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AN ACT concerning lotteries; providing for the operation of certain state-
  owned and operated lottery games at certain racetrack facilities; pro-
  viding for disposition of revenues from such games; prohibiting certain
  acts and providing penalties for violations; amending K.S.A. 74-8701,
  74-8702, 74-8704, 74-8706, 74-8711, 74-8716 and 74-8720 and K.S.A.
  1996 Supp. 74-8710, 74-8718, 74-8719 and 74-8810 and repealing the
  existing sections.
Be it enacted by the Legislature of the State of Kansas:
  Section 1.  K.S.A. 74-8701 is hereby amended to read as follows: 74-
8701. K.S.A. 74-8701 through 74-8721, and sections 3, 4 and 5, and
amendments thereto, shall be known as and may be cited as the Kansas
lottery act.
  Sec. 2.  K.S.A. 74-8702 is hereby amended to read as follows: 74-
8702. As used in this act, unless the context otherwise requires:
  (a)  ``Central computer'' means any computer equipment operated by
the lottery to which on-line lottery game equipment communicates for any
purpose described in rules and regulations of the commission.
  (a) (b)  ``Commission'' means the Kansas lottery commission.
  (c)  ``Disable'' means the process of executing a shutdown command
from the central computer which causes on-line equipment to cease func-
tioning.
  (b) (d)  ``Executive director'' means the executive director of the Kan-
sas lottery.
  (c) (e)  ``Gaming equipment'' means any electric, electronic or me-
chanical device or other equipment unique to the Kansas lottery used
directly in the operation of any lottery and in the determination of winners
pursuant to this act.
  (d) (f)  ``Kansas lottery'' means the state agency created by this act to
operate a lottery or lotteries pursuant to this act.
  (g)  ``Keno'' means a game in which a player selects up to 20 numbers
from a total of 80 numbers and a computer or other selection device
randomly selects up to 20 numbers from the same pool of 80 numbers.
Winners are determined by the correct matching of the numbers selected
by the player with the numbers randomly selected by the computer or
other selection device. If the player wins the game, as determined in ac-
cordance with the rules of game adopted by rules and regulations of the
commission, the player may be awarded game credits redeemable in cash.
  (e) (h)  ``Lottery retailer'' means any person with whom the Kansas
lottery has contracted to sell lottery tickets or shares, or both, to the
public.  ``Lottery retailer'' does not include a racetrack lottery retailer.
  (f) (i)  ``Lottery'' or ``state lottery'' means the lottery or lotteries op-
erated pursuant to this act.
  (g) (j) (1)  ``Major procurement'' means any gaming product or serv-
ice, including but not limited to gaming products and services related to
racetrack lottery games, facilities, advertising and promotional services,
annuity contracts, prize payment agreements, consulting services, equip-
ment, tickets and other products and services unique to the Kansas lot-
tery, but not including.
  (2)  ``Major procurement'' does not include materials, supplies, equip-
ment and services common to the ordinary operations of state agencies.
  (k)  ``Net income from racetrack lottery games'' means all revenue from
the sale of racetrack lottery tickets and shares less amounts paid by race-
track lottery retailers or by the lottery as prizes for racetrack lottery
games.
  (l)  ``Parimutuel on-line lottery game'' means any on-line lottery game
in which:
  (1)  The total money wagered by individuals playing the game utilizing
on-line equipment is placed in pools;
  (2)  the winners are paid prizes from such pools;
  (3)  the size and extent of the prizes are determined by the size and
extent of the pools; and
  (4)  the takeout for purses, taxes and the share of the racetrack lottery
retailer from each pool is not less than 5% nor more than 20%, as deter-
mined by the commission, of the total amount wagered in such pool and
is not affected by the outcome of the game.
  (m)  ``On-line equipment'' means any commission approved terminal,
or associated equipment, that is connected to a central computer for any
purpose described in rules and regulations of the commission, including
but not limited to security, monitoring, auditing and execution of acti-
vation and disable programs. On-line equipment may be equipped with
one or more video display monitors.
  (n)  ``On-line instant bingo'' means instant bingo, as defined by sub-
section (c), excluding subpart (4), of K.S.A. 79-4701 and amendments
thereto, utilizing on-line equipment.
  (o)  ``On-line lottery game'' means any lottery game conducted by util-
izing on-line equipment.
  (h) (p)  ``Person'' means any natural person, association, corporation
or partnership.
  (i) (q)  ``Prize'' means any prize paid directly by the Kansas lottery
pursuant to its rules and regulations.
  (r)  ``Racetrack facility'' means racetrack facility as defined by K.S.A.
74-8802 and amendments thereto.
  (s)  ``Racetrack licensee'' means : (1) A facility owner or facility man-
ager licensee, as defined by K.S.A. 74-8802 and amendments thereto; or
  (2) an organization licensee that owns a racetrack facility, as authorized
pursuant to the Kansas parimutuel racing act.
  (t)  ``Racetrack lottery game'' means any lottery game conducted by
the Kansas lottery at racetrack lottery retailer locations, including but not
limited to: (1) Call bingo, as defined by K.S.A. 79-4701 and amendments
thereto; (2) on-line instant bingo; (3) keno, utilizing on-line equipment;
and (4) any parimutuel on-line lottery game. ``Racetrack lottery game''
does not include any game played on a slot machine or video lottery
machine.
  (u)  ``Racetrack lottery retailer'' means a racetrack licensee with which
the executive director has entered into a contract pursuant to section 3.
  (v)  ``Racetrack lottery retailer locations'' are those locations where
racetrack lottery retailers are authorized to sell lottery tickets and sales
pursuant to a contract with the lottery.
  (w)  ``Racetrack organization licensee'' means an organization licensee
as defined by K.S.A. 74-8802 and amendments thereto.
