TITLE 16. ECONOMIC REGULATION

PART 4. TEXAS DEPARTMENT OF LICENSING AND REGULATION

CHAPTER 140. ADMINISTRATION OF TEXAS LOTTERY AND CHARITABLE BINGO

The Texas Department of Licensing and Regulation (Department) proposes repeal of an existing rule at 16 Texas Administrative Code (TAC), Chapter 140, Subchapter A, §140.2; amendments to existing rules at Subchapter B, §§140.152, 140.153, 140.157, 140.158 and §140.160; and Subchapter E, §140.355 and §140.368; and a new rule at Subchapter E, §140.369, regarding the Texas Lottery program. These proposed changes are referred to as "proposed rules."

EXPLANATION OF AND JUSTIFICATION FOR THE RULES

The rules under 16 TAC, Chapter 140, implement Texas Government Code, Chapter 466, State Lottery; and Texas Occupations Code, Chapter 51, Texas Department of Licensing and Regulation.

The proposed rules are necessary to implement Senate Bill (SB) 1346 and SB 3070, 89th Legislature, Regular Session (2025), and to make related cleanup changes to conform the rules to the transfer of the state lottery to the Department. SB 1346 prohibits licensed lottery ticket sales agents from knowingly selling or allowing the sale of tickets for a lottery game involving a drawing to anyone attempting to buy all or substantially all possible winning tickets for a drawing. After a hearing, the Texas Commission of Licensing and Regulation (Commission) shall revoke the license of an agent who violates this prohibition for each of the sales agent's licensed locations. A revoked agent cannot reapply for a license before the first anniversary of the license revocation date. The proposed rules implement SB 1346 by adding this prohibited conduct as a basis for license suspension or revocation, updating the Standard Penalty Chart to include the violation, and adding a reapplication restriction for a person whose license has been revoked for this conduct.

SB 3070, which transferred administration of the state lottery to the Department on September 1, 2025, makes it a Class B misdemeanor for a person to sell more than 100 lottery tickets to one individual in a single transaction; authorizes a person to buy a ticket only in person at a licensed sales agency during normal business hours; and requires a licensed sales agent or an agent's employee to use a process prescribed by a rule to verify the age of each ticket purchaser at the point of sale. A person who violated this requirement would commit a Class B misdemeanor. SB 3070 also prohibits a person from using a telephone, Internet application, or mobile Internet application to purchase or order a ticket for a lottery game, or, for compensation, to accept a ticket order for a lottery game from a player, sell a ticket to a player, or arrange to purchase or for another person to purchase a ticket on behalf of a player. An offense under these provisions is a Class A misdemeanor. SB 3070 revises the offense of selling a ticket to a minor to specify that a person commits an offense if the person did so with criminal negligence, rather than knowingly and intentionally. Finally, SB 3070 prohibits the Department from providing a licensed location of a sales agent with more than five lottery vending machines, lottery computer terminals, or items of lottery equipment that print tickets.

The proposed rules implement SB 3070 by conforming Chapter 140 to the transfer of the state lottery to the Department, incorporating the new statutory ticket-sales requirements and prohibitions into the retailer and enforcement rules, updating the Standard Penalty Chart to reflect those changes, and establishing limitations on the placement of certain lottery equipment at licensed sales locations. The proposed rules also make technical and cleanup changes to update cross-references, remove outdated references, and improve consistency within Chapter 140.

Advisory Committee Recommendations

The proposed rules were presented to and discussed by the Lottery Advisory Committee at its meeting on July 15, 2026. The Advisory Committee did not recommend any changes to the proposed rules and voted to recommend that the proposed rules be published in the Texas Register for public comment. After the Advisory Committee meeting, the Department made limited changes to the proposed rules in response to further internal review. The changes revise §140.158(b)(5) to replace the reference to discourteous conduct with a more specific reference to abusive conduct; clarify in the Standard Penalty Chart that a violation of Government Code §466.1555 results in revocation at all licensed locations of the licensee; revise §140.369(b) to apply the five-machine limitation to lottery vending machines unless additional machines are approved by the director; and replace "entries" with "tickets" in §140.369(d). The Department also made a nonsubstantive capitalization correction in §140.152(a). These changes address concerns regarding clarity and specificity and more closely conform the proposed rules to the applicable statutory requirements.

SECTION-BY-SECTION SUMMARY

Subchapter A. Lottery Procurement, Lottery Advisory Committee, and Bingo Advisory Committee

The proposed rules amend the heading of Subchapter A to remove the reference to the Bingo Advisory Committee because §140.2, concerning that committee, is being repealed.

The proposed rules repeal §140.2, because the substance of this rule has been consolidated into and is now fully addressed in §141.102, relating to Bingo Advisory Committee. As a result of this consolidation, §140.2 is no longer necessary and its repeal eliminates redundancy and improves clarity within the Department's rules.

Subchapter B. Licensing of Sales Agents

The proposed amendments to §140.152 update references to "commission" to "department," and update a cross-reference to a rule that was transferred from Chapter 401 to Chapter 140 and renumbered effective October 1, 2025. The proposed amendments also delete a reference to the director of the Lottery Operations Division, clarifying that the term "director" in the rule will instead refer to the executive director or his/her designee. After the Advisory Committee recommended publication of the proposed rules, the Department made a nonsubstantive capitalization correction in §140.152(a). This correction does not substantively differ from the rule recommended by the Advisory Committee.

