery machine cer-
10       tified under this act.
11             New Sec.  5. (a) Video lottery retailers shall not make any payments,
12       enhancements, loans or gifts, directly or indirectly, to any video lottery
13       machine vendor, the vendor's owners, officers, employees or family.
14       Video machine vendors shall not make any payments, enhancements,
15       loans or gifts, directly or indirectly, to any video lottery retailer or the
16       retailer's owners, officers, employees or family. Prohibited enhancements
17       include, but shall not be limited to, the following: Remodeling, bonuses,
18       incentives, furnishings and signage. Each video lottery retailer shall pro-
19       vide, without compensation or reimbursement, the retailer's own license
20       fees, electrical and telephone service to the machines, floor space and
21       labor to pay prizes and such other services as required pursuant to such
22       retailer's contract with the lottery. The cost of installation of electrical or
23       telephone service for the machines shall be paid by the retailer pursuant
24       to the contract with the lottery. A person violating the terms of this sub-
25       section is guilty of a severity level 8, nonperson felony and, upon convic-
26       tion, the person's certificate shall be terminated by the executive director
27       or the executive director's designee.
28             (b) The amount of video lottery machine income shall be reported
29       and 40% of such amount of video lottery machine income shall be re-
30       mitted by the video lottery retailer to the Kansas lottery within 15 days
31       after the 15th day of each month and within 15 days after the end of each
32       month unless rules and regulations of the commission require such in-
33       come to be reported and remitted more frequently. Each video lottery
34       retailer shall keep a record of video lottery machine income in the form
35       the Kansas lottery may require. A video lottery retailer who falsely reports
36       or fails to report the amount due required by this subsection is guilty of
37       a severity level 8, nonperson felony upon conviction is subject to termi-
38       nation by the executive director or executive director's designee. A video
39       lottery retailer shall be assessed a penalty for late payments at the rate of
40       11/2% per month on the unpaid balance.
41             (c) The video lottery retailer shall pay all credits resulting from video
42       lottery machine play as provided by the contract with the lottery or by
43       rules and regulations of the commission.

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  1             Sec.  6. K.S.A. 1998 Supp. 21-4302 is hereby amended to read as
  2       follows: 21-4302. (a) "Bet" means a bargain in which the parties agree
  3       that, dependent upon chance, one stands to win or lose something of
  4       value specified in the agreement. A bet does not include:
  5             (1) Bona fide business transactions which are valid under the law of
  6       contracts including, but not limited to, contracts for the purchase or sale
  7       at a future date of securities or other commodities, and agreements to
  8       compensation for loss caused by the happening of the chance including,
  9       but not limited to, contracts of indemnity or guaranty and life or health
10       and accident insurance;
11             (2) offers of purses, prizes or premiums to the actual contestants in
12       any bona fide contest for the determination of skill, speed, strength, or
13       endurance or to the bona fide owners of animals or vehicles entered in
14       such a contest;
15             (3) a lottery as defined in this section;
16             (4) any bingo game by or for participants managed, operated or con-
17       ducted in accordance with the laws of the state of Kansas by an organi-
18       zation licensed by the state of Kansas to manage, operate or conduct
19       games of bingo;
20             (5) a lottery operated by the state pursuant to the Kansas lottery act;
21             (6) any system of parimutuel wagering managed, operated and con-
22       ducted in accordance with the Kansas parimutuel racing act; or
23             (7) tribal gaming.
24             (b) "Lottery" means an enterprise wherein for a consideration the
25       participants are given an opportunity to win a prize, the award of which
26       is determined by chance. A lottery does not include:
27             (1) A lottery operated by the state pursuant to the Kansas lottery act;
28       or
29             (2) tribal gaming.
30             (c) "Consideration" means anything which is a commercial or finan-
31       cial advantage to the promoter or a disadvantage to any participant.
32             Mere registration without purchase of goods or services; personal at-
33       tendance at places or events, without payment of an admission price or
34       fee; listening to or watching radio and television programs; answering the
35       telephone or making a telephone call and acts of like nature are not
36       consideration.
37             As used in this subsection, consideration does not include:
38             (1) Sums of money paid by or for participants in any bingo game
39       managed, operated or conducted in accordance with the laws of the state
40       of Kansas by any bona fide nonprofit religious, charitable, fraternal, ed-
41       ucational or veteran organization licensed to manage, operate or conduct
42       bingo games under the laws of the state of Kansas and it shall be conclu-
43       sively presumed that such sums paid by or for such participants were

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  1       intended by such participants to be for the benefit of the sponsoring
  2       organizations for the use of such sponsoring organizations in furthering
  3       the purposes of such sponsoring organizations, as set forth in the appro-
  4       priate paragraphs of subsection (c) or (d) of section 501 of the federal
  5       internal revenue code of 1986 and as set forth in K.S.A. 79-4701 and
  6       amendments thereto;
  7             (2) sums of money paid by or for participants in any lottery operated
  8       by the state pursuant to the Kansas lottery act;
  9             (3) sums of money paid by or for participants in any system of par-
10       imutuel wagering managed, operated and conducted in accordance with
11       the Kansas parimutuel racing act; or
12             (4) sums of money paid by or for a person to participate in tribal
13       gaming.
14             (d)  (1) "Gambling device" means:
15             (A) Any so-called "slot machine" or any other machine, mechanical
16       device, electronic device or other contrivance an essential part of which
17       is a drum or reel with insignia thereon, and (i) which when operated may
18       deliver, as the result of chance, any money or property, or (ii) by the
19       operation of which a person may become entitled to receive, as the result
20       of chance, any money or property;
21             (B) any other machine, mechanical device, electronic device or other
22       contrivance (including, but not limited to, roulette wheels and similar
23       devices) which is equipped with or designed to accommodate the addition
24       of a mechanism that enables accumulated credits to be removed, is
25       equipped with or designed to accommodate a mechanism to record the
26       number of credits removed or is otherwise designed, manufactured or
27       altered primarily for use in connection with gambling, and (i) which when
28       operated may deliver, as the result of chance, any money or property, or
29       (ii) by the operation of which a person may become entitled to receive,
30       as the result of chance, any money or property;
31             (C) any subassembly or essential part intended to be used in con-
32       nection with any such machine, mechanical device, electronic device or
33       other contrivance, but which is not attached to any such machine, me-
34       chanical device, electronic device or other contrivance as a constituent
35       part; or
36             (D) any token, chip, paper, receipt or other document which evi-
37       dences, purports to evidence or is designed to evidence participation in
38       a lottery or the making of a bet.; or
39             (E) any device that awards credits and contains a circuit, meter,
40       switch or electronic computer program capable of removing and record-
41       ing the removal of credits when the award of credits is dependent upon
42       chance.
43             The fact that the prize is not automatically paid by the device does