  (x)  ``Returned ticket'' means any ticket that was transferred to a lot-
tery retailer or racetrack lottery retailer, was not sold by such retailer
and was returned to the Kansas lottery for refund by issuance of a credit
or otherwise.
  (j) (y)  ``Share'' means any intangible manifestation authorized by the
Kansas lottery to prove participation in a lottery game, including a race-
track lottery game.
  (z)  ``Slot machine'' means a mechanical, electromechanical or com-
puterized device: (1) Into which cash, tokens or other consideration is
placed and play is activated by a player; (2) which displays symbols in a
game of chance or skill, or plays or simulates the play of a game of chance
or skill; and (3) which determines whether the player has won or lost. If
the player is a winner, the device distributes the prize, or paper, tokens
or other tangible or intangible evidence of the prize.
  (aa)  ``Terminal'' means on-line equipment that is not activated by in-
sertion of cash, tokens or other consideration and that is used by lottery
retailers or racetrack lottery retailers, or their employees, to record sales
of lottery tickets for purposes of determining game winners, generate lot-
tery tickets or validate winning lottery tickets for customers.
  (k) (bb)  ``Ticket'' means any tangible evidence issued by the Kansas
lottery to prove participation in a lottery game, including a racetrack
lottery game.
  (l) (cc)  ``Vendor'' means any person who has entered into a major
procurement contract with the Kansas lottery.
  (m)  ``Returned ticket'' means any ticket which was transferred to a
lottery retailer, which was not sold by the lottery retailer and which was
returned to the Kansas lottery for refund by issuance of a credit or oth-
erwise.
  (n) (dd)  ``Video lottery machine'' means any electronic video game
machine that, upon insertion of cash, tokens or other consideration, is
available to play or simulate the play of a video game authorized by the
commission, including but not limited to bingo, poker, black jack and
keno, and which uses a video display and microprocessors and in which,
by chance, the player may receive free games or credits that can be re-
deemed for cash a prize or paper, tokens or other intangible evidence of
a prize.
  New Sec. 3.  (a) The executive director may enter into contracts with
racetrack licensees for the sale of racetrack lottery game tickets or shares
to the public, as provided by this act and rules and regulations adopted
pursuant to this act. Each such contract shall be subject to the approval
of the Kansas racing and gaming commission, based on a determination
by the Kansas racing and gaming commission that the contract is in the
best interest of the racing industry in Kansas. Each contract shall be
renewable annually and shall be conditioned on the racetrack lottery re-
tailer's remaining a facility owner licensee, facility manager licensee or
organization license under the Kansas parimutuel racing act during the
term of the contract. Such contracts shall not be subject to the provisions
of K.S.A. 75-3738 through 75-3744, and amendments thereto.
  (b)  Contracts entered into pursuant to this section shall include but
not be limited to:
  (1)  Provisions for the racetrack lottery retailer to pay all costs asso-
ciated with advertising and promotional services, consulting services,
equipment, tickets and other products or services for the operation of
racetrack lottery games;
  (2)  accounting procedures to determine the net income from race-
track lottery games, unclaimed prizes and credits;
  (3)  provisions requiring the racetrack lottery retailer to remit to the
Kansas lottery the net income from racetrack lottery games operated by
such retailer and procedures for remittance of such income;
  (4)  subject to the provisions of subsection (c), the times of operation
of racetrack lottery games, the locations of operation of racetrack lottery
games within the racetrack facility, and other matters relating to the op-
eration of racetrack lottery games;
  (5)  minimum requirements for a racetrack lottery retailer to provide
qualified oversight, security and supervision of the operation of racetrack
lottery games at a racetrack facility; and
  (6)  provisions for the racetrack lottery retailer to file a surety bond
or other security with the executive director, based on the expected vol-
ume of such retailer's sales of lottery tickets or shares and conditioned
on the retailer's performance of such retailer's obligations pursuant to the
contract, the provisions of this act and rules and regulations adopted pur-
suant to this act.
  (c)  Days of operation of racetrack lottery games shall not be restricted
except as follows:
  (1)  No racetrack lottery game shall be operated at a racetrack facility,
other than at a fair association location, except: (A) On days when live
races are conducted or simulcast races are displayed at the racetrack fa-
cility; and (B) at times when, within the preceding 72 hours, live horse
or dog racing has been conducted at the racetrack facility, except during
those extended periods in which live races are not scheduled to allow for
track maintenance, emergencies declared pursuant to subsection (b)(4)
of K.S.A. 74-8836 and amendments thereto or similar circumstances.
  (2)  No racetrack lottery game shall be operated at a racetrack facility
at a fair association location except when live racing has been scheduled
during the same calendar year at the location where the racetrack lottery
games will be operated. The number of days during which racetrack lot-
tery games may be operated at a fair association location shall not exceed
twice the number of simulcast race days authorized at such location.
  (d)  No racetrack lottery game shall be operated pursuant to this act:
  (1)  At a racetrack facility, other than a fair association location, where
the conduct of both live horse and live greyhound races is authorized
pursuant to the Kansas parimutuel racing act unless the racetrack organ-
ization licensee conducting live races at the racetrack facility: (A) Seeks
approval of not less than 45 days of live horse racing at the racetrack
facility during the first year in which racetrack lottery games are permitted
at the racetrack facility and 55 days of live horse racing during every year
thereafter; and (B) seeks approval of not less than 250 days of live grey-
hound racing at the racetrack facility during each year in which racetrack
lottery games are operated at the racetrack facility; or
  (2)  at a racetrack facility, other than a fair association location, where
the conduct of only live greyhound races is authorized pursuant to the
Kansas parimutuel racing act unless the racetrack organization licensee
conducting live races at the racetrack facility seeks approval of not less
than 250 days of live greyhound racing at the racetrack facility during
each year in which in which racetrack lottery games are operated at the
racetrack facility.