The proposed amendments to §140.153 update references to "commission" to "department" throughout the rule. The proposed amendments add new subsection (g), which states that a person whose license is revoked under Tex. Gov't Code §466.1555(b) and §140.158 may not reapply for a license until one year after the revocation date. The proposed amendments also update cross-references to rules that were transferred from Chapter 401 to Chapter 140 and renumbered effective October 1, 2025.

The proposed amendments to §140.157 update references to "commission" with "department," and update cross-references to rules that were transferred from Chapter 401 to Chapter 140 and renumbered effective October 1, 2025. The proposed amendments also correct a typo.

The proposed amendments to §140.158 update references to "commission" to "department" throughout the rule, and update cross-references to rules that were transferred from Chapter 401 to Chapter 140 and renumbered effective October 1, 2025. The proposed amendments to §140.158(b) add new paragraph (39), which provides a basis for license suspension or revocation if a licensee sells to one individual more than 100 lottery tickets in a single transaction, whether draw game tickets, scratch tickets, or any combination; renumber existing paragraphs (39), (40), (41), and (42) as new paragraphs (40), (41), (42), and (43); and revise renumbered paragraph (40), relating to selling a ticket to a minor, to reflect that a person commits an offense if the person did so with criminal negligence, rather than knowingly and intentionally. The proposed amendments to §140.158(b) also add new paragraph (44), which provides a basis for license revocation if a licensee knowingly sells or allows the sale of tickets for a lottery game involving a drawing to one or more persons attempting to purchase all or substantially all possible winning tickets for the drawing; new paragraph (45), which provides a basis for license revocation if a licensee fails to verify the age of each ticket purchaser at the point of sale; new paragraph (46), which provides a basis for license revocation if a licensee, by telephone, Internet application, or mobile Internet application, facilitates the purchase or orders the purchase of a ticket for a lottery game; new paragraph (47), which provides a basis for license revocation if a licensee, by telephone, Internet application, or mobile Internet application, for compensation, accepts an order for a ticket for a lottery game from a player, sells a ticket for a lottery game to a player, or arranges to purchase a ticket on behalf of a person playing a lottery game, or for another person to purchase a ticket on behalf of a person playing a lottery game; and new paragraph (48), which provides a basis for license revocation if a licensee sells tickets to a person who is not physically present at the retailer's location, a person outside the retailer's licensed location, or to a person outside the normal business hours of the retailer's licensed location. The proposed amendments also renumber existing paragraph (43) as paragraph (49) and add new subsection (d), which defines "ticket" for purposes of the chapter as a single scratch ticket or a single draw game ticket that may include multiple plays per ticket. After the Advisory Committee recommended publication of the proposed rules, the Department revised §140.158(b)(5) to replace "discourteous treatment" with "abusive treatment." This change differs from the language recommended by the Advisory Committee and was made to remove a potentially subjective standard.

The proposed amendments to §140.160 update references to "commission" with "department," and update cross-references to rules that were transferred from Chapter 401 to Chapter 140 and renumbered effective October 1, 2025. The proposed amendments also clarify that the executive director or commission may assess penalties for violations and may deviate from the Standard Penalty Chart unless otherwise required by statute. The proposed amendments to §140.160(h) update the figure 16 TAC §140.160(h), Standard Penalty Chart, to reflect the addition of new violation 39, the amendment and renumbering of violation 40, the renumbering of violations 41, 42, and 43, and the addition of new violations Nos. 44, 45, 46, 47, and 48, corresponding to the proposed amendments to §140.158(b)(39)-(48), as outlined above. After the Advisory Committee recommended publication of the proposed rules, the Department revised the Standard Penalty Chart to clarify that the penalty for violation 44 is revocation of all licensed locations of the licensee, consistent with Government Code §466.1555(b). This clarification differs from the language recommended by the Advisory Committee but does not change the statutorily required penalty.

Subchapter E. Retailer Rules

The proposed amendments to §140.355 update references to "commission" to "department". The proposed amendments add new subsection (d), which requires each retailer to electronically access the electronically readable information on a ticket purchaser's driver's license, commercial driver's license, or personal identification certificate to verify the age of each ticket purchaser at the point of sale, and allows the retailer to visually inspect the identification if the retailer cannot access the electronically readable information; add new subsection (g), which prohibits retailers from selling to one individual more than 100 lottery tickets in a single transaction; and add new subsection (h), which prohibits retailers from selling tickets to persons who are not physically present at the retailer's location, who are outside the retailer's licensed location, or outside the normal business hours of the retailer's licensed location.

The proposed amendments to §140.368 update references to "commission" to "department" throughout the rule.

The proposed rules add §140.369, which establishes limitations on certain lottery equipment supplied to licensed sales locations. Subsection (a) provides that a licensed location may not be supplied with more than five traditional lottery terminals unless additional terminals are approved by the director and requires that the number of terminals not be disproportionate to the amount of legitimate retail business conducted at the location. Subsection (b) establishes the same limitations for lottery vending machines, consistent with Government Code §466.259. Subsection (c) temporarily exempts Texas Lottery promotional events from the five-terminal limit and allows additional equipment approved by the director to support those activities. Subsection (d) defines "traditional lottery terminal" for purposes of the section. After the Advisory Committee recommended publication of the proposed rules, the Department revised subsection (b) to apply the five-machine limitation to lottery vending machines unless additional machines are approved by the director. This differs from the version recommended by the Advisory Committee, which exempted lottery vending machines from the limitation. The Department also replaced "entries" with "tickets" in subsection (d) for clarity.