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  1       not affect its character as a gambling device.
  2             (2) Gambling device does not include:
  3             (A) Any machine, mechanical device, electronic device or other con-
  4       trivance used or for use by a licensee of the Kansas racing commission as
  5       authorized by law and rules and regulations adopted by the commission
  6       or by the Kansas lottery or Kansas lottery retailers as authorized by law
  7       and rules and regulations adopted by the Kansas lottery commission;
  8             (B) any machine, mechanical device, electronic device or other con-
  9       trivance, such as a coin-operated bowling alley, shuffleboard, marble ma-
10       chine (a so-called pinball machine), or mechanical gun, which is not de-
11       signed and manufactured primarily for use in connection with gambling,
12       and (i) which when operated does not deliver, as a result of chance, any
13       money, or (ii) by the operation of which a person may not become entitled
14       to receive, as the result of the application of an element of chance, any
15       money;
16             (C) any so-called claw, crane, or digger machine and similar devices
17       which are designed and manufactured primarily for use at carnivals or
18       county or state fairs; or
19             (D) any machine, mechanical device, electronic device or other con-
20       trivance used in tribal gaming.
21             (e) A "gambling place" is any place, room, building, vehicle, tent or
22       location which is used for any of the following: Making and settling bets;
23       receiving, holding, recording or forwarding bets or offers to bet; con-
24       ducting lotteries; or playing gambling devices. Evidence that the place
25       has a general reputation as a gambling place or that, at or about the time
26       in question, it was frequently visited by persons known to be commercial
27       gamblers or known as frequenters of gambling places is admissible on the
28       issue of whether it is a gambling place.
29             (f) "Tribal gaming" has the meaning provided by K.S.A. 1998 Supp.
30       74-9802 and amendments thereto.
31             (g) "Tribal gaming commission" has the meaning provided by K.S.A.
32       1998 Supp. 74-9802 and amendments thereto.
33             (h) "Something of value" includes credits or free replays when
34       awarded to a player of a gambling device.
35             Sec.  7. K.S.A. 1998 Supp. 38-1602 is hereby amended to read as
36       follows: 38-1602. As used in this code, unless the context otherwise
37       requires:
38             (a) "Juvenile" means a person 10 or more years of age but less than
39       18 years of age.
40             (b) "Juvenile offender" means a person who does an act commits an
41       offense while a juvenile which if done committed by an adult would con-
42       stitute the commission of a felony or misdemeanor as defined by K.S.A.
43       21-3105, and amendments thereto, or who violates the provisions of

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  1       K.S.A. 21-4204a or K.S.A., 41-727, subsection (b) or (c) of K.S.A. 74-7819
  2       or subsection (j) of K.S.A. 74-8810, and amendments thereto, but does
  3       not include:
  4             (1) A person 14 or more years of age who commits a traffic offense,
  5       as defined in subsection (d) of K.S.A. 8-2117 and amendments thereto;
  6             (2) a person 16 years of age or over who commits an offense defined
  7       in chapter 32 of the Kansas Statutes Annotated;
  8             (3) a person whose prosecution as an adult is authorized pursuant to
  9       K.S.A. 38-1636 and amendments thereto and whose prosecution results
10       in the conviction of an adult crime; or
11             (4) a person who has been found to be an extended jurisdiction
12       juvenile pursuant to subsection (a)(2) of K.S.A. 38-1636, and amendment
13       thereto, and whose stay of adult sentence execution has been revoked
14       under 18 years of age who previously has been:
15             (A) Convicted as an adult under the Kansas code of criminal
16       procedure;
17             (B) sentenced as an adult under the Kansas code of criminal proce-
18       dure following termination of status as an extended jurisdiction juvenile
19       pursuant to K.S.A. 38-16,126, and amendments thereto; or
20             (C) convicted or sentenced as an adult in another state or foreign
21       jurisdiction under substantially similar procedures described in K.S.A. 38-
22       1636, and amendments thereto, or because of attaining the age of majority
23       designated in that state or jurisdiction.
24             (c) "Parent," when used in relation to a juvenile or a juvenile of-
25       fender, includes a guardian, conservator and every person who is by law
26       liable to maintain, care for or support the juvenile.
27             (d) "Law enforcement officer" means any person who by virtue of
28       that person's office or public employment is vested by law with a duty to
29       maintain public order or to make arrests for crimes, whether that duty
30       extends to all crimes or is limited to specific crimes.
31             (e) "Youth residential facility" means any home, foster home or
32       structure which provides twenty-four-hour-a-day care for juveniles and
33       which is licensed pursuant to article 5 of chapter 65 of the Kansas Statutes
34       Annotated.
35             (f) "Juvenile detention facility" means any secure public or private
36       facility which is used for the lawful custody of accused or adjudicated
37       juvenile offenders and which must shall not be a jail.
38             (g) "Juvenile correctional facility" means a facility operated by the
39       commissioner for juvenile offenders.
40             (h) "Warrant" means a written order by a judge of the court directed
41       to any law enforcement officer commanding the officer to take into cus-
42       tody the juvenile named or described therein.
43             (i) "Commissioner" means the commissioner of juvenile justice.