  (e)  All moneys received by the commission from racetrack lottery
games operated pursuant to this section shall be deposited in the state
treasury and credited to the racetrack lottery operating fund established
by section 4.
  New Sec. 4.  (a) There is hereby established in the state treasury the
racetrack lottery operating fund.
  (b)  The executive director shall remit at least weekly to the state
treasurer the net income from the operation of racetrack lottery games
collected pursuant to this act. Upon receipt of any such remittance, the
state treasurer shall deposit the entire amount thereof in the state treasury
and credit it to the racetrack lottery operating fund. Moneys credited to
the fund shall be expended or transferred only as provided by this act.
Expenditures from such fund shall be made in accordance with appro-
priations acts upon warrants of the director of accounts and reports issued
pursuant to vouchers approved by the executive director or by a person
designated by the executive director.
  (c)  Moneys in the racetrack lottery operating fund shall be used for:
  (1)  The payment of expenses of the Kansas lottery attributable to the
operation of racetrack lottery games and implementation, administration
and enforcement of contracts entered into pursuant to section 3;
  (2)  transfers to the state racing fund pursuant to subsection (d);
  (3)  transfers to the state gaming revenues fund pursuant to subsection
  (e);
  (4)  transfers to the breed and purse enhancements fund pursuant to
subsection (f);
  (5)  payments to organization licensees pursuant to subsection (g); and
  (6)  payments to racetrack lottery retailers pursuant to subsection (h).
  (d)  On or before the 15th day of each month, commencing with the
month following the first month in which moneys are credited to the
racetrack lottery operating fund, the director of accounts and reports shall
transfer moneys in the racetrack lottery operating fund to the state racing
fund created by K.S.A. 74-8826 and amendments thereto in an amount
certified monthly by the executive director and determined as equal to
the expenses of the Kansas racing and gaming commission attributable to
the operation of racetrack lottery games, based on an accounting by the
executive director of the Kansas racing and gaming commission.
  (e)  On or before the 15th day of each month, commencing with the
month following the first month in which moneys are credited to the
racetrack lottery operating fund, the director of accounts and reports shall
transfer moneys in the racetrack lottery operating fund to the state gam-
ing revenues fund created by K.S.A. 79-4801 and amendments thereto
in an amount certified monthly by the executive director and determined
as equal to 10% of the moneys in the racetrack lottery operating fund in
excess of those needed for the purposes described in subsections (c)(1)
and (c)(2).
  (f)  On or before the 15th day of each month, commencing with the
month following the first month in which moneys are credited to the
racetrack lottery operating fund, the director of accounts and reports shall
transfer moneys in the fund to the breed and purse enhancements fund
established pursuant to section 5, in an amount certified monthly by the
executive director and determined as equal to the following percentages:
  (1)  Subject to the provisions of subsection (f)(4), of the proportionate
amount of moneys in the racetrack lottery operating fund in excess of the
those needed for the purposes described in subsections (c)(1) and (c)(2)
that were derived from the operation of racetrack lottery games at a race-
track where a racetrack organization licensee conducts both live horse
races and live greyhound races: (A) 12% shall be credited to the grey-
hound account; (B) 5% shall be credited to the thoroughbred account;
and (C) 3% shall be credited to the quarter horse account;
  (2)  of the proportionate amount of moneys in the racetrack lottery
operating fund in excess of the those needed for the purposes described
in subsections (c)(1) and (c)(2) that were derived from the operation of
racetrack lottery games at a racetrack where a racetrack organization li-
censee conducts only live greyhound races: (A) 14% shall be credited to
the greyhound account; (B) 3.75% shall be credited to the thoroughbred
account; and (C) 2.25% shall be credited to the quarter horse account;
  (3)  subject to the provisions of subsection (f)(5), of the proportionate
amount of moneys in the racetrack lottery operating fund in excess of the
those needed for the purposes described in subsections (c)(1) and (c)(2)
that were derived from the operation of racetrack lottery games at a race-
track where a racetrack organization licensee conducts only live horse
races: (A) 6% shall be credited to the greyhound account; (B) 3.85% shall
be credited to the quarter horse account; and (C) 0.15% shall be credited
to the account for racing horses other than thoroughbreds and quarter
horses;
  (4)  of the proportionate amount of moneys in the racetrack lottery
operating fund in excess of the those needed for the purposes described
in subsections (c)(1) and (c)(2) that were derived from the operation of
racetrack lottery games at Anthony Downs when a racetrack organization
licensee conducts both live horse races and live greyhound races at An-
thony Downs: (A) 12% shall be credited to the greyhound account; (B)
4.9% shall be credited to the thoroughbred account; (C) 3% shall be
credited to the quarter horse account; and (D) 0.1% shall be credited to
the account for racing horses other than thoroughbreds and quarter
horses; and
  (5)  of the proportionate amount of moneys in the racetrack lottery
operating fund in excess of the those needed for the purposes described
in subsections (c)(1) and (c)(2) that were derived from the operation of
racetrack lottery games at Anthony Downs when a racetrack organization
licensee conducts only live horse races at Anthony Downs: (A) 6% shall
be credited to the greyhound account; (B) 8.5% shall be credited to the
thoroughbred account; (C) 5.25% shall be credited to the quarter horse
account; and (D) .15% shall be credited to the account for racing horses
other than thoroughbreds and quarter horses.