FISCAL IMPACT ON STATE AND LOCAL GOVERNMENT

Tony Couvillon, Senior Policy Research and Budget Analyst, has determined that for each year of the first five years the proposed rules are in effect, there are no estimated additional costs or reductions in costs to state or local government as a result of enforcing or administering the proposed rules.

Mr. Couvillon has determined that for each year of the first five years the proposed rules are in effect, there is no estimated increase or loss in revenue to the state or local government as a result of enforcing or administering the proposed rules.

Mr. Couvillon has determined that for each year of the first five years the proposed rules are in effect, enforcing or administering the proposed rules does not have foreseeable implications relating to costs or revenues of state governments or local governments.

LOCAL EMPLOYMENT IMPACT STATEMENT

Because Mr. Couvillon has determined that the proposed rules will not affect a local economy, the agency is not required to prepare a local employment impact statement under Texas Government Code §2001.022.

PUBLIC BENEFITS

Mr. Couvillon also has determined that for each year of the first five-year period the proposed rules are in effect, the public benefit will be ensuring that the lottery is administered fairly and that the public can have confidence in the integrity of lottery games. The proposed rules will also help ensure that only adults can purchase lottery tickets, and will provide clearer rules for licensed sales agents and retailers regarding restricted sales, age verification, ticket-purchase limits, and limitations on certain lottery equipment.

PROBABLE ECONOMIC COSTS TO PERSONS REQUIRED TO COMPLY WITH PROPOSAL

Mr. Couvillon has determined that for each year of the first five-year period the proposed rules are in effect, there are no anticipated economic costs to persons who are required to comply with the proposed rules.

FISCAL IMPACT ON SMALL BUSINESSES, MICRO-BUSINESSES, AND RURAL COMMUNITIES

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities as a result of the proposed rules. Because the agency has determined that the proposed rules will have no adverse economic effect on small businesses, micro-businesses, or rural communities, preparation of an Economic Impact Statement and a Regulatory Flexibility Analysis, as detailed under Texas Government Code §2006.002, is not required.

ONE-FOR-ONE REQUIREMENT FOR RULES WITH A FISCAL IMPACT

The proposed rules do not have a fiscal note that imposes a cost on regulated persons, including another state agency, a special district, or a local government. Therefore, the agency is not required to take any further action under Texas Government Code §2001.0045.

GOVERNMENT GROWTH IMPACT STATEMENT

Pursuant to Texas Government Code §2001.0221, the agency provides the following Government Growth Impact Statement for the proposed rules. For each year of the first five years the proposed rules will be in effect, the agency has determined the following:

1. The proposed rules do not create or eliminate a government program.

2. Implementation of the proposed rules does not require the creation of new employee positions or the elimination of existing employee positions.

3. Implementation of the proposed rules does not require an increase or decrease in future legislative appropriations to the agency.

4. The proposed rules do not require an increase or decrease in fees paid to the agency.

5. The proposed rules create a new regulation. The proposed rules create a new regulation by prohibiting a person whose license has been revoked for selling or allowing the sale of lottery draw tickets to a person or persons attempting to purchase all or substantially all possible winning tickets for the drawing from applying for a license before the first anniversary of the license revocation date, and by setting limitations on the placement of lottery terminals.

6. The proposed rules expand, limit, or repeal an existing regulation. The proposed rules expand existing regulations by adding new grounds for license suspension or revocation; adding new retailer restrictions for age verification, ticket-purchase limits, and in-person sales during normal business hours; and updating the Standard Penalty Chart to reflect the proposed changes. The proposed rules limit an existing regulation by removing the requirement for a person seeking to inspect a license application to submit a written request to the executive director specifically stating the information sought to be inspected. The proposed rules repeal an existing regulation by repealing §140.2, Bingo Advisory Committee, because the substance of that rule has been consolidated into §141.102.

7. The proposed rules do not increase or decrease the number of individuals subject to the rules' applicability.

8. The proposed rules do not positively or adversely affect this state's economy.

TAKINGS IMPACT ASSESSMENT

The Department has determined that no private real property interests are affected by the proposed rules and the proposed rules do not restrict, limit, or impose a burden on an owner's rights to his or her private real property that would otherwise exist in the absence of government action. As a result, the proposed rules do not constitute a taking or require a takings impact assessment under Texas Government Code §2007.043.

PUBLIC COMMENTS AND INFORMATION RELATED TO THE COST, BENEFIT, OR EFFECT OF THE PROPOSED RULES

The Department is requesting public comments on the proposed rules and information related to the cost, benefit, or effect of the proposed rules, including any applicable data, research, or analysis. Any information that is submitted in response to this request must include an explanation of how and why the submitted information is specific to the proposed rules. Please do not submit copyrighted, confidential, or proprietary information.

Comments on the proposed rules and responses to the request for information may be submitted electronically on the Department's website at https://ga.tdlr.texas.gov:1443/form/Ch140_Rule_Making; by facsimile to (512) 344-5189; or by mail to Dorota Bienkowska, Legal Assistant, Texas Department of Licensing and Regulation, P.O. Box 16630, Austin, Texas 78761. The deadline for comments is 30 days after publication in the Texas Register .

