Reforms to Modernize Charitable Break Open Tickets

Updated, July 19, 2022

The AGCO has approved changes to modernize the break open ticket (BOT) charitable lottery sector. These changes were developed in close collaboration with stakeholders to address financial pressures facing the charitable sector. Changes include increasing expense maximums and introducing a new revenue model for new BOT types submitted to the AGCO for approval in 2022 and beyond. These changes have provided stability to the BOT market while enabling the continued use of BOTs as a fundraising tool for charities and the communities they support. 

The increase to expense maximums applies to allowable Gaming Equipment Suppliers (GES) expenses and became effective as of January 4, 2022. The new expense maximums provide a variable expense rate between ticket types, as shown in the revised Schedule of Approved Break Open Ticket Types and Associated Expense Maximums chart below.

The AGCO has also approved a new revenue model for new BOT types submitted to and approved by the AGCO in 2022 and beyond. This change modernizes the way expenses are calculated by streamlining and simplifying the BOT administration process for charities. It also protects the charitable share of BOT fundraising revenue. The new revenue model will apply to eligible new tickets submitted to the AGCO and no further tickets will be approved under the previous expense maximums model.

BOT lotteries have served as an important fundraising tool for charities for many years. The reforms were developed with advice from a range of charities, stakeholders and associations involved in this sector.

Increases to Expense Maximums

Through the AGCO-approved expense maximums, some BOT sector participants may earn a defined percentage of the BOT “Win”. Effective January 4, 2022 the expense maximums for Gaming Equipment Suppliers increased as per the chart below and as shown in the updated Schedule of Approved Break Open Ticket Types and Associated Expense Maximums.

The increases in expense maximums apply to Gaming Equipment Suppliers and existing ticket types. The changes highlighted below took effect on January 4, 2022.  Retroactive invoicing of boxes ordered before January 4, 2022 is not permitted. These changes will not affect charitable or municipal reporting.

New Revenue Model for BOTs and New Tickets

As originally announced in December 2021, the AGCO is also introducing a new revenue model (“revenue split” model) for BOTs to provide a more flexible, modern approach to expenses.

The goals of the new revenue model for new BOT types submitted to and approved by the AGCO in 2022 and beyond are:

• To modernize the way expenses are calculated by streamlining and simplifying the BOT administration process for charities, and
• To protect the charitable share of BOT fundraising revenue.

This updated information bulletin includes an amendment to the new revenue model approach. The model applies to new tickets at $1 and above, provided that the $1 tickets have a count below 5,000 tickets.

• AGCO will no longer approve any new $ 0.50 tickets
• AGCO will no longer approve any new $ 1 tickets with counts of more than 5,000.

An exception to this amendment is an AGCO approval today of four new $0.50 tickets that were submitted earlier this year and prior to the amendment described in this Bulletin.

The four new approved break open tickets under the new revenue model are ticket types AG91, AG92, SP45, and SP46. Charities and suppliers will split revenue from these tickets according to the revenue model outlined below. The ticket price, count and prizes are listed below:

New Revenue Model

The following new revenue model will apply to these four tickets and eligible new tickets submitted to the AGCO for approval starting in 2022 and beyond. The approach is as follows:

• "Net win" will be calculated as gross wager, minus prizes, minus ticket cost, to equal the net win:
  • “Gross wager” = ticket price multiplied by ticket count
  • “Ticket cost” = the actual and auditable manufacturer-invoiced cost of the tickets plus HST.
    • The actual and auditable manufacturer-invoiced cost of the ticket plus HST is shared equally between the supplier and the charity (not from the charity’s share of the net revenues).
• The charity and suppliers will split the "net win" with 50% going to each party. Charities and suppliers will pay applicable expenses out of their 50% portion of the net win.
• Under the supplier 50% portion of the net win: 
  • Separate expense lines, such as the GES category, are eliminated.
  • A variety of supplier expenses are paid (see the table below).
  • The seller portion of the expense maximums will be paid by the supplier.  Suppliers will have the business flexibility to negotiate seller commission directly with retailers.
• Under the charity 50% portion of the net win:
  • Separate expense lines, such as charity administration, are eliminated.
  • The charity will pay for expenses, including administrative costs and the licence fee, from their 50% portion of the net win.

• For further clarification, suppliers will pay for all dispenser-related costs from their share of the revenue. In addition, suppliers will also pay the full cost of HST on the services they provide from their share of the revenue. The charity will not pay for any supplier-related service or HST costs.

Locations where BOTs are Sold

This model applies to a variety of locations where BOTs are sold, including a break open ticket seller (third party retailer), the licensee's own location, and non-pooling bingo halls.

For new BOT types submitted to the AGCO in 2022 and beyond, licensees who own the location where BOTs are sold or licensees in non-pooling bingo halls, will be able to collect up to half of the net win to cover their supplier costs.

Supplementary Materials

To accommodate the new revenue model, the AGCO will make changes to the Break Open Ticket Licence Terms and Conditions and Standards for Suppliers of Goods and Services: Break Open Tickets. These changes reflect the approach for the revenue model, and provide flexibility by allowing charities, suppliers and retailers to enter into contracts based on the new revenue model for new tickets. These will be available in the coming weeks.

Reporting

Charities will continue to use the existing Break Open Ticket Lottery Report to complete their reporting requirements. The reporting on both revenue models can be completed on one report, with the models being differentiated by the ticket type.

In section 5 of the report, charities may record the revenue split paid to the supplier in either the gaming equipment supplier or gaming service supplier line. Charities will no longer be required to report their administrative expenses, the seller commission or the dispenser fee.

Quick Facts about BOTs:

• The AGCO is responsible for regulating and overseeing licensed lottery events such as the sale of BOTs conducted and managed by eligible charitable and religious organizations to raise funds to support charitable purposes.
• A BOT is a cardboard device that has perforated cover window tabs behind which symbols are revealed by tearing open the cover tab. The winning combination of symbols is specified on the back of the ticket. BOTs are also known as "Nevada tickets" or "pull tabs."
• BOT types are characterized by the number of tickets per deal, the price per ticket and the total value of prizes per deal.
• For more information on BOTs, including how to apply for a provincial or municipal licence to hold a break open ticket event, please visit the AGCO's BOT Licensing Overview page.
• If you have questions regarding specific types of BOTs, please review the List of Approved Break Open Ticket Manufacturers for additional details.
• See updated Schedule of Approved Break Open Ticket Types and Associated Expense Maximums and The New Revenue Model

Contact the AGCO for More Information

Charitable gaming-related inquiries can be sent directly to the AGCO’s Eligibility Officers at lotterylicensing@agco.ca. The AGCO’s Customer Service can be reached at 1-800-522-2876, Monday to Friday from 8:30 a.m. to 5 p.m.