16 TAC §401.308

The Texas Lottery Commission proposes amendments to 16 TAC §401.308, relating to the "Cash 5" on-line game. The proposed amendments provide for a matrix change from 5/39 to 5/37. The proposed amendments also add a guaranteed prize amount of $2 for a match on the new 2-of-5 prize category. The purpose of these changes is to make the game easier to win overall and to provide players with more chances to win. Currently, the overall odds of winning are 1:100 and the proposed new overall odds of winning will be 1:8. The current game statistically generates approximately 5,000 to 6,000 winners per draw. The proposed changes will statistically generate approximately 54,000 winners per draw. The proposed changes also increase the number of draws a week from four to six. The purpose of the draws per week increase is to increase sales and also revenue to the State of Texas. The proposed amendments also eliminate language that indicates unclaimed prizes go to the prize reserve fund. Pursuant to Government Code, §466.4075, unclaimed prize money shall be deposited to the credit of the Texas Department of Health state-owned multicategorical teaching hospital account or the tertiary care facility account as prescribed in §466.4075. Another proposed change is to correct a typographical error.

The preamble makes the proposed changes sound very attractive and some of them are, however, the TLC fails to mention the new prize allocations. I explain in depth the new "(2) Prize Pool" below.

Bart Sanchez, Financial Administration Director, has determined for each year of the first five years the section is in effect there will be the following foreseeable additional fiscal implications for state or local government as a result of enforcing or administering the rule. FY02, $(956,708); FY03, $4,593,005; FY04, $4,603,151; FY05, $4,603,151; and, FY06, $4,603,151. The negative impact on revenue for FY02 is due to the game being launched six weeks before the end of the fiscal year. There is no anticipated impact on small businesses, micro businesses or local or state employment as a result of implementing the section.

Robert Tirloni, On-line Products Manager, Marketing Division, has determined that each of the first five years the section as proposed is in effect, the public benefit anticipated as a result of the proposed amendments is to offer additional draws to lottery players. An additional public benefit anticipated is additional sales and revenue. Retailers will benefit because they will be receiving additional monies from the additional Cash 5 sales. The State of Texas will receive additional revenue from the additional Cash 5 sales. The players will benefit from the new matrix and the new 2-of-5 prize category because the new overall odds will be 1:8 instead of 1:100 and the new prize category has a guaranteed $2 prize amount.

Written comments on the proposed amendment may be submitted to Kimberly L. Kiplin, General Counsel, Texas Lottery Commission, P.O. Box 16630, Austin, Texas 78761-6630. The Texas Lottery Commission will also conduct a hearing to receive comment on the proposed amendments on April 4, 2002 at 9:00 a.m. at the Texas Department of Housing and Community Affairs, 507 Sabine Street, 4th Floor, Board Room, Austin, Texas.

The amendments are proposed under Government Code, §466.015 which authorizes the Commission to adopt all rules necessary to administer the State Lottery Act and to adopt rules governing the establishment and operation of the lottery, and under Government Code, §467.102 which authorizes the Commission to adopt rules for the enforcement and administration of the laws under the Commission's jurisdiction.

The amendments implement Government Code, Chapter 466.

(a) Cash 5. A Texas Lottery on-line game to be known as "Cash 5" is authorized to be conducted by the executive director under the following rules and under such further instructions and directives as the executive director may issue in furtherance thereof. If a conflict arises between this rule and §401.304 of this title (relating to On-Line Game Rules (General)), this section shall have precedence.

(b) Definitions. In addition to the definitions provided in §401.301 of this title (relating to General Definitions), and unless the context in this rule otherwise requires, the following definitions apply.

(1) Advance Play--A player may purchase a Cash 5 ticket for any of the five [three] Cash 5 drawings immediately following the current drawing. Example: On Monday, before the drawing, a Cash 5 ticket can be purchased for Tuesday, Wednesday, Thursday, [ or] Friday, or Saturday drawings.

6 draws per week will result in smaller jackpots and smaller prizes as many players will simply spread the same dollars over the 6 draws. Some players who play special numbers may quit altogether because they can't afford to play all draws. I oppose this change.

(2) Multi draw--A player may purchase a Cash 5 ticket for up to 12 [20] consecutive drawings beginning with the current draw.

(3) Number--Any play integer from one through 37 [39] inclusive.

(4) Play--The five numbers selected on each play board and printed on the ticket.

(5) Play board--A field of the 37 [39] numbers found on the playslip.

Great! Lower the number of balls and improve our odds! I'm for this change.

(6) Playslip--An optically readable card issued by the Texas Lottery used by players of Cash 5 to select plays. There shall be five play boards on each playslip identified as [at] A, B, C, D, and E. A playslip has no pecuniary value and shall not constitute evidence of ticket purchase or of numbers selected.

(c) Price of ticket. The price of each Cash 5 play shall be $1.00. A player may purchase up to five plays on one ticket. Multiple draws are available for up to 12 [20] consecutive draws beginning with the current draw. A player may purchase a Cash 5 ticket for advance play.