SUBCHAPTER A. LOTTERY PROCUREMENT, LOTTERY ADVISORY COMMITTEE, AND BINGO ADVISORY COMMITTEE

The proposed repeal is proposed under Texas Government Code, Chapter 466, and Texas Occupations Code, Chapter 51, which authorize the Texas Commission of Licensing and Regulation, the Department's governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by the Department.

The statutory provisions affected by the proposed rules are those set forth in Texas Government Code, Chapter 466, and Texas Occupations Code, Chapter 51. No other statutes, articles, or codes are affected by the proposed rules.

The legislation that enacted the statutory authority under which the proposed rules are to be adopted are Senate Bill (SB) 1346 and SB 3070, 89th Legislature, Regular Session (2025).

§ 140.2. Bingo Advisory Committee.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on July 27, 2026.

TRD-202603159

Deanne Rienstra

General Counsel

Texas Department of Licensing and Regulation

Earliest possible date of adoption: September 6, 2026

For further information, please call: (512) 344-5392

SUBCHAPTER B. LICENSING OF SALES AGENTS

STATUTORY AUTHORITY

The proposed rules are proposed under Texas Government Code, Chapter 466, and Texas Occupations Code, Chapter 51, which authorize the Texas Commission of Licensing and Regulation, the Department's governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by the Department.

The statutory provisions affected by the proposed rules are those set forth in Texas Government Code, Chapter 466, and Texas Occupations Code, Chapter 51. No other statutes, articles, or codes are affected by the proposed rules.

The legislation that enacted the statutory authority under which the proposed rules are to be adopted are Senate Bill (SB) 1346 and SB 3070, 89th Legislature, Regular Session (2025).

§ 140.152. Application for License.

(a) An applicant for a license under this subchapter must apply to the Texas Department of Licensing and Regulation (department) [ Commission ] using forms provided by the department [ Commission ].

(b) The executive director (director) or his/her designee shall develop all forms and related documents including, but not limited to, an application form, release form to obtain a credit report, and/or any other background information relating to the applicant required to determine the applicant's eligibility for a license and whether the granting of a license to the applicant will best serve the public convenience. An applicant must disclose all criminal convictions for those individuals of whom an investigation is authorized under the Government Code, §466.201, and which are requested in the application.

(c) An applicant shall, under penalty of perjury, complete, sign, date, and submit all forms and related information and documents required. By signing and submitting the application form, the applicant agrees to allow the director [ of the Lottery Operations Division (hereinafter "director") ] to investigate the credit, criminal, and tax background of the applicant and other matters as authorized under the State Lottery Act (Act) , Government Code, Chapter 466.

(d) Every application for a license submitted under this subchapter shall be accompanied by a license application fee in an amount to be established by the director. If the director denies an application for a license based on a factor listed in §140.153(a) [ §401.153(a) of this title ] (relating to Qualifications for License), the director shall refund one half of the application fee to the applicant. If the director denies an application based on another factor, the director may not refund any part of the application fee. If an applicant fails to provide all forms and related information and documents required as part of the application, the director may cancel the application without making a determination to deny. If the director cancels an application, the director shall not refund any part of the application fee.

(e) Every license application submitted to the director under this subchapter shall be accompanied by security as authorized by the Government Code, §466.156(a), in a form and amount determined by the director. The director may reduce or waive the amount of security required, if feasible, after consideration of the possible loss to the state from the operation of the applicant in connection with the lottery, whether the applicant is a minority business as defined by Government Code, §466.107, or any other factor the director finds relevant. If the director determines that the purposes of the Act would be best served through establishment and maintenance of a pooled fund for purposes of reimbursing the division for losses arising from the operation of licensed sales agents, the director may require security in the form of a mandatory contribution by each applicant. Any amount so contributed may not be refunded. Depending upon the losses required to be reimbursed by such a fund, the director may require additional contributions to such a fund as a condition of any license application, including a license renewal application.

(f) All applications submitted under this subchapter shall be available for public inspection during business hours, provided that criminal history information and other information confidential by law shall not be available for inspection. Requests for inspection will be handled in compliance with the Texas Public Information Act, Chapter 552, Government Code. [ Any person seeking to inspect any application shall furnish a written request to the director specifically stating the information sought to be inspected. The director may respond to such requests orally or in writing in order to arrange for the inspection of the requested documents after a reasonable time is allowed for the division to review the documents and delete confidential information. ]

§ 140.153. Qualifications for License.