  (g)  On or before the 15th day of each month, commencing with the
month following the first month in which moneys are credited to the
racetrack lottery operating fund, the executive director shall authorize
payments from the fund to racetrack organization licensees conducting
live races at racetrack facilities where racetrack lottery games are con-
ducted. Such payments shall be in an aggregate amount equal to 1% of
the moneys in the racetrack lottery operating fund in excess of those
needed for the purposes described in subsections (c)(1) and (c)(2). The
payment to each licensee shall be in an amount proportionate to that
portion of the moneys in the fund that were derived from racetrack lottery
games operated at the racetrack facility where the licensee conducts live
racing. All amounts received by a racetrack organization licensee pursuant
to this subsection shall be distributed to organizations qualified to receive
distributions of the licensee's net earnings under subsection (d)(1) of
K.S.A. 74-8813 and amendments thereto, subject to the limitation of sub-
section (d)(2) of K.S.A. 74-8813 and amendments thereto.
  (h)  On or before the 15th day of each month, commencing with the
month following the first month in which moneys are credited to the
racetrack lottery operating fund, the executive director shall authorize
payments from the fund to racetrack lottery retailers. Such payments shall
be in an aggregate amount equal to the moneys in the fund in excess of
those needed for the purposes described in subsections (c)(1), (c)(2),
  (c)(3), (c)(4) and (c)(5). The payment to each retailer shall be in an
amount proportionate to that portion of the moneys in the fund that were
derived from racetrack lottery games operated by the retailer.
  New Sec. 5.  (a) There is hereby established in the state treasury the
breed and purse enhancement fund.
  (b)  There is hereby created, in the breed and purse supplement fund,
the greyhound account, the thoroughbred account, the quarter horse ac-
count and the account for racing horses other than thoroughbreds and
quarter horses. Moneys in such accounts shall be used as directed by the
Kansas racing and gaming commission for the respective breeds for: (1)
Purse supplements; and (2) awards to owners of Kansas-bred horses and
owners of Kansas-bred greyhounds.
  (c)  Expenditures from the breed and purse enhancement fund shall
be made in accordance with appropriation acts upon warrants of the di-
rector of accounts and reports issued pursuant to vouchers approved by
the executive director of the Kansas racing and gaming commission or by
a person designated by such executive director.
  Sec. 6.  K.S.A. 74-8704 is hereby amended to read as follows: 74-
8704. (a) The executive director shall have the power to:
  (1)  Supervise and administer the operation of the state lottery in ac-
cordance with the provisions of this act and such rules and regulations as
adopted hereunder.
  (2)  Appoint, subject to the Kansas civil service act and within the
limitations of appropriations therefor, all other employees of the Kansas
lottery, which employees shall be in the classified service unless otherwise
specifically provided by this act.
  (3)  Enter into contracts for advertising and promotional services, sub-
ject to the provisions of subsection (b); annuities or other methods
deemed appropriate for the payment of prizes; data processing and other
technical products, equipment and services; and facilities as needed to
operate the Kansas lottery, including but not limited to gaming equip-
ment, tickets and other services involved in major procurement contracts,
in accordance with K.S.A. 74-8705 and amendments thereto.
  (4)  Enter into contracts with persons for the sale of lottery tickets or
shares to the public, as provided by this act and rules and regulations
adopted pursuant to this act, which contracts shall not be subject to the
provisions of K.S.A. 75-3738 through 75-3744, and amendments thereto.
  (5)  Require lottery retailers to furnish proof of financial stability or
furnish surety in an amount based upon the expected volume of sales of
lottery tickets or shares.
  (6)  Examine, or cause to be examined by any agent or representative
designated by the executive director, any books, papers, records or mem-
oranda of any lottery retailer or racetrack lottery retailer for the purpose
of ascertaining compliance with the provisions of this act or rules and
regulations adopted hereunder.
  (7)  Issue subpoenas to compel access to or for the production of any
books, papers, records or memoranda in the custody or control of any
lottery retailer or racetrack lottery retailer, or to compel the appearance
of any lottery retailer, racetrack lottery retailer or employee of any lottery
retailer or racetrack lottery retailer, for the purpose of ascertaining com-
pliance with the provisions of this act or, rules and regulations adopted
hereunder or terms of any contract entered into pursuant to section 3.
Subpoenas issued under the provisions of this subsection may be served
upon natural persons and corporations in the manner provided in K.S.A.
60-304 and amendments thereto for the service of process by any officer
authorized to serve subpoenas in civil actions or by the executive director
or an agent or representative designated by the executive director. In the
case of the refusal of any person to comply with any such subpoena, the
executive director may make application to the district court of any county
where such books, papers, records, memoranda or person is located for
an order to comply.
  (8)  Administer oaths and take depositions to the same extent and
subject to the same limitations as would apply if the deposition were in
aid of a civil action in the district court.
  (9)  Require fingerprinting of employees and such other persons who
work in sensitive areas within the lottery as deemed appropriate by the
director. The director may submit such fingerprints to the Kansas bureau
of investigation and to the federal bureau of investigation for the purposes
of verifying the identity of such employees and persons and obtaining
records of their criminal arrests and convictions.
  (b)  The Kansas lottery shall not engage in on-site display advertising
or promotion of the lottery at any amateur athletic or sporting event
including, but not limited to, amateur athletic sporting events at institu-
tions under the jurisdiction and control of the state board of regents.
  Sec. 7.  K.S.A. 74-8706 is hereby amended to read as follows: 74-
8706. The executive director shall have the duty to:
  (a)  Make and keep books and records which accurately and fairly
reflect each day's transactions, including but not limited to: The distri-
bution of tickets and shares to lottery retailers; receipt of funds, prize
claims, prize disbursements made by the Kansas lottery or otherwise or
prizes liable to be paid by the Kansas lottery; expenses and other financial
transactions of the Kansas lottery necessary so as to permit daily account-
ability.
  (b)  Make quarterly and annual financial reports to the commission,
the governor, the state treasurer and the legislature. Such reports shall
be based upon generally accepted accounting principles and include a full
and complete statement of lottery revenues, prize disbursements, ex-
penses, net revenues and other financial transactions for the reporting
period.
