This question was posed to me recently, “Can I legally start my own lottery.” I thought it was an interesting question because I think most people wouldn’t see any harm in offering friends, family, club members, etc the chance to pay for the chance to win prizes.
So I decided to answer this question with another question.
Here it is:
Your neighbor says, “pay me $3.00 and I’ll enter you into my private lottery for a chance to win $15,000,000.” Would you trust him?
Probably not. And why would you trust him?
Because the likelihood of your neighbor putting $15,000,000 into your hands, even if you did win a lottery based on his rules, is very low.
This simplistic and ridiculous scenario answers the question for me.
NO
You may not legally start your own lottery.
States in the U.S. differ on aspects of the lottery: some states make you identify yourself publicly when you win. Others don’t. Some states take out more in taxes than others. When it comes to privately ran lotteries
ALL federal and state agencies explicitly state that it is against the law to start your own lottery. One of the reasons why this is the case is in part due to the hypothetical dilemma proposed above.
Lotteries have been in existence in America as far back as when the first sellers arrived. Even back then corruption and political manipulation led to lotteries never paying out the money owed.
This reason, along with other reasons, led to lotteries being outlawed in most states for decades. One can also surmise that the perceived legitimacy of the lottery is why state lawmakers require people to publicly claim large lottery prizes.
You must come forward and do so publicly when you claim your $90 million. That way, everybody else can see that an ordinary person is receiving the money. No funny business is going on.
Whether or not that winning player gets robbed, kidnapped, or murdered because others want some or all of that newfound fortune is irrelevant. Politicians want people to see the lottery itself is legitimate.
If you do want to start your own game of chance, the rules that govern what constitutes a lottery make things a bit confusing. Three elements constitute what makes a lottery into a lottery.
The first element is the element of chance. In other words, a winner is going to be selected by a random process. Whatever the process is: numbers drawn, cards drawn, etc, it is a process that is unplanned.
The second element is a prize. The prize is whatever is determined by the organizer: cash, gift cards, new cars, etc.
The third element is what is called a consideration. Consideration is something that the participant must do to enter the drawing, and it’s usually to the benefit of the one administering the contest.
This can be a required payment to enter the drawing. It could also be time or effort spent by the participant, and in doing so benefits the sponsor in the end.
If all three elements Prize, Consideration, and Chance are present, you have a form of lottery that is very likely deemed illegal. I mentioned that this gets confusing because it seems that individuals can participate in things like raffles, which meet all of those criteria.
First of all, I am not a lawyer or any type of government official. Don’t take what I say in this blog as legal advice because it is far from it.
But from what I’ve read, a rule of thumb to keep the law off of your back if you want to sponsor games of chance is this:
Be sure that one of the three elements is not present in your drawing. For example, make sure that participants can enter for free in some cases.
If your lottery-not-lottery really gains traction, you may want to consult a lawyer.
Otherwise, the Federal Trade Commission might come a-callin’ with a bill in hand ordering you to pay a hefty fine. I won’t advise you on what to do. All I can tell you is that you can not legally start your own lottery. What you do with that information is up to you.