(a) Before issuing a license to any person under this subchapter, the executive director or his/her designee shall consider:

(1) the financial responsibility and security of the applicant and the business or activity in which the applicant is engaged. Consideration of this factor may include the analysis of the applicant's credit record, compliance with tax laws of other jurisdictions, status of permits and licenses, results of criminal background check, adequacy of security procedures against theft, whether the location is fixed and permanent, whether the applicant can provide appropriate security, and any other factor that may assist the director in such evaluation;

(2) the public accessibility of the applicant's place of business or activity. Consideration of this factor may include analysis of the applicant's hours of operation, proximity to major transit routes, proximity to large employers, public parking availability, and any other factor that may assist the director in such evaluation;

(3) the sufficiency of existing sales agents to serve the public convenience. Consideration of this factor may include analysis of number and proximity of other sales agents in a given market area, and/or number of "minority businesses" (as that term is defined in the Government Code, §466.107(b)) licensed in a given market area, with the possibility that additional licenses for any given market area may be denied if the area is determined to be adequately served by existing licensees;

(4) whether individuals under 18 years of age constitute a majority of the applicant's customers or as customers provide a majority of the applicant's sales volume;

(5) the volume of expected lottery sales at the applicant's place of business or activity; and

(6) any other factor that is helpful in determining whether the applicant's experience, character, and general fitness are such that the applicant's participation as a sales agent will not detract from the integrity, security, honesty, or fairness of the operation of the lottery. An example of the type of factor considered in this regard is the analysis of the type of product sold or form of service provided by the applicant.

(b) The director may grant or deny an application for a license under this subchapter based on any one or more factors listed in subsection (a) [ of this section ]. In addition, the director shall deny an application for a license under this subchapter upon a finding that the applicant:

(1) has been convicted of a felony, criminal fraud, gambling or a gambling-related offense, or a misdemeanor involving moral turpitude, if less than 10 years has elapsed since the termination of the sentence, parole, mandatory supervision, or probation served for the offense;

(2) is or has been a professional gambler. A "professional gambler" is a person whose profession is, or whose major source of income derives from, playing games of chance for profit;

(3) has been finally determined to be delinquent in the payment of a tax or other money collected by the comptroller, the Texas Workforce Commission, or the Texas Alcoholic Beverage Commission;

(4) is married to a person described in paragraph (1), (2), or (3) [ of this subsection ];

(5) has violated the Act or a rule adopted under the Act [ by the commission in furtherance of the State Lottery Act ];

(6) is not an individual, and an individual described in one or more of paragraphs (1) - (5) [ of this subsection ]:

(A) is an officer or director of the applicant;

(B) holds more than 10% of any class of issued and outstanding stock in the applicant;

(C) holds an equitable ownership interest greater than 10% in the applicant;

(D) is a creditor of the applicant to the extent of more than 10% of the applicant's outstanding debt at any time after the application is filed but before the director acts to grant or deny the license;

(E) is the owner or lessee of a business that the applicant conducts or through which the applicant will conduct a ticket sales agency;

(F) shares or will share in the profits, other than stock dividends, of the applicant or sales agent;

(G) participates in managing the affairs of the applicant; or

(H) is an employee of the applicant who is or will be involved in selling tickets or handling money from the sale of tickets;

(7) provided false or misleading information on the application form, or failed to provide information required as part of the application;

(8) failed to provide fingerprint identification for individuals for which such identification is requested in a form acceptable to the division following the division's request for such identification;

(9) has previously had a sales agent's license revoked, unless the director is satisfied the person will comply with the [ State Lottery ] Act and the rules under this chapter;

(10) failed to certify to the director the applicant's compliance with the federal Americans With Disabilities Act;

(11) is the subject of a license suspension or decision issued under Chapter 232, Family Code;

(12) intends to sell lottery tickets via the Internet [ internet ]; or

(13) intends to engage in business exclusively as a Texas Lottery ticket sales agent. For purposes of this section, an applicant "intends to engage in business exclusively as a Texas Lottery ticket sales agent" if the applicant does not sell any goods or services to the public other than Texas Lottery tickets.

(c) Without limiting the foregoing grounds for denial of a license under this subchapter, the director shall deny a license to any person whose location for the sales agency is either:

(1) a location licensed for games of bingo under the Bingo Enabling Act (Occupations Code, Chapter 2001);

(2) on land owned by the State of Texas; or a political subdivision of this state and on which is located a public primary or secondary school, an institution of higher education, or an agency of the state; or

(3) a location for which a person holds a wine and malt beverage retailer's permit, mixed beverage permit, mixed beverage permit with a retailer late hours certificate, private club registration permit, or private club registration permit with a retailer late hours certificate issued under the Alcoholic Beverage Code, Chapter 25, 28, 29, or 32, other than a location for which a person holds a wine and malt beverage retailer's permit issued under Chapter 25, Alcoholic Beverage Code, that derives less than 30 percent of the location's gross receipts from the sale or service of alcoholic beverages.

(d) Any applicant whose application is denied under this subchapter, or who is granted a license the terms of which are more restricted than those applied for, shall be notified by the director in writing of the denial or restriction and of the reasons therefore. The applicant may appeal the director's decision in accordance with rules adopted under this chapter [ by the commission for that purpose ].

(e) A license issued under this chapter may by its terms limit the type of games and/or method of sales authorized by the license. A determination of appropriate limitations on any license are within the director's sole discretion, provided that the director shall furnish the licensee with a written explanation of [ or ] the reasons for any such limitations.

(f) Based upon consideration of the factors in §140.160(g) [ §401.160(g) of this title ] (relating to Standard Penalty Chart), the director may determine a person or organization whose license has been revoked or surrendered, or whose application has been denied for reasons which would justify a revocation of an existing license, will not be eligible to apply for another license earlier than one year from the date of revocation, surrender, or denial.

§ 140.157. Provisional License.