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  1             (j) "Jail" means:
  2             (1) An adult jail or lockup; or
  3             (2) a facility in the same building as an adult jail or lockup, unless
  4       the facility meets all applicable licensure requirements under law and
  5       there is (A) total separation of the juvenile and adult facility spatial areas
  6       such that there could be no haphazard or accidental contact between
  7       juvenile and adult residents in the respective facilities; (B) total separation
  8       in all juvenile and adult program activities within the facilities, including
  9       recreation, education, counseling, health care, dining, sleeping, and gen-
10       eral living activities; and (C) separate juvenile and adult staff, including
11       management, security staff and direct care staff such as recreational, ed-
12       ucational and counseling.
13             (k) "Court-appointed special advocate" means a responsible adult,
14       other than an attorney appointed pursuant to K.S.A. 38-1606 and amend-
15       ments thereto, who is appointed by the court to represent the best inter-
16       ests of a child, as provided in K.S.A. 1998 Supp. 38-1606a, and amend-
17       ments thereto, in a proceeding pursuant to this code.
18             (l) "Juvenile intake and assessment worker" means a responsible
19       adult authorized to perform intake and assessment services as part of the
20       intake and assessment system established pursuant to K.S.A. 76-3202 75-
21       7023, and amendments thereto.
22             (m) "Institution" means the following institutions: The Atchison ju-
23       venile correctional facility, the Beloit juvenile correctional facility, the
24       Larned juvenile correctional facility and the Topeka juvenile correctional
25       facility.
26             (n) "Sanction Sanctions house" means a facility which is operated or
27       structured so as to ensure that all entrances and exits from the facility are
28       under the exclusive control of the staff of the facility, whether or not the
29       person being detained has freedom of movement within the perimeters
30       of the facility, or which relies on locked rooms and buildings, fences, or
31       physical restraint in order to control the behavior of its residents. Upon
32       an order from the court, a licensed juvenile detention facility may serve
33       as a sanction sanctions house. A sanction sanctions house may be physi-
34       cally connected physically to a nonsecure shelter facility provided the
35       sanction sanctions house is not a licensed juvenile detention facility.
36             (o) "Sentencing risk assessment tool" means an instrument admin-
37       istered to juvenile offenders which delivers a score, or group of scores,
38       describing, but not limited to describing, the juvenile's potential risk to
39       the community.
40             (p) "Educational institution" means all schools at the elementary and
41       secondary levels.
42             (q) "Educator" means any administrator, teacher or other profes-
43       sional or paraprofessional employee of an educational institution who has

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  1       exposure to a pupil specified in subsection (a)(1) through (5) of K.S.A.
  2       1998 Supp. 72-89b03, and amendments thereto.
  3             Sec.  8. K.S.A. 41-308 is hereby amended to read as follows: 41-308.
  4       (a) A retailer's license shall allow the licensee to sell and offer for sale at
  5       retail and deliver in the original package, as therein prescribed, alcoholic
  6       liquor for use or consumption off of and away from the premises specified
  7       in such license. A retailer's license shall permit sale and delivery of al-
  8       coholic liquor only on the licensed premises and shall not permit sale of
  9       alcoholic liquor for resale in any form, except that a licensed retailer may:
10             (1) Sell alcoholic liquor to a temporary permit holder for resale by
11       such permit holder; and
12             (2) sell and deliver alcoholic liquor to a caterer or to the licensed
13       premises of a club or drinking establishment, if such premises are in the
14       county where the retailer's premises are located or in an adjacent county,
15       for resale by such club, establishment or caterer.
16             (b) Except as otherwise provided, the holder of a retailer's license
17       shall not sell, offer for sale, give away or permit to be sold, offered for
18       sale or given away in or from the premises specified in such license any
19       service or thing of value whatsoever except alcoholic liquor in the original
20       package, except that. A licensed retailer may:
21             (1) Charge a delivery fee for delivery to a club, drinking establish-
22       ment or caterer pursuant to subsection (a);
23             (2) sell lottery tickets and shares and video lottery machine games to
24       the public in accordance with the Kansas lottery act, if the retailer is
25       selected as a lottery retailer;
26             (3) include in the sale of alcoholic liquor any goods included by the
27       manufacturer in packaging with the alcoholic liquor, subject to the ap-
28       proval of the director; and
29             (4) distribute to the public, without charge, consumer advertising
30       specialties bearing advertising matter, subject to rules and regulations of
31       the secretary limiting the form and distribution of such specialties so that
32       they are not conditioned on or an inducement to the purchase of alcoholic
33       liquor.
34             (c) No licensed retailer shall furnish any entertainment in or on such
35       premises or permit the placement or operation of any pinball machine or
36       game of skill or chance to be located in or on such premises except a
37       video lottery machine authorized pursuant to subsection (b)(2).
38             (d) A retailer's license shall allow the licensee to store alcoholic liquor
39       in refrigerators, cold storage units, ice boxes or other cooling devices, and
40       the licensee may sell such alcoholic liquor to consumers in a chilled
41       condition.
42             Sec.  9. K.S.A. 74-8701 is hereby amended to read as follows: 74-
43       8701. K.S.A. 74-8701 through 74-8721 and sections 1 through 5, and

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  1       amendments thereto, shall be known as and may be cited as the Kansas
  2       lottery act.
  3             Sec.  10. K.S.A. 74-8702 is hereby amended to read as follows: 74-
  4       8702. As used in this act, unless the context otherwise requires:
  5             (a) "Commission" means the Kansas lottery commission.
  6             (b) "Executive director" means the executive director of the Kansas
  7       lottery.
  8             (c) "Gaming equipment" means any electric, electronic or mechan-
  9       ical device or other equipment unique to the Kansas lottery used directly
10       in the operation of any lottery and in the determination of winners pur-
11       suant to this act.
12             (d) "Kansas lottery" means the state agency created by this act to
13       operate a lottery or lotteries pursuant to this act.
14             (e) "Lottery retailer" means:
15             (1) Any person with whom the Kansas lottery has contracted to sell
16       lottery tickets or shares, or both, to the public.; or
17             (2) a video lottery retailer.
18             (f) "Lottery" or "state lottery" means the lottery or lotteries operated
19       pursuant to this act.
20             (g) "Major procurement" means any gaming product or service, in-
21       cluding but not limited to facilities, advertising and promotional services,
22       annuity contracts, prize payment agreements, consulting services, equip-
23       ment, tickets and other products and services unique to the Kansas lot-
24       tery, but not including materials, supplies, equipment and services com-
25       mon to the ordinary operations of state agencies.
26             (h) "Person" means any natural person, association, corporation or
27       partnership.
28             (i) "Prize" means any prize paid directly by the Kansas lottery pur-
29       suant to its rules and regulations.
30             (j) "Share" means any intangible manifestation authorized by the
31       Kansas lottery to prove participation in a lottery game.
32             (k) "Ticket" means any tangible evidence issued by the Kansas lottery
33       to prove participation in a lottery game.
34             (l) "Vendor" means any person who has entered into a major pro-
35       curement contract with the Kansas lottery or a video lottery machine
36       vendor.
37             (m) "Returned ticket" means any ticket which was transferred to a
38       lottery retailer, which was not sold by the lottery retailer and which was
39       returned to the Kansas lottery for refund by issuance of a credit or
40       otherwise.
41             (n) "Video lottery machine" means any electronic video game ma-
42       chine that, upon insertion of cash, coins or tokens is available to play or
43       simulate the play of a video game authorized by the commission, including