(d) Play for Cash 5.

(1) Type of play. A Cash 5 player must select five numbers in each play or allow number selection by a random number generator operated by the computer, referred to as Quick Pick. A winning play is achieved only when two, three, four, or five of the numbers selected by the player match, in any order, the five winning numbers drawn by the lottery.

(2) Method of play. The player may use playslips to make number selections. The on-line terminal will read the playslip and issue ticket(s) with corresponding plays. If a playslip is not available, the on-line retailer may enter the selected numbers via the keyboard. However, the retailer shall not accept telephone or mail-in requests to manually enter selected numbers. A [If offered by the lottery, a] player may leave all play selections to a random number generator operated by the computer, commonly referred to as Quick Pick.

(3) One prize per play. The holder of a winning ticket may win only one prize per play in connection with the winning number drawn and shall be entitled only to the highest prize category won by those numbers.

(e) Prizes for Cash 5.

(1) Prize amounts. The first, second, and third prize amounts, for each drawing, paid to each Cash 5 player who selects a matching combination of numbers will vary due to a pari-mutuel calculation. The calculation of a prize shall be rounded down so that prizes can be paid in multiples of whole dollars. Each prize category breakage will carry forward to the next drawing for each respective prize category. The prize amounts are based on the total amount in the prize category for that Cash 5 drawing distributed equally over the number of matching combinations in each prize category. The fourth prize is a guaranteed $2 prize.

(2) Prize pool. The prize pool for Cash 5 prizes shall be a minimum of 50% of Cash 5 sales. This pool will be allocated into two components. The first component consists of the funds necessary to pay all the fourth prize category $2 prize winners. The first component is obtained by an allocation from the Cash 5 prize pool to the fourth prize category so that all of the fourth prize category shares will each receive the guaranteed $2 prize. The second component contains the remaining prize pool funds after subtraction of the first component allocation and will be referred to as the "residual prize pool". The residual prize pool will be allocated to the first, second, and third prize categories according to the percentages applicable for each prize category.

Notice that most of the language under "(2) Prize Pool" is all new. So that you will understand the true impact of the $2 prize and how it effects the other "pari-mutuel" prizes, here is an easy example using an actual drawing to show you what this means.

On March 14, 2002, Cash 5 sales were $605,801. The TLC gets 50% right off the top leaving the balance in the prize pool (the players share) - $302,900.50.

Based on the odds that 1 (one) in every 9 tickets should match 2 of 5 numbers and will be a $2 winner (605,801 tickets divided by 9 equals 67,311 winning $2 tickets.) 67,311 winning tickets times $2 = $134,622 that is needed for the $2 winners. The prize pool was $302,900.50 so now we subtract $134,622 from the prize pool so we can pay the "guaranteed" prizes. This leaves $168,278.50 in the "residual prize pool." This is the amount of money that will be left to divide among the 3 of 5, 4 of 5 and 5 of 5 winners.

Based on the odds again, one (1) in every 88 tickets should be a 3 of 5 winner. 605,801 tickets divided by 88 equals 6884 winning tickets. In this case, the 3 of 5 winners split 41.77% of the "residual prize pool" which is $168,278.50. So we take 41.77% of $168,278.50 = $70,290. This is the amount the 6884 winners split. $70,290 divided by 6884 = $10 each. (FYI - For the actual drawing on March 14, 6637 players matched 3 of 5 numbers and won $23)

Still based on the odds, one (1) in every 2724 tickets should be a 4 of 5 winner. 605,801 tickets divided by 2724 equals 222 winning tickets. In this case, the 4 of 5 winners split 18.08% of the "residual prize pool" which is still $168,278.50. So we take 18.08% of $168,278.50 = $30,424 and the 222 winners split this amount. $30,424 divided by 222 = $137 each. (FYI - For the actual drawing on March 14, 195 players matched 4 of 5 numbers and won $466)

Finally, we have the 5 of 5 winners who split 40.15% of the "residual prize pool." The "residual prize" pool is still $168,278.50. So we take 40.15% of $168,278.50 = $67,563 and the 5 of 5 winners split the $67,563. (For the actual drawing on March 14, the player who matched 5 of 5 numbers won $60,580)

Notice that 40.15% + 18.08% + 41.77% equals 100%. This is "pari-mutuel" meaning each prize category splits a set percentage of sales. In this case, the amount they split is determined after the TLC takes what they need to pay the $2 prizes.

Now tell me, why hasn't the TLC made prize amounts clear to the players so players can comment intelligently? Will these prizes entice you to play more or less?

I oppose the new allocations. Further, I am extremely angry to see that the TLC "butters up" a rule change and does not disclose all the facts about the rule change. And I'd call this change a MAJOR change.

(3) Prize categories.