  (c)  Make available for inspection by the commission, upon request,
all books, records, files and other information and documents of the Kan-
sas lottery.
  (d)  Engage, in accordance with K.S.A. 74-8705 and amendments
thereto, an independent firm experienced in security procedures, includ-
ing but not limited to computer security and systems security, to peri-
odically conduct a comprehensive study and evaluation of all aspects of
security in the operation of the Kansas lottery.
  (e)  Engage, in accordance with K.S.A. 74-8705 and amendments
thereto, an independent firm experienced in marketing research and anal-
ysis to periodically conduct an evaluation to determine the effectiveness
of marketing, promotion and public information programs used by the
Kansas lottery and make recommendations which will enhance such pro-
grams.
  (f)  Prepare and submit budgets and proposals for the operation of
the Kansas lottery.
  (g)  Operate the Kansas lottery in such a manner that, after the initial
state appropriation, it is self-sustaining and self-funded.
  (h)  Make available at the point of sale of any lottery tickets or shares
a list of the odds of winning such game, based upon the number of tickets
or shares projected to be sold.
  (i)  Make provision for the timely and efficient transfer of funds due
from lottery retailers and racetrack lottery retailers to the lottery oper-
ating fund or the racetrack lottery operating fund, as provided by law,
including the use of electronic funds transfers whenever possible.
  Sec. 8.  K.S.A. 1996 Supp. 74-8710 is hereby amended to read as
follows: 74-8710. (a) The commission, upon the recommendation of the
executive director, shall adopt rules and regulations governing the estab-
lishment and operation of a state lottery as necessary to carry out the
purposes of this act. Temporary rules and regulations may be adopted by
the commission without being subject to the provisions and requirements
of K.S.A. 77-415 through 77-438, and amendments thereto, but shall be
subject to approval by the attorney general as to legality and shall be filed
with the secretary of state and published in the Kansas register. Tem-
porary and permanent rules and regulations may include but shall not be
limited to:
  (1)  Subject to the provisions of subsection (b), the types of lottery
games to be conducted, including but not limited to instant lottery, on-
line and, traditional and racetrack lottery games, but not including games
on slot machines or video lottery machines.
  (2)  The manner of selecting the winning tickets or shares, except that,
if a lottery game utilizes a drawing of winning numbers, a drawing among
entries or a drawing among finalists, such drawings shall always be open
to the public and shall be recorded on both video and audio tape.
  (3)  The manner of payment of prizes to the holders of winning tickets
or shares.
  (4)  The frequency of the drawings or selections of winning tickets or
shares.
  (5)  The type or types of locations at which tickets or shares may be
sold.
  (6)  The method or methods to be used in selling tickets or shares.
  (7)  Additional qualifications for the selection of lottery retailers and
racetrack lottery retailers and the amount of application fees to be paid
by each, which fees shall be sufficient to pay all expenses of any back-
ground investigation and processing of the application.
  (8)  The amount and method of compensation to be paid to lottery
retailers, including special bonuses and incentives and a commission of
not less than 7.5% of sales.
  (9)  Deadlines for claims for prizes by winners of each lottery game.
  (10)  Provisions for confidentiality of information submitted by ven-
dors pursuant to K.S.A. 74-8705, and amendments thereto.
  (11)  Information required to be submitted by vendors, in addition to
that required by K.S.A. 74-8705, and amendments thereto.
  (12)  The major procurement contracts or portions thereof to be
awarded to minority business enterprises pursuant to subsection (a) of
K.S.A. 74-8705, and amendments thereto, and procedures for the award
thereof.
  (13)  For racetrack lottery games, minimum prize pay-outs of not less
than 80% and maximum prize pay-outs of not more than 95%.
  (14)  Minimum and maximum prize pay-outs for on-line instant bingo
conducted by lottery retailers.
  (b)  Rules and regulations adopted by the commission pursuant to this
section shall require that the odds in racetrack lottery games be posted in
prominent locations on the premises where the games are operated or
conducted.
  (c)  No new racetrack lottery game or other lottery game shall com-
mence operation after the effective date of this act unless first approved
by the governor or, in the governor's absence or disability, the lieutenant
governor.
  Sec. 9.  K.S.A. 74-8711 is hereby amended to read as follows: 74-
8711. (a) There is hereby established in the state treasury the lottery
operating fund.
  (b)  The executive director shall remit at least weekly to the state
treasurer all moneys collected from the sale of lottery tickets and shares
and any other moneys received by or on behalf of the Kansas lottery,
other than net income from racetrack lottery games. Upon receipt of any
such remittance, the state treasurer shall deposit the entire amount
thereof in the state treasury and credit it to the lottery operating fund.
Moneys credited to the fund shall be expended or transferred only as
provided by this act. Expenditures from such fund shall be made in ac-
cordance with appropriations acts upon warrants of the director of ac-
counts and reports issued pursuant to vouchers approved by the executive
director or by a person designated by the executive director.
  (c)  Moneys in the lottery operating fund shall be used for:
  (1)  The payment of expenses of the lottery, which shall include all
costs incurred in the operation and administration of the Kansas lottery;
all costs resulting from contracts entered into for the purchase or lease
of goods and services needed for operation of the lottery, including but
not limited to supplies, materials, tickets, independent studies and sur-
veys, data transmission, advertising, printing, promotion, incentives, pub-
lic relations, communications, and distribution of tickets and shares; and
reimbursement of costs of facilities and services provided by other state
agencies;
  (2)  the payment of compensation to lottery retailers;
  (3)  transfers of moneys to the lottery prize payment fund pursuant to
K.S.A. 74-8712 and amendments thereto;
  (4)  transfers to the state general fund pursuant to K.S.A. 74-8713 and
amendments thereto;
  (5)  transfers to the state gaming revenues fund pursuant to subsection
  (d) of this section and as otherwise provided by law; and
  (6)  the transfers to the county reappraisal fund as prescribed by law.