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  1       but not limited to bingo, poker, black jack and keno, and which uses a
  2       video display and microprocessors and in which, by chance, the player
  3       may receive free games or credits that can be redeemed for cash. A video
  4       lottery machine does not include a machine that directly dispenses coins
  5       or cash.
  6             (o) "Associated equipment" means any proprietary device, machine
  7       or part used in the manufacture or maintenance of a video lottery ma-
  8       chine, including but not limited to, integrated circuit chips, printed wired
  9       assembly, printed wired boards, printing mechanisms, video display mon-
10       itors and metering devices.
11             (p) "Bingo" means games of bingo managed, operated and conducted
12       in accordance with K.S.A. 79-4701 and amendments thereto.
13             (q) "Credit" means the smallest unit of payment entitling a player to
14       play a video lottery machine game.
15             (r) "Financial institution" means any savings and loan association,
16       federally chartered savings bank, bank, trust company, credit union, in-
17       surance company or other organization which is authorized to make loans
18       and which is regulated by law.
19             (s) "Licensed establishment" means a:
20             (1) Retailer licensed pursuant to the Kansas liquor control act;
21             (2) club or drinking establishment licensed pursuant to the club and
22       drinking establishment act; or
23             (3) retailer licensed pursuant to the provisions of article 27 of chapter
24       41 of the Kansas Statutes Annotated.
25             (t) "Video lottery machine income" means cash put into a video lot-
26       tery machine minus credits redeemed for cash.
27             (u) "Video lottery machine leasing company" means any person
28       which owns and leases video lottery machines to video lottery machine
29       distributors or video lottery machine operators and which receives con-
30       sideration in the form of fixed regular payments and does not receive
31       additional payments or reductions directly or indirectly based upon the
32       profits or losses generated from the machines it leases.
33             (v) "Video lottery machine manufacturer" means any person that
34       assembles or produces video lottery machines or associated equipment for
35       sale or use in this state.
36             (w) "Video lottery machine distributor" means any person that dis-
37       tributes or sells video lottery machines or associated equipment for use in
38       this state, other than a video lottery machine leasing company.
39             (x) "Video lottery machine operator" means any person that places,
40       maintains, owns or leases video lottery machines or associated equipment
41       for use in this state.
42             (y) "Video lottery retailer" means the state fair board, with regard
43       to video lottery machines placed on the state fairgrounds, or any person

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  1       with whom the Kansas lottery has contracted for the placement of video
  2       lottery machines.
  3             (z) "Video lottery machine vendor" means a video lottery machine
  4       leasing company, video lottery machine manufacturer, video lottery ma-
  5       chine distributor and video lottery machine operator.
  6             Sec.  11. K.S.A. 74-8704 is hereby amended to read as follows: 74-
  7       8704. (a) The executive director shall have the power to:
  8             (1) Supervise and administer the operation of the state lottery in
  9       accordance with the provisions of this act and such rules and regulations
10       as adopted hereunder pursuant thereto.
11             (2) Appoint, subject to the Kansas civil service act and within the
12       limitations of appropriations therefor, all other employees of the Kansas
13       lottery, which employees shall be in the classified service unless otherwise
14       specifically provided by this act.
15             (3) Enter into contracts for advertising and promotional services,
16       subject to the provisions of subsection (b); annuities or other methods
17       deemed appropriate for the payment of prizes; data processing and other
18       technical products, equipment and services; and facilities as needed to
19       operate the Kansas lottery, including but not limited to gaming equip-
20       ment, tickets and other services involved in major procurement contracts,
21       in accordance with K.S.A. 74-8705, and amendments thereto.
22             (4) Enter into contracts with persons for the sale of lottery tickets
23       or shares to the public or the placement of video lottery machines, as
24       provided by this act and rules and regulations adopted pursuant to this
25       act, which thereto. Such contracts shall not be subject to the provisions
26       of K.S.A. 75-3738 through 75-3744, and amendments thereto.
27             (5) Require lottery retailers to furnish proof of financial stability or
28       furnish surety in an amount based upon the expected volume of sales of
29       lottery tickets or shares or video lottery machine games.
30             (6) Examine, or cause to be examined by any agent or representative
31       designated by the executive director, any books, papers, records or mem-
32       oranda of any lottery retailer for the purpose of ascertaining compliance
33       with the provisions of this act or rules and regulations adopted hereunder
34       pursuant thereto.
35             (7) Issue subpoenas to compel access to or for the production of any
36       books, papers, records or memoranda in the custody or control of any
37       lottery retailer, or to compel the appearance of any lottery retailer or
38       employee of any lottery retailer, for the purpose of ascertaining compli-
39       ance with the provisions of this act or rules and regulations adopted here-
40       under pursuant thereto. Subpoenas issued under the provisions of this
41       subsection may be served upon natural persons and corporations in the
42       manner provided in K.S.A. 60-304, and amendments thereto, for the serv-
43       ice of process by any officer authorized to serve subpoenas in civil actions

