U.S. Law Snapshot: Illegal Lotteries

Running a loyalty program or sweepstakes outside of certain parameters runs the potential risk of being considered an illegal lottery and entering the realm of gambling.  Some states like California will allow state-run lotteries, but prohibit private lotteries.  An illegal lottery constitutes some sort of consideration, a chance result, and a certain award constituting value.  Arguably, if all three are present then such a structure constitutes an illegal lottery.  However, how each component is defined and interpreted varies from state to state.  Whether an award has value is arguably related to whether a secondary market exists for that award/virtual currency.  To be further discussed in the BHBA panel taking place on 9/9.