LOTTERY LAW
This article seeks to analyze whether America PAC’s giveaway constituted an illegal lottery under U.S. and Canadian law. Readers should note that possible election law issues, as well as all peripheral legislation and legal provision that may be relevant, such as Canada’s Competition Act , are beyond the scope of this article. US legal framework In the United States, lotteries are regulated at both the federal and state levels, with enforcement driven primarily by state laws and supplemented by federal statutes targeting interstate and international lottery activities. 4 A “lottery” is generally defined as any scheme that involves “(1) the distribution of prizes; (2) according to chance; (3) for a consideration.” 5 Lotteries are broadly prohibited unless specifically authorized by state law, such as state-run lotteries. As all three of the aforementioned elements must be present for a promotion to be considered a lottery, most sweepstake operators stay above board by offering a “no purchase necessary” or alternative method of entry (“AMOE”). In doing so, these operators eliminate the consideration element from the equation, and can thus credibly maintain the position that their sweepstakes are not lotteries. 6 Application America PAC’s giveaway presents an unusual set of facts vis- à-vis the framework outlined above. To start, the giveaway did not include an AMOE. Nor is it clear that what participants were required to do – submit personal information, sign a political petition, and agree to act as a spokesperson – constituted “consideration” in the relevant sense. Conveniently, a lower court has already considered and ruled on these very issues. The Philadelphia Court Case Shortly after America PAC announced its giveaway, the Commonwealth of Pennsylvania filed an emergency motion for injunctive relief at the Philadelphia Court of Common
Pleas, against America PAC and Elon Musk, seeking to halt the giveaway on the grounds that it constituted an illegal lottery. After reviewing the applicable legal framework, the court concluded that Pennsylvania had failed to establish any of the three required elements of a lottery. On the question of prize, the court took a straightforward view: there wasn’t one. Based on the evidence, individuals selected by America PAC were required to perform services as paid spokespersons in order to receive the US$1 million. The court further noted that from the outset, Elon Musk had made clear that serving as a spokesperson was a condition of payment, negating any claim that the money was a prize to be won. The court likewise found the element of chance to be lacking. Credible testimony from America PAC indicated that selection was based on a multi-step vetting process, including reviews of participants’ social media activity and in-person meetings prior to town hall events. Candidates were chosen based on their perceived suitability and, on that basis, the court concluded that the selection process did not involve chance. As for the last element – consideration – the court held that “consideration” in the context of illegal lotteries must involve money. 7 This holding did not stem from any statutory definition. Rather, the court observed that monetary consideration was a consistent element across myriad Pennsylvania lottery cases. It therefore declined to adopt the broader conception of consideration used in many contract law cases, reasoning that there was no juridical basis in this instance to thus transplant definitions across contexts. 8 It should be emphasized that this case arose in the context of an emergency motion for injunctive relief, where the party seeking the injunction bears a particularly high burden. The court itself cited multiple authorities to that effect. While it is possible – and indeed likely – that the outcome may have been different in a full trial or on a different application, the decision nevertheless offers a useful basis for analysis.
4 See, for example, 18 U.S.C. §§1301 – 1307, and 39 U.S.C. §§ 3001-3017. 5 FCC v. American Broadcasting Co., Inc. , 347 U.S. 284, 290 (1954) 6 David Klein, The Sweepstakes AMOE in a Nutshell, Klein Moynihan Turco LLP (April 11, 2023), https://kleinmoynihan.com/the-sweepstakes- amoe-in-a-nutshell-contest-marketing-lawyer/ 7 Commonwealth of Pennsylvania v. America PAC and Elon Musk , No. 3509 (Phila. C.P. Nov 12, 2024), available at https://www.pacourts.us/ Storage/media/pdfs/20241113/183454-krasnervmusketalfindingsoffactandconclusionsoflaw.pdf 8 Id ., noting that these holdings are likely at least partly a function of the procedural context of assessing a preliminary injunction, which is an “extraordinary remedy” and places “a heavy burden of proof” on the party seeking the injunction.
IMGL MAGAZINE | SEPTEMBER 2025
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