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  1       or by the executive director or an agent or representative designated by
  2       the executive director. In the case of the refusal of any person to comply
  3       with any such subpoena, the executive director may make application to
  4       the district court of any county where such books, papers, records, mem-
  5       oranda or person is located for an order to comply.
  6             (8) Administer oaths and take depositions to the same extent and
  7       subject to the same limitations as would apply if the deposition were in
  8       aid of a civil action in the district court.
  9             (9) Require fingerprinting of employees and such other persons who
10       work in sensitive areas within the lottery as deemed appropriate by the
11       director. The director may submit such fingerprints to the Kansas bureau
12       of investigation and to the federal bureau of investigation for the purposes
13       of verifying the identity of such employees and persons and obtaining
14       records of their criminal arrests and convictions.
15             (b) The Kansas lottery shall not engage in on-site display advertising
16       or promotion of the lottery at any amateur athletic or sporting event
17       including, but not limited to, amateur athletic sporting events at institu-
18       tions under the jurisdiction and control of the state board of regents.
19             Sec.  12. K.S.A. 74-8708 is hereby amended to read as follows: 74-
20       8708. (a) The executive director shall select as lottery retailers such per-
21       sons as deemed best able to serve the public convenience and promote
22       the sale of lottery tickets or shares or video lottery machine games in
23       accordance with marketing plans developed by the Kansas lottery. In the
24       selection of lottery retailers, the executive director shall consider factors
25       such as financial responsibility, security of the applicant's place of business
26       or activity, accessibility of the applicant's place of business or activity,
27       integrity, reputation, volume of expected sales and such other factors as
28       the executive director may deem appropriate. The executive director may
29       select the state fair board as a lottery retailer to sell lottery tickets or
30       shares. If selected as a lottery retailer, the state fair board shall be au-
31       thorized to sell lottery tickets or shares or place video lottery machines
32       only on the state fairgrounds and only during the time of the annual state
33       fair. Other persons lawfully engaged in nongovernmental business on
34       state property may be selected as lottery retailers.
35             (b) The executive director may charge an application fee to persons
36       applying to become lottery retailers. The application fee for video lottery
37       retailers shall be $50 for each machine to be placed on the premises. The
38       application fee for all other lottery retailers shall be established by rules
39       and regulations of the commission. All moneys from fees collected pur-
40       suant to this subsection shall be deposited in the state treasury and cred-
41       ited to the lottery operating fund.
42             (c) All lottery retailer contracts awarded by the Kansas lottery under
43       this act shall be renewable annually after issuance unless sooner canceled

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  1       or terminated.
  2             (d) No lottery retailer contract awarded under this act shall be trans-
  3       ferred or assignable.
  4             (e) Each lottery retailer shall be issued a lottery retailer certificate
  5       which shall be conspicuously displayed at the place for each location
  6       where the lottery retailer is authorized to sell lottery tickets or shares. or
  7       video lottery machine games. The certificate shall be displayed conspic-
  8       uously at such location. The commission shall establish by rules and reg-
  9       ulations an annual fee for each certificate issued to a video lottery retailer,
10       which fee shall not exceed $500.
11             (f) Lottery tickets or shares shall only be sold only by the lottery
12       retailer at the location stated on the lottery retailer certificate. Video lot-
13       tery machine games shall be placed only by the video lottery retailer at
14       the location stated on the video lottery retailer certificate.
15             (g) To be selected as a lottery retailer or a video lottery machine
16       vendor, a natural person acting as a sole proprietor must shall:
17             (1) Be at least 18 years of age;
18             (2) have sufficient financial resources to support the activities re-
19       quired to sell lottery tickets or shares or video lottery machine games;
20             (3) be current in payment of all taxes, interest and penalties owed
21       to any taxing subdivision where the lottery retailer will sell lottery tickets
22       or shares or video lottery machine games;
23             (4) be current in filing all applicable tax returns and in payment of
24       all taxes, interest and penalties owed to the state of Kansas, excluding
25       items under formal appeal pursuant to applicable statutes; and
26             (5) not be engaged exclusively in the sale of lottery tickets and shares
27       or video lottery machine games.
28             (h) No natural person shall be selected as a lottery retailer or a video
29       lottery machine vendor who:
30             (1) Has been convicted of a felony in this or any other jurisdiction,
31       unless at least 10 years have passed since satisfactory completion of the
32       sentence or probation imposed by the court for each such felony;
33             (2) has been convicted of an illegal gambling activity in this or any
34       other jurisdiction;
35             (3) has been found to have violated the provisions of this act or any
36       rule and regulation adopted hereunder pursuant thereto;
37             (4) is a another vendor or an employee or agent of any other vendor
38       doing business with the Kansas lottery;
39             (5) resides in the same household of an employee of the Kansas
40       lottery or of a member of the commission; or
41             (6) has made a statement of material fact to the Kansas lottery, know-
42       ing such statement to be false.
43             (i) For a partnership to be selected as a lottery retailer or a video