In addition to and without limiting the director's ability to issue licenses, the director may issue provisional licenses to applicants to become sales agents. Examples of the reason a provisional license may be issued include but are not limited to a special event and the pendency [ pendancy ] of a background check conducted pursuant to Government Code, Chapter 466. A provisional license shall expire on the date specified on the license. A provisional license is subject to suspension or revocation in accordance with the rules adopted [ procedures established by rules issued by the commission ] under this title upon the [ commission's ] finding of any factor under §140.153(b) [ §401.153(b) of this title ] (relating to Qualifications for License), §140.158 [ §401.158 of this title ] (relating to Suspension or Revocation of License), or §140.159 [ §401.159 of this title ] (relating to Summary Suspension of License).

§ 140.158. Suspension or Revocation of License.

(a) The department [ commission ] may suspend or revoke any license issued under this subchapter if the department [ commission ] finds that any factor listed as grounds for denial of a license under §140.153(b) [ §401.153(b) of this title ] (relating to Qualifications for License) or any factor listed in subsection (b) [ of this section ] apply to the licensee. The department [ commission ] shall inform the sales agent in writing of the decision to suspend or revoke a license for any of these reasons. In addition, in the event of a license suspension under this section, the director [ of the Lottery Operations Division ] shall also inform the licensee of the terms under which the suspended license may be reissued.

(b) Without limiting the department's [ commission's ] ability to consider factors listed in §140.153(b) [ §401.153(b) of this title ] as grounds for suspension or revocation of a license issued under this subchapter, the department [ commission ] may also suspend or revoke a license for reasons including, but not limited to, any of the following:

(1) licensee engages in telecommunication or printed advertising that the director determines to have been false, deceptive or misleading;

(2) licensee conditions redemption of a lottery prize upon the purchase of any other item or service;

(3) licensee imposes a restriction upon the redemption of a lottery prize not specifically authorized by the director;

(4) licensee fails to follow instructions and procedures for the conduct of any lottery game, lottery special event or promotion;

(5) licensee and/or its employee(s) exhibit abusive [ discourteous ] treatment including, but not limited to, abusive language toward customers, department [ commission ] employees or department [ commission ] vendors;

(6) licensee fails to establish or maintain reasonable security precautions regarding the handling of lottery tickets and other materials;

(7) licensee fails to deface a validated ticket;

(8) licensee sells a draw game ticket for a draw that has already taken place;

(9) licensee fails to follow validation procedures, including, but not limited to, paying a claim without validating the ticket, failing to pay a valid prize after validating a customer's winning ticket, or retaining a customer's winning ticket that has not been validated;

(10) licensee violates any directive or instruction issued by the director [ of the Lottery Operations Division ];

(11) licensee violates any express term or condition of its license not specifically set forth in this subchapter;

(12) licensee sells a scratch ticket from a game that has closed after the date designated for the end of the game;

(13) licensee refuses to refund or properly cancel a Pick 3 or Daily 4 ticket;

(14) licensee fails to return an exchange ticket to a prize claimant claiming a prize on a multi-draw ticket if an exchange ticket is produced by the licensee's terminal;

(15) licensee fails to keep accurate and complete records of all tickets that have not been sold from confirmed, active, and settled packs;

(16) licensee fails to meet any requirement under §140.368 [ §401.368 of this title ] (relating to Lottery Ticket Vending Machines), if the licensee has been supplied with a self-service lottery ticket vending machine by the department [ commission ];

(17) licensee fails to take readily achievable measures within the allowed time period to comply with the barrier removal requirements regarding the ADA;

(18) licensee fails to prominently post license;

(19) licensee sells tickets that were assigned to another licensed location;

(20) licensee knowingly sells a ticket or pays a lottery prize to another person who is:

(A) an officer or an employee of the department [ commission ];

(B) an officer, member, or employee of a lottery operator;

(C) an officer, member, or employee of a contractor or subcontractor that is excluded by the terms of its contract from playing lottery games;

(D) the spouse, child, brother, sister, or parent of a person described by subparagraph (A), (B), or (C) [ of this paragraph ] who resides within the same household as that person;

(21) licensee endangers the security and/or integrity of the lottery games operated by the department [ commission ];

(22) licensee intentionally or knowingly sells a ticket at a price the licensee knows is greater than the price set by the executive director;

(23) licensee charges a fee for lottery ticket purchases using a debit card, requires an additional purchase with a debit card, and/or requires a minimum dollar amount for debit card purchases of only lottery tickets.

(24) licensee sells tickets at a location that is not licensed;

(25) licensee intentionally or knowingly sells a ticket by extending credit or lends money to enable a person to buy a ticket;

(26) licensee intentionally or knowingly sells a ticket and accepts anything for payment not specifically allowed under the State Lottery Act;

(27) licensee sells tickets over the telephone or Internet, or via mail order sales; or establishes or promotes a group purchase or pooling arrangement under which tickets are purchased on behalf of the group or pool and any prize is divided among the members of the group or pool, and the licensee intentionally or knowingly:

(A) uses any part of the funds solicited or accepted for a purpose other than purchasing tickets on behalf of the group or pool; or

(B) retains a share of any prize awarded as compensation for establishing or promoting the group purchase or pooling arrangement;

(28) licensee intentionally or knowingly alters or forges a ticket;

(29) licensee intentionally or knowingly influences or attempts to influence the selection of a winner of a lottery game;