  (d)  The director of accounts and reports shall transfer moneys in the
lottery operating fund to the state gaming revenues fund created by
K.S.A. 79-4801 and amendments thereto, on or before the 15th day of
each month, for fiscal years commencing on or after July 1, 1988 in an
amount certified monthly by the executive director and determined as
follows, whichever is greater:
  (1)  In an amount equal to the moneys in the lottery operating fund
in excess of those needed for the purposes described in subsections (c)(1)
through (c)(4); or
  (2)  an amount equal to not less than 30% of total monthly revenues
from the sales of lottery tickets and shares less:
  (A)  Estimated returned tickets; and
  (B)  compensation paid to lottery retailers for on-line instant bingo
sales by lottery retailers.
  Sec. 10.  K.S.A. 74-8716 is hereby amended to read as follows: 74-
8716. (a) It is unlawful for the executive director, a member of the com-
mission or any employee of the Kansas lottery, or any person residing in
the household thereof to:
  (1)  Have, either directly or indirectly, an interest in a business or
person knowing that such business or person contracts with the Kansas
lottery for a major procurement, whether such interest is as a natural
person, partner, member of an association, stockholder or director or
officer of a corporation;
  (2)  have, either directly or indirectly, an interest in: (A) A racetrack
lottery retailer; or (B) a business or person knowing that such business
or person contracts with a racetrack lottery retailer for goods or services
related to the operation of racetrack lottery games;
  (2) (3)  accept or agree to accept any economic opportunity, gift, loan,
gratuity, special discount, favor or service, or hospitality other than food
and beverages, having an aggregate value of $20 or more in any calendar
year from a person knowing that such person (A) contracts or seeks to
contract with the state to supply gaming equipment, materials, tickets or
consulting services for use in the lottery or (B) is a lottery retailer, race-
track lottery retailer or an applicant for lottery retailer or racetrack
     lottery
retailer.
  (b)  It is unlawful for a lottery retailer or racetrack lottery retailer, an
applicant for lottery retailer or racetrack lottery retailer or a person who
contracts or seeks to contract with the state or with a racetrack lottery
retailer to supply gaming equipment, materials, tickets or consulting serv-
ices for use in the lottery to offer, pay, give or make any economic op-
portunity, gift, loan, gratuity, special discount, favor or service, or hospi-
tality other than food and beverages, having an aggregate value of $20 or
more in any calendar year to a person, knowing such person is the ex-
ecutive director, a member of the commission or an employee of the
Kansas lottery, or a person residing in the household thereof.
  (c)  Violation of this section is a class A misdemeanor.
  (d)  If the executive director, a member of the commission or an em-
ployee of the Kansas lottery, or any person residing in the household
thereof, is convicted of an act described by this section, such executive
director, member or employee shall be removed from office or employ-
ment with the Kansas lottery.
  (e)  In addition to the provisions of this section, all other provisions
of law relating to conflicts of interest of state employees shall apply to the
members of the commission and employees of the Kansas lottery.
  Sec. 11.  K.S.A. 1996 Supp. 74-8718 is hereby amended to read as
follows: 74-8718. (a) It is unlawful for:
  (1)  Any person to sell a lottery ticket or share at a price other than
that fixed by rules and regulations adopted pursuant to this act;
  (2)  any person other than a lottery retailer or racetrack lottery retailer
authorized by the Kansas lottery to sell or resell any lottery ticket or share;
or
  (3)  any person to sell a lottery ticket or share to any person, knowing
such person to be under 18 years of age.
  (b) (1)  Violation of this section is a class A nonperson misdemeanor
upon conviction for a first offense; and
  (2)  violation of this section is a severity level 9, nonperson felony upon
conviction for a second or subsequent offense.
  Sec. 12.  K.S.A. 1996 Supp. 74-8719 is hereby amended to read as
follows: 74-8719. (a) It is unlawful for any person to purchase a lottery
ticket or share, or to share in the lottery winnings of a person, knowing
that such person is:
  (1)  The executive director, a member of the commission or an em-
ployee of the Kansas lottery;
  (2)  an officer or employee of a vendor contracting with the Kansas
lottery to supply gaming equipment or tickets to the Kansas lottery for
use in the operation of any lottery conducted pursuant to this act;
  (3)  a spouse, child, stepchild, brother, stepbrother, sister, stepsister,
parent or stepparent of a person described by subsection (a)(1) or (2); or
  (4)  a person who resides in the same household as any person de-
scribed by subsection (a)(1) or (2).
  (b) (1)  Violation of subsection (a) is a class A nonperson misde-
meanor upon conviction for a first offense.
  (2)  Violation of subsection (a) is a severity level 9, nonperson felony
upon conviction for a second or subsequent offense.
  (c)  Notwithstanding subsection (a), the executive director may au-
thorize in writing any employee of the Kansas lottery and any employee
of a lottery vendor to purchase a lottery ticket for the purposes of verifying
the proper operation of the state lottery with respect to security, systems
operation and, lottery retailer contract compliance and racetrack lottery
retailer. Any prize awarded as a result of such ticket purchase shall be-
come the property of the Kansas lottery and be added to the prize pools
of subsequent lottery games.
  (d)  Certain classes of persons who, because of the unique nature of
the supplies or services they provide for use directly in the operation of
a lottery pursuant to this act, may be prohibited, in accordance with rules
and regulations adopted by the commission, from participating in any
lottery in which such supplies or services are used.
