Learn more about lottery bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
What Are Lottery Bonds?
Lottery bonds, also called lotto bonds, are hybrid surety bonds that function as both license and permit bonds and financial guarantee bonds. They protect the public against fraud and dishonest behavior by establishments that sell lottery tickets. They also protect the state Lottery Commission or other agency that administers the lottery programs the state participates in, including multi-state lotteries, and licenses ticket sellers.
Lottery bonds guarantee that lottery tickets will be sold and lottery machines will be operated in compliance with all applicable state rules and regulations, including keeping sufficient funds on hand to pay prizes under a specified dollar amount, maintaining lottery equipment and immediately reporting malfunctioning machines. Lottery bonds also guarantee that sellers will remit to the state all taxes due from the sale of lottery tickets.
Who Needs Them?
Businesses that want to become licensed sellers of lottery tickets or to operate lottery equipment must purchase a lottery bond and renew it periodically in order to keep their license. The state licensing agency, usually the Department of Revenue Lottery Commission or State Lottery Agency is the obligee. The person licensed to sell tickets or operate lottery equipment is the principal. The surety is the company issuing and guaranteeing the bond.
How Do They Work?
The obligee can file a claim against the bond if a seller fails to pay the required taxes on lottery ticket sales or otherwise violates the terms of the bond. The surety will verify and compensate the obligee for the financial loss resulting from the actions of the principal. The principal must then reimburse the surety for the amount paid out on the claim.
What Do They Cost?
The state licensing agency determines the total amount of the bond that an applicant must purchase for initial licensing or a license renewal.
The percentage of the total bond amount that must be paid as the premium for a lottery bond depends largely on the applicant’s credit and financial history and financial statements for the business. Applicants with the highest credit scores usually pay a premium of between 1% and 5% of the bond amount, while those with poor credit will pay a higher premium rate.
Use our convenient online system to apply for a lottery bond today.
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