Consumer protection The Smart Money is on Fox Our gaming lawyers are ranked among the best in the world by Chambers USA and Chambers Global, and the national Gaming Practice at Fox Rothschild is one of the largest and most respected in the country.
A person wishing to make money through gambling can attempt to secure a casino or other license by meeting financial and background suitability requirements and complying with stringent operational regulations. An alternative is to become a social media “influencer” and simply run lotteries on social media platforms. Based on the lack of legislation or enforcement, impacted state governments and the gaming industry seem fine with this situation. I spend more time on Facebook than a person ought, which arguably should be naught. Still, I use social media networks to communicate with my friends and family. Facebook has algorithms that track the ads you click on and then steadily feed you related items. I clicked on an advertisement by a well-known web personality promoting a lottery in which, for US$35, “everyone” wins a car. In truth, most participants only get a 1/64 scale die-cast model that is likely worth much less than $35, while a few participants win an actual vehicle. This advertisement is unambiguously a ploy to generate significant returns by raffling rare automobiles. I was curious whether the promotion was legal, so I clicked on the ad and searched through its linked pages. Now I get an endless stream of lottery ads. After reviewing, most are of, at best, questionable legality. United States lottery laws are primarily set at the state level. Although these laws vary, most states determined that illegal lotteries occur when a person pays consideration for the opportunity to win a prize based on chance. Therefore, a promotion that charges US$35 to have a chance to win a real car is a lottery, right? Not quite. States provide an exception for businesses, such as ’McDonald’s, to sell retail items, such as hamburgers, through promotions that give away lottery entries provided that non- paying customers have an alternative method of entry (AMOE). At first, most courts that considered this exception insisted that the promoter’s goal must be to increase sales of the primary product rather than simply
make money selling entries to a lottery. This is still the prevailing case law in many states. Assuming that all states now allow AMOE even where the only purpose of the promotion is to make money from raffling valuable items, AMOE rules generally require substantially equal opportunity for non-paying participants to (1) enter, (2) win the same prizes as paying customers, and (3) claim prizes. These rules are generally established by court precedent, so a state would be better served by codifying them. A model state act, however, should provide: “Every game promotion offered to a person located in this state must provide for non- paying persons to enter, claim, and win all offered prizes on equal terms as paying persons.” I will not dwell on the second and third elements because they tend to have less relevance to these online raffles. The second concept of equal dignity is that non-paying participants should have equal chances to win all prizes offered. Separate prize pools may invalidate the flexible entry sweepstakes because the non-paying participants do not have the opportunity to win the same prizes as paying participants. As an aside, in the “everyone wins” car raffle, only paying participants can win the cheapest 1/64 model car. Non-paying entrants are excluded from “everyone ” and unlikely to win anything. You are merely given a chance to win a full- sized car. Despite its misleading title, the smaller print of the raffle written rules says if you buy a 1/64 car, you have the opportunity to win the real expensive vehicles. The third requirement of equal dignity is that non-paying participants must be able to claim their prizes just as easily as paying participants. The most relevant AMOE requirement to social media raffles is equal opportunity to enter. This provision requires the promoter to allow non-paying participants to enter the raffle similarly to paying participants. Central to the notion of equal opportunity to enter is that the public knows (1) that they do not need to pay to enter, (2) how to enter the sweepstakes, and (3) that no purchase
You Need More Than Good Odds to Keep a Competitive Edge
Our gaming lawyers are ranked among the best in the world by Chambers USA and Chambers Global, and the national Gaming Practice at Fox Rothschild is one of the largest and most respected in the country.
Marie Jiacopello Jones 609.572.2259 mjones@foxrothschild.com C.J. Fisher 609.572.2209 cjfisher@foxrothschild.com
20 • IMGL Magazine • April 2022 www.foxrothschild.com/gaming
IMGL Magazine • April 2022 • 20
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