  (e)  Nothing in this section shall prohibit lottery retailers or their em-
ployees from purchasing lottery tickets and shares or from being paid a
prize of a winning ticket or share.
  (f)  Each person who purchases a lottery ticket or share thereby agrees
to be bound by rules and regulations adopted by the commission and by
the provisions of this act.
  Sec. 13.  K.S.A. 74-8720 is hereby amended to read as follows: 74-
8720. (a) As nearly as practical and except as provided by subsection
  (b)(13) of K.S.A. 74-8710, and amendments thereto, an amount equal to
not less than 45% of the total sales of lottery tickets or shares, computed
on an annual basis, shall be allocated for payment of lottery prizes.
  (b)  The prize to be paid or awarded for each winning ticket or share
shall be paid to one natural person who is adjudged by the executive
director, the director's designee or the lottery retailer or racetrack lottery
retailer paying the prize, to be the holder of such winning ticket or share,
or the person designated in writing by the holder of the winning ticket
or share on a form satisfactory to the executive director, except that the
prize of a deceased winner shall be paid to the duly appointed represen-
tative of the estate of such winner or to such other person or persons
appearing to be legally entitled thereto.
  (c)  The executive director shall award the designated prize to the
holder of the ticket or share upon the validation of a claim or confirmation
of a winning share. The executive director shall have the authority to make
payment for prizes by any means deemed appropriate upon the validation
of winning tickets or shares.
  (d)  The right of a person to a prize drawn or awarded is not assign-
able.
  (e)  All prizes awarded shall be taxed as Kansas source income and
shall be subject to all state and federal income tax laws and rules and
regulations. State income taxes shall be withheld from prizes paid when-
ever federal income taxes are required to be withheld under current fed-
eral law.
  (f)  Unclaimed prize money not payable directly by lottery retailers
shall be retained for the period established by rules and regulations and
if no claim is made within such period, then such unclaimed prize money
shall be added to the prize pools of subsequent lottery games.
  (g)  The state of Kansas, members of the commission and employees
of the Kansas lottery shall be discharged of all further liability upon pay-
ment of a prize pursuant to this section.
  (h)  The Kansas lottery shall not publicly disclose the identity of any
person awarded a prize except upon written authorization of such person.
  Sec. 14.  K.S.A. 1996 Supp. 74-8810 is hereby amended to read as
follows: 74-8810. (a) It is a class A nonperson misdemeanor for any person
to have a financial interest, directly or indirectly, in any racetrack facility
within the state of Kansas or in any host facility for a simulcast race
displayed in this state:
  (1)  While such person is a member of the commission or during the
five years immediately following such person's term as member of the
commission; or
  (2)  while such person is an officer, director or member of an organ-
ization licensee, other than a fair association or horsemen's nonprofit or-
ganization, or during the five years immediately following the time such
person is an officer, director or member of such an organization licensee.
  (b)  It is a class A nonperson misdemeanor for any member, employee
or appointee of the commission, including stewards and racing judges, to
knowingly:
  (1)  Participate in the operation of or have a financial interest in any
business which has been issued a concessionaire license, racing or wa-
gering equipment or services license, facility owner license or facility
manager license, or any business which sells goods or services to an or-
ganization licensee;
  (2)  participate directly or indirectly as an owner, owner-trainer or
trainer of a horse or greyhound, or as a jockey of a horse, entered in a
race meeting conducted in this state;
  (3)  place a wager on an entry in a horse or greyhound race conducted
by an organization licensee; or
  (4)  accept any compensation, gift, loan, entertainment, favor or serv-
ice from any licensee, except such suitable facilities and services within a
racetrack facility operated by an organization licensee as may be required
to facilitate the performance of the member's, employee's or appointee's
official duties.
  (c)  It is a class A nonperson misdemeanor for any member, employee
or appointee of the commission, or any spouse, parent, grandparent,
brother, sister, child, son-in-law, daughter-in-law, grandchild, uncle, aunt,
parent-in-law, brother-in-law or sister-in-law thereof, to:
  (1)  Hold any license issued by the commission, except that a steward
or racing judge shall hold an occupation license to be such a steward or
judge; or
  (2)  enter into any business dealing, venture or contract with an owner
or lessee of a racetrack facility in Kansas; or
  (3)  have, directly or indirectly, an interest in a business or person
knowing that such business or person contracts with a racetrack lottery
retailer pursuant to subsection (b)(1) of section 3.
  (d)  It is a class A nonperson misdemeanor for any officer, director or
member of an organization licensee, other than a fair association or hor-
semen's nonprofit organization, to:
  (1)  Receive, for duties performed as an officer or director of such
licensee, any compensation or reimbursement or payment of expenses in
excess of the amounts provided by K.S.A. 75-3223 and amendments
thereto for board members' compensation, mileage and expenses; or
  (2)  enter into any business dealing, venture or contract with the or-
ganization licensee or, other than in the capacity of an officer or director
of the organization licensee, with a facility owner licensee, facility man-
ager licensee, racing or wagering equipment or services license or con-
cessionaire licensee, or with any host facility for a simulcast race displayed
in this state.
  (e)  It is a class A nonperson misdemeanor for any facility owner li-
censee or facility manager licensee, other than a horsemen's association,
or any officer, director, employee, stockholder or shareholder thereof or
any person having an ownership interest therein, to participate directly
or indirectly as an owner, owner-trainer or trainer of a horse or grey-
hound, or as a jockey of a horse, entered in a live race conducted in this
state.
  (f)  It is a class A nonperson misdemeanor for any licensee of the
commission, or any person who is an officer, director, member or em-
ployee of a licensee, to place a wager at a racetrack facility located in
Kansas on an entry in a horse or greyhound race if:
  (1)  The commission has by rules and regulations designated such per-
son's position as a position which could influence the outcome of such
race or the parimutuel wagering thereon; and
  (2)  such race is conducted at or simulcast to the racetrack facility
where the licensee is authorized to engage in licensed activities.