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  1       lottery machine vendor, the partnership must shall meet the require-
  2       ments of subsections (g)(2), (g)(3), (g)(4) and (g)(5) and each partner must
  3       shall meet the requirements of subsections (g)(1), (g)(3), (g)(4) and (h)(1)
  4       through (h)(6).
  5             (j) For a corporation to be selected as a lottery retailer or a video
  6       lottery machine vendor, the corporation must shall meet the require-
  7       ments of subsections (g)(2), (g)(3), (g)(4) and (g)(5) and each officer or
  8       director and each stockholder who owns 5% or more of the stock of such
  9       corporation must or of any parent or subsidiary corporation shall meet
10       the requirements of subsections (g)(3), (g)(4) and (h)(1) through (h)(6).
11             (k) For an unincorporated association to be selected as a lottery
12       retailer or a video lottery machine vendor, the association must shall meet
13       the requirements of subsections (g)(2), (g)(3), (g)(4) and (g)(5) and each
14       officer or director must shall meet the requirements of subsections (g)(1),
15       (g)(3), (g)(4) and (h)(1) through (h)(6).
16             (l) For a limited liability company to be selected as a video lottery
17       machine vendor, the company shall meet the requirements of subsections
18       (g)(2), (g)(3), (g)(4) and (g)(5) and each member having a 5% or more
19       interest in the company, or any parent or subsidiary of such company
20       shall meet the requirements of subsections (g)(3), (g)(4) and (h)(1) through
21       (h)(6).
22             (l) (m) The executive director may terminate the certificate of any
23       lottery retailer or a video lottery machine vendor who fails to meet any
24       of the applicable qualifying standards for selection as a retailer or vendor
25       provided in this section or on the grounds for termination provided in
26       the contract pursuant to rules and regulations adopted by the commission.
27             (m) (n) If a lottery retailer's rental payments for the business prem-
28       ises are contractually computed, in whole or in part, on the basis of a
29       percentage of retail sales, and such computation of retail sales is not ex-
30       plicitly defined to include sale of lottery tickets or shares in a state-op-
31       erated lottery or sales of video lottery machine games, the compensation
32       received by the lottery retailer from the Kansas lottery, other than re-
33       imbursement of prizes paid by the lottery retailer, shall be considered the
34       amount of the retail sale for purposes of computing the rental payment.
35             (n) For a limited liability company to be selected as a video lottery
36       machine vendor, the company must meet the requirements of subsections
37       (g)(2), (g)(3), (g)(4) and (g)(5) and each member having a 5% or more
38       interest in the company, or any parent or subsidiary of such company
39       must meet the requirements of subsections (g)(3), (g)(4) and (h)(1)
40       through (h)(6).
41             (o) Each person entering a contract with the Kansas lottery as a video
42       lottery machine vendor or video lottery retailer shall submit to a back-
43       ground investigation, including: (1) Each partner of a partnership; (2)

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  1       each officer and director of a corporation or of a parent or subsidiary
  2       corporation; (3) each stockholder owning 5% or more of the stock of a
  3       corporation or of a parent or subsidiary corporation; (4) each officer and
  4       director of an unincorporated association; and (5) each member having a
  5       5% or more ownership interest in a limited liability company. The com-
  6       mission may adopt rules and regulations concerning the nature and extent
  7       of background investigations required by this subsection.
  8             (p) In addition to the requirements of subsections (a) through (o):
  9             (1) A natural person shall not receive a certificate as a video lottery
10       machine vendor unless such person is a resident of this state;
11             (2) a partnership shall not receive a certificate as a video lottery
12       machine vendor unless each partner is a resident of this state;
13             (3) a corporation shall not receive a certificate as a video lottery
14       vendor unless such a corporation is a Kansas corporation; and
15             (4) an unincorporated association shall not receive a certificate as a
16       video lottery machine vendor unless each officer or director is a resident
17       of this state.
18             Sec.  13. K.S.A. 1998 Supp. 74-8710 is hereby amended to read as
19       follows: 74-8710. (a) The commission, upon the recommendation of the
20       executive director, shall adopt rules and regulations governing the estab-
21       lishment and operation of a state lottery as necessary to carry out the
22       purposes of this act. Temporary rules and regulations may be adopted by
23       the commission without being subject to the provisions and requirements
24       of K.S.A. 77-415 through 77-438, and amendments thereto, but shall be
25       subject to approval by the attorney general as to legality and shall be filed
26       with the secretary of state and published in the Kansas register. Tem-
27       porary and permanent rules and regulations may include but shall not be
28       limited to:
29             (1) Subject to the provisions of subsection (b), the types of lottery
30       games to be conducted, including but not limited to instant lottery, on-
31       line and traditional games, but not including games on and video lottery
32       machines machine games.
33             (2) The manner of selecting the winning tickets or shares, except
34       that, if a lottery game utilizes a drawing of winning numbers, a drawing
35       among entries or a drawing among finalists, such drawings shall always
36       be open to the public and shall be recorded on both video and audio tape.
37             (3) The manner of payment of prizes to the holders of winning tickets
38       or shares and winners of video lottery machine games.
39             (4) The frequency of the drawings or selections of winning tickets
40       or shares.
41             (5) The type or types of locations at which tickets or shares may be
42       sold or at which video lottery machines may be placed.
43             (6) The method or methods to be used in selling tickets or shares or

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  1       video lottery machine games.
  2             (7) Additional qualifications for the selection of lottery retailers and
  3       the amount of application fees to be paid by each.
  4             (8) The amount and method of compensation to be paid to lottery
  5       retailers, including special bonuses and incentives.
  6             (9) Deadlines for claims for prizes by winners of each lottery game
  7       or video lottery machine game.
  8             (10) Provisions for confidentiality of information submitted by ven-
  9       dors pursuant to K.S.A. 74-8705, and amendments thereto.
10             (11) Information required to be submitted by vendors, in addition
11       to that required by K.S.A. 74-8705, and amendments thereto.
12             (12) The major procurement contracts or portions thereof to be
13       awarded to minority business enterprises pursuant to subsection (a) of
14       K.S.A. 74-8705, and amendments thereto, and procedures for the award
15       thereof.
16             (13) Provisions to prevent direct and indirect payment by manufac-
17       turers, distributors or operators to video lottery retailers or shareholders
18       and owners of video lottery retailers, other than payments expressly per-
19       mitted by contract.
20             (14) Provisions to prohibit lottery retailers from holding themselves
21       out to the public as gambling establishments, casinos or other terms sug-
22       gesting any form of lottery or gambling.
23             (b) No new lottery game shall commence operation after the effec-
24       tive date of this act unless first approved by the governor or, in the gov-
25       ernor's absence or disability, the lieutenant governor.
26             Sec.  14. K.S.A. 74-8711 is hereby amended to read as follows: 74-
27       8711. (a) There is hereby established in the state treasury the lottery
28       operating fund.
29             (b) The executive director shall remit at least weekly to the state
30       treasurer all moneys collected from the sale of lottery tickets and shares
31       and video lottery machine games and any other moneys received by or
32       on behalf of the Kansas lottery. Upon receipt of any such remittance, the
33       state treasurer shall deposit the entire amount thereof in the state treasury
34       and credit it to the lottery operating fund. Moneys credited to the fund
35       shall be expended or transferred only as provided by this act. Expendi-
36       tures from such fund shall be made in accordance with appropriations
37       acts upon warrants of the director of accounts and reports issued pursuant
38       to vouchers approved by the executive director or by a person designated
39       by the executive director.
40             (c) Moneys in the lottery operating fund shall be used for:
41             (1) The payment of expenses of the lottery, which shall include all
42       costs incurred in the operation and administration of the Kansas lottery;
43       all costs resulting from contracts entered into for the purchase or lease