(30) licensee intentionally or knowingly claims a lottery prize or a share of a lottery prize by means of fraud, deceit, or misrepresentation; or aids or agrees to aid another person or persons to claim a lottery prize or a share of a lottery prize by means of fraud, deceit, or misrepresentation;

(31) licensee intentionally or knowingly tampers with, damages, defaces, or renders inoperable any vending machine, electronic computer terminal, or other mechanical device used in a lottery game, or fails to exercise due care in the treatment of department [ commission ] property;

(32) licensee:

(A) induces another person to assign or transfer a right to claim a prize;

(B) initiates or accepts an offer to sell the right to claim a prize;

(C) initiates or accepts an offer of compensation from another person to claim a lottery prize; or

(D) purchases, for anything of value, a lottery ticket from a person who is not a licensed lottery retailer;

(33) licensee intentionally or knowingly makes a statement or entry that the person knows to be false or misleading on a required report;

(34) licensee fails to maintain or make an entry the licensee knows is required to be maintained or made for a required report;

(35) licensee knowingly refuses to permit the director [ of the Lottery Operations Division, the executive director ], the employees of the department [ commission, the lottery operator ], the employees or agents of the lottery operator, or the state auditor to examine the agent's books, records, papers or other objects, or refuses to answer any question authorized under the State Lottery Act;

(36) licensee intentionally or knowingly makes a material and false or incorrect, or deceptive statement, written or oral, to a person conducting an investigation under the State Lottery Act or a department [ commission ] rule;

(37) licensee commits an offense of conspiracy as defined in the State Lottery Act;

(38) licensee sells or offers for sale any interest in a lottery of another state or state government or an Indian tribe or tribal government, including an interest in an actual lottery ticket, receipt, contingent promise to pay, order to purchase, or other record of the interest;

(40) [ (39) ] licensee, with criminal negligence, [ licensee intentionally or knowingly ] sells or offers to sell a ticket to a person that the licensee knows is younger than 18 years (revocation only);

(41) [ (40) ] licensee incurs four (4) notices of nonsufficient fund transfers or non-transfer of funds within a 12-month period (revocation only);

(42) [ (41) ] licensee fails to pay the full amount of money owed to the department [ commission ] after a nonsufficient funds transfer or non-transfer of funds to the department's [ commission's ] account (revocation only);

(43) [ (42) ] licensee knowingly sells tickets to, works with, or otherwise assists a lottery ticket courier service (revocation only); [ or ]

(49) [ (43) ] licensee has violated a provision of the State Lottery Act[ , Government Code, Chapter 466, ] or a department [ commission ] rule adopted under the [ State Lottery ] Act.

(c) For purposes of this chapter, the term "lottery ticket courier service" means a service that, by any remote means, such as telephone, Internet application, or mobile application, accepts and fulfills, for a fee or compensation, orders to purchase lottery tickets on behalf of another person not present to effect an in-person sale.

§140.160. Standard Penalty Chart.

(a) The department [commission], through the executive director or his/her designee [of the Lottery Operations Division], may offer settlements to persons charged with violating the provisions of the State Lottery Act or rules of the commission. Settlement of those cases, unless otherwise provided for elsewhere in this rule, shall be in compliance with the following standard penalty chart. A settlement will be in the form of an Agreement and Consent Order [of the commission].

(b) A repeat violation by a licensee justifies the penalty for a second or third violation if it occurs within 12 months of the first violation. Violations need not be the same or similar in nature to previous violations to be considered repeat violations.

(c) A penalty for an alleged repeat violation shall not be assessed unless the alleged violation occurs after the licensee has been notified, in writing, of the first alleged violation. Notwithstanding the preceding sentence, if an alleged violation is discovered during an undercover operation, then no notice of any prior alleged violations may be necessary to assess a penalty for a repeat violation. The requirement that written notice be given to a licensee shall not be interpreted to require that a notice of hearing for the violation be delivered to the licensee.

(d) The list of violations in the standard penalty chart is not an exclusive list of violations of the Act [commission] or rules of the commission. The executive director or commission is authorized to assess penalties for a [any] violation of any of the foregoing statutes or rules for which a penalty is not provided on the chart. Any penalty assessed for a violation not provided for on the standard penalty chart shall be approved by the director [of the Lottery Operations Division or his/her designee] prior to its assessment.

(e) Any person responsible for assessing a penalty for a violation may, unless otherwise required by statute, deviate from the standard penalty chart if mitigating circumstances are involved and consideration will be given to all the factors listed in subsection (g) [of this section]. If a recommendation deviating from the standard penalty chart is made, it must be made in writing and [be] filed with the case report. Final approval shall be made by the director [of the Lottery Operations Division or his/her designee].

(f) Unless otherwise provided by statute, the [The] standard penalty chart does not bind an administrative law judge or the commission as to penalties for any violation determined to have occurred by the facts presented in an administrative hearing and the record of that proceeding shall be the determining factor as to the sufficiency of the penalty assessed.

(g) Based upon consideration of the following factors, the executive director or commission may, unless otherwise required by statute, impose penalties other than the penalties recommended in §140.158 [§401.158 of this title] (relating to Suspension or Revocation of License) and/or this section:

(1) Severity of the offense;

(2) Danger to the public;

(3) Number of repetition of offenses;

(4) Number of complaints previously found justified against the licensee;

(5) Length of time the licensee has held a license;

(6) Actual damage, physical or otherwise, caused by the violations;

(7) Deterrent effect of the penalty imposed;

(8) Attempts by licensee to correct or stop violations or refusal by licensee to correct or stop violations;

(9) Penalties imposed for related offenses;

(10) Current employment status of any employee(s) that committed violation(s); or

(11) Any other mitigating or aggravating circumstances.

