April 9, 2014
Here is an explanation of what makes a lottery illegal by our own Rosemary Stein, a Vice President at the Chicago office of Marden-Kane.
Did you know that the first recorded signs of a lottery are keno slips from the Chinese Han Dynasty between 205 and 187 BC? These lotteries are believed to have helped to finance major government projects like the Great Wall of China. In early America, an English lottery, authorized by King James I in 1612, granted the Virginia Company of London the right to raise money to help establish settlers in the first permanent English colony at Jamestown, Virginia. Lotteries in colonial America played a significant part in the financing of both private and public ventures.
In our modern day, our federal and state governments are also using lotteries to raise funds. However, it is ILLEGAL under federal and state law for a private entity to run a lottery.
A lottery is generally defined as a promotion in which all three of the following elements are present: PRIZE, CHANCE and CONSIDERATION.
PRIZE: Anything of value awarded to winners: cash, trips, cars, or merchandise for example.
CHANCE: Winners are selected by a random process (i.e., drawing, seeded winning objects, pre-selected numbers)
CONSIDERATION:
- Monetary-Purchase of a Sponsor’s product or service or other payment
- Non-Monetary- Time or effort expended which benefits Sponsor in some direct way
One of the three elements must be eliminated for a promotion to be lawful (Promotions may not require consideration). Consideration may be eliminated by providing an alternate (Free) means of entry either by mail, online or toll-free number.
If you are planning a Sweepstakes or Promotion, be sure to give Free methods of entry equal position: Same limit on number of entries, same time period to submit entries and to conduct the random drawing from one pool of entries regardless of method of entry.
If you need help planning your sweepstakes or promotion contact us.
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I’ve been trying to find the exact statute that states this. i know it is out there, just not sure where. Every site just says “federal and state laws prohibit private lotteries”
Every state has it’s own laws about this. You would need to refer to the laws of each state.
According to my research so far, federal laws only prohibit lotteries that are organized through specific means (e.g., mail or phone), which leaves other ways open. Is that not true? Like Joe, I am having a hard time finding a blanket ban on the three elements you described above in all circ*mstances (except state-run ones). I realize each state has its own laws, but maybe some states do allow private lotteries?
If you have specific questions about your state and an idea for a promotion you can contact us at 516-365-3999 and we can research the feasibility.