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  1       of goods and services needed for operation of the lottery, including but
  2       not limited to equipment supplies, materials, tickets, independent studies
  3       and surveys, data transmission, advertising, printing, promotion, incen-
  4       tives, public relations, communications, and distribution of tickets and
  5       shares and video lottery machines; and reimbursement of costs of facilities
  6       and services provided by other state agencies;
  7             (2) the payment of compensation to lottery retailers;
  8             (3) transfers of moneys to the lottery prize payment fund pursuant
  9       to K.S.A. 74-8712, and amendments thereto;
10             (4) transfers to the state general fund pursuant to K.S.A. 74-8713,
11       and amendments thereto;
12             (5) transfers to the state gaming revenues fund pursuant to subsec-
13       tion (d) of this section and as otherwise provided by law; and
14             (6) the transfers to the county reappraisal fund as prescribed by law.
15             (d) The director of accounts and reports shall transfer moneys in the
16       lottery operating fund to the state gaming revenues fund created by
17       K.S.A. 79-4801, and amendments thereto, on or before the 15th day of
18       each month, for fiscal years commencing on or after July 1, 1988. The
19       transfer shall be in an amount certified monthly by the executive director
20       and determined as follows, whichever is greater:
21             (1) In an amount equal to the moneys in the lottery operating fund
22       in excess of those needed for the purposes described in subsections (c)(1)
23       through (c)(4); or
24             (2) an amount equal to not less than 30% of total monthly revenues
25       from the sales of lottery tickets and shares less estimated returned tickets
26       and video lottery machine income.
27             Sec.  15. K.S.A. 74-8712 is hereby amended to read as follows: 74-
28       8712. (a) There is hereby established in the state treasury the lottery prize
29       payment fund.
30             (b) The executive director shall certify periodically to the director of
31       accounts and reports such amounts as the executive director determines
32       necessary to pay prizes to the holders of valid winning lottery tickets or
33       shares and such amounts as the executive director determines necessary
34       to pay prizes to winners of video lottery machine games, other than prizes
35       paid by video lottery retailers in the ordinary course of business as a video
36       lottery retailer. Upon receipt of such certification, the director of accounts
37       and reports shall promptly transfer the amount certified from the lottery
38       operating fund to the lottery prize payment fund. Moneys credited to the
39       fund shall be expended only for the payment of prizes to the holders of
40       valid winning lottery tickets or shares or winners of video lottery machine
41       games, for the reimbursement of retailers who have paid holders of win-
42       ning tickets or shares or winners of video lottery machine games or as
43       otherwise authorized by law. Prior to making any expenditure for reim-

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  1       bursement of a retailer or payment of a prize of $50 or more, the executive
  2       director shall cause all proposed prize payments to be matched against
  3       the state debtor files maintained by the director of accounts and reports
  4       and shall certify and pay or deliver any matched prize or the cash amount
  5       thereof to the director of accounts and reports for setoff as prescribed
  6       under K.S.A. 75-6201 et seq. and amendments thereto. Expenditures
  7       from such fund shall be made in accordance with appropriations acts upon
  8       warrants of the director of accounts and reports, or a person designated
  9       by the director of accounts and reports pursuant to K.S.A. 75-3732 and
10       amendments thereto, issued pursuant to vouchers approved by the ex-
11       ecutive director, or a person designated by the executive director.
12             Sec.  16. K.S.A. 1998 Supp. 74-8717 is hereby amended to read as
13       follows: 74-8717. (a) It is unlawful to:
14             (1) Falsely make, alter, forge, pass or counterfeit, with intent to de-
15       fraud, a lottery ticket or share, or receipt for the purchase thereof, issued
16       or purported to have been issued by the Kansas lottery under this act.;
17             (2) tamper with a video lottery machine with intent to interfere with
18       the proper operation of such machine;
19             (3) intentionally manipulate the outcome, payoff or operation of a
20       video lottery machine by physical tampering or any other means; or
21             (4) possess or control, or permit to be kept in a person's possession
22       or control, a video lottery machine or device identified as a gambling
23       device pursuant to K.S.A. 21-4302 and amendments thereto, but not in-
24       cluding a video lottery machine certified by the Kansas lottery.
25             (b) Violation of this section is a severity level 8, nonperson felony.
26             Sec.  17. K.S.A. 1998 Supp. 74-8718 is hereby amended to read as
27       follows: 74-8718. (a) It is unlawful for:
28             (1) Any person to sell a lottery ticket or share or a video lottery
29       machine game at a price other than that fixed by rules and regulations
30       adopted pursuant to this act;
31             (2) any person other than the Kansas lottery or a lottery retailer
32       authorized by the Kansas lottery to sell or resell any lottery ticket or share;
33       or
34             (3) any person to sell a lottery ticket or share to any person, knowing
35       such person to be under 18 years of age.;
36             (4) any person other than the Kansas lottery to have a video lottery
37       machine on premises owned by or under the control of such person unless
38       such person is the Kansas lottery; a video lottery machine vendor; a fi-
39       nancial institution or its agent, or a video lottery machine leasing company
40       or its agent, who has taken possession and advised the executive director
41       of its possession; or a video lottery retailer operating with a certificate
42       from the Kansas lottery;
43             (5) any video lottery retailer or any employee of such retailer, to