(h) Standard Penalty Chart.

Figure: 16 TAC §140.160(h) (.pdf)

[Figure: 16 TAC §401.160(h)]

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on July 27, 2026.

TRD-202603157

Deanne Rienstra

General Counsel

Texas Department of Licensing and Regulation

Earliest possible date of adoption: September 6, 2026

For further information, please call: (512) 344-5392

SUBCHAPTER E. RETAILER RULES

The proposed rules are proposed under Texas Government Code, Chapter 466, and Texas Occupations Code, Chapter 51, which authorize the Texas Commission of Licensing and Regulation, the Department's governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by the Department.

The statutory provisions affected by the proposed rules are those set forth in Texas Government Code, Chapter 466, and Texas Occupations Code, Chapter 51. No other statutes, articles, or codes are affected by the proposed rules.

The legislation that enacted the statutory authority under which the proposed rules are to be adopted are Senate Bill (SB) 1346 and SB 3070, 89th Legislature, Regular Session (2025).

§140.355. Restricted Sales.

(a) Retailers shall not sell lottery tickets via the Internet or by mail, phone, fax, or other similar method of communications. Retailers shall not sell a lottery ticket or any other document evidencing a right, privilege, or share in a lottery ticket from another jurisdiction by any means.

(b) Retailers shall not knowingly sell tickets to, work with, or otherwise assist a lottery ticket courier service.

(c) Retailers shall not sell tickets to persons under the age of 18. Any ticket purchased by or sold to an individual under the age of 18 years shall be void and the prize otherwise payable on the ticket is treated as an unclaimed prize under Texas Government Code §466.408.

(e) [(d)] Retailers shall not sell a ticket or pay a lottery prize to another person that the retailer knows is:

(1) an officer or an employee of the department [commission];

(2) an officer, member, or employee of a lottery operator;

(3) an officer, member, or employee of a contractor or subcontractor that is excluded by the terms of its contract from playing lottery games;

(4) the spouse, child, brother, sister, or parent of a person described by paragraph (1), (2), or (3) [of this subsection] who resides within the same household as that person.

(f) [(e)] Retailers shall not sell tickets from a game after the game's closing date.

§140.368. Lottery Ticket Vending Machines.

(a) No sales agent may distribute or sell lottery game tickets from a lottery ticket vending machine, except those lottery ticket vending machines supplied and placed by the department [commission]. For purposes of this section lottery ticket vending machine is defined as a ticket dispensing machine that dispenses lottery game tickets without the assistance of a sales agent's personnel.

(b) Lottery ticket vending machines may be placed by the department [commission] in a sales agent's location based upon criteria established by the executive director or his/her designee. The criteria may include consideration of the location of the sales agent, the type of the sales agent's location, e.g., grocery store, the size of the sales agent's location, and minimum sales criteria that shall be provided to the sales agents prior to implementation of such criteria.

(c) A lottery sales agent must maintain the minimum sales criteria established by the executive director in order to obtain and retain a lottery ticket vending machine. A sales agent who does not maintain minimum sales in accordance with such sales criteria may be placed in a sales review period unless good cause exists as determined by the executive director. After the sales agent's sales review period has expired, the sales agent's sale of lottery game tickets shall be reviewed. If the sales agent has not maintained the minimum sales in accordance with the minimum ticket sales criteria during such sales review period, the department [commission] or department's [commission's] designated representative may remove the lottery ticket vending machine.

(d) The minimum sales criteria established by the executive director shall be provided to the sales agents at least 30 days prior to imposition of such minimum sales criteria.

(e) Lottery ticket vending machines may only be placed within the sales agent's location in a site approved by the department [commission].

(f) A lottery sales agent may redeem any lottery prize of less than $600.

(g) Every lottery sales agent location equipped with a lottery ticket vending machine(s) will be provided a remote shut off device to allow for the control of sales transactions.

(h) A lottery sales agent shall keep the lottery ticket vending machine stocked with printer supplies and tickets.

(i) A lottery sales agent shall provide designated sales reports to the department [commission] or the department's [commission's] designated representative(s).

(j) A lottery sales agent shall undergo required training relating to the use and maintenance of lottery ticket vending machines prior to ticket sales from the lottery ticket vending machine.

(k) A lottery sales agent shall allow department [commission] designated service technicians access to the lottery ticket vending machine to allow service and repair of the lottery ticket vending machine.

(l) A sales agent is expected to make every reasonable effort to provide player resolution at the retail location if a player's lottery purchase, or attempted purchase, from a lottery vending machine results in a need to refund the player's money. The sales agent is to contact the Retailer Services [Lottery Operations Division] for service to resolve a mechanical error and the department [commission] to request any refund due to player reimbursement. Resolution due to player errors or requests for ticket cancellations must follow the specific lottery game rule for the game played.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on July 27, 2026.

TRD-202603158

Deanne Rienstra

General Counsel

Texas Department of Licensing and Regulation

Earliest possible date of adoption: September 6, 2026

For further information, please call: (512) 344-5392