  (g)  It is a class B nonperson misdemeanor for any person to use any
animal or fowl in the training or racing of racing greyhounds.
  (h)  It is a class A nonperson misdemeanor for any person to:
  (1)  Sell a parimutuel ticket or an interest in such a ticket to a person
knowing such person to be under 18 years of age, upon conviction of the
first offense;
  (2)  accept, transmit or deliver, from a person outside a racetrack fa-
cility, anything of value to be wagered in any parimutuel system of wa-
gering within a racetrack facility, upon conviction of the first offense;
  (3)  administer or conspire to administer any drug or medication to a
horse or greyhound within the confines of a racetrack facility in violation
of rules and regulations of the commission, upon conviction of the first
offense;
  (4)  possess or conspire to possess, within the confines of a racetrack
facility, any drug or medication for administration to a horse or greyhound
in violation of rules and regulations of the commission, upon conviction
of the first offense;
  (5)  possess or conspire to possess, within the confines of a racetrack
facility, equipment for administering drugs or medications to horses or
greyhounds in violation of rules and regulations of the commission, upon
conviction of the first offense;
  (6)  enter any horse or greyhound in any race knowing such horse or
greyhound to be ineligible to compete in such race pursuant to K.S.A.
74-8812 and amendments thereto; or
  (7)  prepare or cause to be prepared an application for registration of
a horse pursuant to K.S.A. 74-8830 and amendments thereto knowing
that such application contains false information.
  (i)  It is a severity level 8, nonperson felony for any person to:
  (1)  Sell a parimutuel ticket or an interest in such a ticket to a person
knowing such person to be under 18 years of age, upon conviction of the
second or a subsequent offense;
  (2)  accept, transmit or deliver, from any person outside a racetrack
facility, anything of value to be wagered in any parimutuel system of
wagering within a racetrack facility, upon the second or a subsequent
conviction;
  (3)  conduct or assist in the conduct of a horse or greyhound race, or
the display of a simulcast race, where the parimutuel system of wagering
is used or is intended to be used and where no license has been issued
to an organization to conduct or simulcast such race;
  (4)  enter any horse or greyhound in any race conducted by an organ-
ization licensee knowing that the class or grade in which such horse or
greyhound is entered is not the true class or grade or knowing that the
name under which such horse or greyhound is entered is not the name
under which such horse or greyhound has been registered and has pub-
licly performed;
  (5)  use or conspire to use any device, other than an ordinary whip for
horses or a mechanical lure for greyhounds, for the purpose of affecting
the speed of any horse or greyhound at any time during a race conducted
by an organization licensee;
  (6)  possess or conspire to possess, within the confines of a racetrack
facility, any device, other than an ordinary whip for horses or a mechanical
lure for greyhounds, designed or intended to affect the speed of a horse
or greyhound;
  (7)  administer or conspire to administer any drug or medication to a
horse or greyhound within the confines of a racetrack facility in violation
of rules and regulations of the commission, upon conviction of the second
or a subsequent offense;
  (8)  possess or conspire to possess, within the confines of a racetrack
facility, any drug or medication for administration to a horse or greyhound
in violation of rules and regulations of the commission, upon conviction
of the second or a subsequent offense;
  (9)  possess or conspire to possess, within the confines of a racetrack
facility, equipment for administering drugs or medications to horses or
greyhounds in violation of rules and regulations of the commission, upon
conviction of the second or a subsequent offense;
  (10)  sponge the nostrils or windpipe of a horse for the purpose of
stimulating or depressing such horse or affecting its speed at any time
during a race meeting conducted by an organization licensee;
  (11)  alter or attempt to alter the natural outcome of any race con-
ducted by, or any simulcast race displayed by, an organization licensee or
transmit or receive an altered race or delayed broadcast race if parimutuel
wagering is conducted or solicited after off time of the race;
  (12)  influence or attempt to influence, by the payment or promise of
payment of money or other valuable consideration, any person to alter
the natural outcome of any race conducted by, or any simulcast race
displayed by, an organization licensee;
  (13)  influence or attempt to influence any member, employee or ap-
pointee of the commission, by the payment or promise of payment of
money or other valuable consideration, in the performance of any official
duty of that member, employee or appointee;
  (14)  fail to report to the commission or to one of its employees or
appointees knowledge of any violation of this act by another person for
the purpose of stimulating or depressing any horse or greyhound, or af-
fecting its speed, at any time during any race conducted by an organiza-
tion licensee;
  (15)  commit any of the following acts with respect to the prior racing
record, pedigree, identity or ownership of a registered horse or greyhound
in any matter related to the breeding, buying, selling or racing of the
animal: (A) Falsify, conceal or cover up, by any trick, scheme or device,
a material fact; (B) make any false, fictitious or fraudulent statement or
representation; or (C) make or use any false writing or document knowing
that it contains any false, fictitious or fraudulent statement or entry; or
  (16)  pass or attempt to pass, cash or attempt to cash any altered or
forged parimutuel ticket knowing it to have been altered or forged.
  (j)  No person less than 18 years of age shall purchase a parimutuel
ticket or an interest in such a ticket. Any person violating this subsection
shall be subject to adjudication as a juvenile offender pursuant to the
Kansas juvenile offenders code.
  Sec. 15.  K.S.A. 74-8701, 74-8702, 74-8704, 74-8706, 74-8711, 74-
8716 and 74-8720 and K.S.A. 1996 Supp. 74-8710, 74-8718, 74-8719 and
74-8810 are hereby repealed.
  Sec. 16.  This act shall take effect and be in force from and after its
publication in the statute book.