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  1       permit an individual under 18 years of age to play a video lottery machine
  2       game, knowing such individual to be under 18 years of age; or
  3             (6) any person who owns or controls premises where a video lottery
  4       machine is placed, or any employee of such person, to permit an individual
  5       under 18 years of age to be in an area where video lottery machines are
  6       located knowing such individual to be under 18 years of age.
  7             (b)  (1) Violation of this section is a class A nonperson misdemeanor
  8       upon conviction for a first offense; and
  9             (2) violation of this section is a severity level 9, nonperson felony
10       upon conviction for a second or subsequent offense.
11             Sec.  18. K.S.A. 1998 Supp. 74-8719 is hereby amended to read as
12       follows: 74-8719. (a) It is unlawful for any person to purchase a lottery
13       ticket or share or play a video lottery machine game, or to share in the
14       lottery winnings of a person, knowing that such person is:
15             (1) The executive director, a member of the commission or an em-
16       ployee of the Kansas lottery;
17             (2) an officer or employee of a vendor contracting with the Kansas
18       lottery to supply gaming equipment or tickets to the Kansas lottery for
19       use in the operation of any lottery conducted pursuant to this act;
20             (3) a spouse, child, stepchild, brother, stepbrother, sister, stepsister,
21       parent or stepparent of a person described by subsection (a)(1) or (2); or
22             (4) a person who resides in the same household as any person de-
23       scribed by subsection (a)(1) or (2).
24             (b) It is unlawful for any person to play a video lottery machine game
25       at any time when the licensed establishment where the machine is located
26       is not open to the public.
27             (c) It is unlawful for any person under 18 years of age to:
28             (1) Play a video lottery machine game; or
29             (2) be in an area where video lottery machines are located.
30             (d)  (1) Violation of subsection (a) is a class A nonperson misde-
31       meanor upon conviction for a first offense.
32             (2) Violation of subsection (a) is a severity level 9, nonperson felony
33       upon conviction for a second or subsequent offense. Violation of subsec-
34       tion (b) or (c) by a person 18 or more years of age is a class A nonperson
35       misdemeanor. Violation of subsection (b) or (c) by a person less than 18
36       years of age shall render the person subject to adjudication as a juvenile
37       offender under the Kansas juvenile justice code.
38             (c) (e) Notwithstanding subsection (a), the executive director may
39       authorize in writing any employee of the Kansas lottery and any employee
40       of a lottery vendor to purchase a lottery ticket or play a video lottery
41       machine game for the purposes of verifying the proper operation of the
42       state lottery with respect to security, systems operation and lottery retailer
43       contract compliance. Any prize awarded as a result of such ticket or share

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  1       purchase or playing such game shall become the property of the Kansas
  2       lottery and be added to the prize pools of subsequent lottery games.
  3             (d) (f) Certain classes of persons who, because of the unique nature
  4       of the supplies or services they provide for use directly in the operation
  5       of a lottery pursuant to this act, may be prohibited, in accordance with
  6       rules and regulations adopted by the commission, from participating in
  7       any lottery in which such supplies or services are used.
  8             (e) (g) Except as provided by subsection (b) and (c), nothing in this
  9       section shall prohibit lottery retailers or their employees from purchasing
10       lottery tickets and or shares or playing video lottery machine games or
11       from being paid a prize of for a winning ticket or share or game.
12             (f) (h) Each person who purchases a lottery ticket or share or plays
13       a video lottery machine game thereby agrees to be bound by rules and
14       regulations adopted by the commission and by the provisions of this act.
15             Sec.  19. K.S.A. 74-8720 is hereby amended to read as follows: 74-
16       8720. (a) As nearly as practical, an amount equal to not less than 45% of
17       the total sales of lottery tickets or shares, computed on an annual basis,
18       shall be allocated for payment of lottery prizes for winning tickets or
19       shares.
20             (b) The prize to be paid or awarded for each winning ticket or share
21       or game shall be paid to one natural person who is adjudged by the ex-
22       ecutive director, the director's designee or the retailer paying the prize,
23       to be the holder of such winning ticket or share or the winner of the game,
24       or the person designated in writing by the holder of the winning ticket
25       or share such holder or winner on a form satisfactory to the executive
26       director, except that the prize of a deceased holder or winner shall be
27       paid to the duly appointed representative of the estate of such holder or
28       winner or to such other person or persons appearing to be legally entitled
29       thereto.
30             (c) The executive director shall award the designated prize to the
31       holder of the ticket or share or the winner of the game upon the validation
32       of a claim or confirmation of a winning share. The executive director shall
33       have the authority to make payment for prizes by any means deemed
34       appropriate upon the validation of winning tickets or shares or games.
35             (d) The right of a person to a prize drawn or awarded is not
36       assignable.
37             (e) All prizes awarded shall be taxed as Kansas source income and
38       shall be subject to all state and federal income tax laws and rules and
39       regulations. State income taxes shall be withheld from prizes paid when-
40       ever federal income taxes are required to be withheld under current fed-
41       eral law.
42             (f) Unclaimed prize money not payable directly by lottery retailers
43       shall be retained for the period established by rules and regulations and

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  1       if no claim is made within such period, then such unclaimed prize money
  2       shall be added to the prize pools of subsequent lottery games.
  3             (g) The state of Kansas, members of the commission and employees
  4       of the Kansas lottery shall be discharged of all further liability upon pay-
  5       ment of a prize pursuant to this section.
  6             (h) The Kansas lottery shall not publicly disclose the identity of any
  7       person awarded a prize except upon written authorization of such person.
  8             Sec.  20. K.S.A. 74-8721 is hereby amended to read as follows: 74-
  9       8721. All sales of lottery tickets and shares and video lottery machine
10       games shall be exempt from retailers' sales taxes imposed pursuant to
11       K.S.A. 12-187 et seq., and amendments thereto, and from the tax imposed
12       by the Kansas retailers' sales tax act. 
13       Sec.  21. K.S.A. 41-308, 74-8701, 74-8702, 74-8704, 74-8708, 74-
14       8711, 74-8712, 74-8720 and 74-8721 and K.S.A. 1998 Supp. 21-4302, 38-
15       1602, 38-1602a, 74-8710, 74-8717, 74-8718 and 74-8719 are hereby
16       repealed.
17         Sec.  22. This act shall take effect and be in force from and after its
18       publication in the statute book.