(A) First [Top] prize--The prize amount shall be calculated by dividing the prize category contributions by the number of shares for the prize category. A share is the matching combination, in one play, of all five numbers of the five numbers drawn (in any order). [ The total prize category contribution will include the following.] Each first [top] prize will be paid in one lump sum payment. The five of five first [top] prize of $600 to $999,999 must be claimed at a Lottery claim center. Five of five prizes of $1,000,000 or larger must be claimed at the Lottery Commission headquarters in Austin. The total prize category contribution for a drawing will include the following.

(i) The direct prize category contribution shall be 40.15% [20%] of the residual prize pool for the drawing.

Notice all of the prize contributions say "shall."

(ii) If the first [top] prize is not won by a Cash 5 player from the [a] drawing, the direct prize category contribution will roll into the second prize category.

(B) Second prize--The prize amount shall be calculated by dividing the prize category contributions by the number of shares for the prize category. A share is the matching combination, in one play, of any four of the five numbers drawn (in any order). The total prize category contribution will include the following.

(i) The direct prize category contribution shall be 18.08% [30%] of the residual prize pool for the drawing.

(ii) If the second prize is not won by a Cash 5 player from the [a] drawing, the direct prize category contribution will roll into the third prize category.

(C) Third prize--The prize amount shall be calculated by dividing the prize category contributions by the number of shares for the prize category. A share is the matching combination, in one play, of any three of the five numbers drawn (in any order). The total prize category contribution will include the following. [The direct prize category contribution shall be 50% of the prize pool for the drawing.]

(i) The direct prize category contribution shall be 41.77% of the residual prize pool for the drawing.

(ii) If the third prize is not won by a Cash 5 player from the drawing, the direct prize category contribution will carry forward to the prize pool for the next drawing.

(D) Fourth prize--The prize amount is a guaranteed $2.

Offering this $2 prize results in much smaller prizes for those who match 3, 4 and 5 numbers. No one plays Cash 5 to win $2 - this will do more harm than good in the long run. I oppose this change for that reason.

(4) Unclaimed Prize Fund. In the event any player who has a valid winning ticket does not claim the prize within 180 days after the drawing in which the prize was won, the prize amount shall be deposited to the credit of the Texas Department of Health state-owned multicategorical teaching hospital account or the tertiary care facility account as prescribed in Government Code, §466.4075 [added to the prize reserve and all rights to the prize shall terminate].

(f) Ticket purchases.

(1) Cash 5 tickets may be purchased only at a licensed location from a lottery retailer authorized by the lottery director to sell on-line tickets.

(2) Cash 5 tickets shall show the player's selection of numbers, or Quick Pick (QP) numbers, boards played, drawing date, and serial [validation and reference] numbers.

(3) It shall be the exclusive responsibility of the player to verify the accuracy of the player's selection(s) and other data printed on the ticket. A ticket is a bearer instrument until signed.

(4) Except as provided in subsection (d)(2) of this section, Cash 5 tickets must be purchased using official Cash 5 playslips. Playslips which have been mechanically completed are not valid. Cash 5 tickets must be printed on official Texas lottery paper stock and purchased at a licensed location through an authorized Texas lottery retailer's on-line terminal.

(g) Drawings.

(1)The Cash 5 drawings shall be held each week on Monday, Tuesday, Wednesday, Thursday, [and] Friday, and Saturday evenings at 9:59 p.m. Central Time except that the drawing schedule may be changed by the executive director, if necessary.

(2) Cash 5 tickets will not be sold during the draw break for the Cash 5 game on Monday, Tuesday, Wednesday, Thursday, [ and] Friday, and Saturday nights.

(3) The drawings will be conducted by lottery officials.

(4) Each drawing shall determine, at random, five winning numbers in accordance with Cash 5 drawing procedures. Any numbers drawn are not declared winning numbers until the drawing is certified by the lottery in accordance with the drawing procedures. The winning numbers shall be used in determining all Cash 5 winners for that drawing.

(5) Each drawing shall be witnessed by an independent certified public accountant. All drawing equipment used shall be examined by at least one lottery security representative, the drawing supervisor, and the independent certified public accountant immediately prior to a drawing and immediately after the drawing.

(6) A drawing will not be invalidated based on the financial liability of the lottery.

(h) Announcement of incentive or bonus program. The executive director shall announce each incentive or bonus program prior to its commencement. The announcement shall specify the beginning and ending time, if applicable, of the incentive or bonus program and the value for the award.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 7, 2002
(But will not appear in the Texas Register until March 22, 2002)

TRD-200201417
Kimberly Kiplin
General Counsel
Texas Lottery Commission
Earliest possible date of adoption: April 21, 2002
For further information, please call: (512) 344-5113

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Also ...

Read the transcript from the March 6, 2002 Commissioners meeting.
See what the staff tells the Commissioners about the changes and notice
the TLC never mentioned to the Commissioners how the prize allocations
would be affected by adding the $2 prize. What's worse, the
Commissioners never inquired either. Click here.