I want to put a new feature on my website where members can participate in lottery kind of contest. There won't be any input of money from members, only they have to participate if they want. Upon the completion of this contest, some random number of winners will be selected out of all participants, who will be awarded with gift-coupons. So, will this be considered as gambling in state like Alabama where gambling is not legal?
A "lottery" is illegal in Alabama. (Charity bingo is an exception to this rule.) A lottery (a) has a prize, (b) winner of which is determined by chance, (c) for consideration (i.e., buying a ticket).
If you are not selling tickets or requiring consideration for this drawing, you're likely not running a lottery.
If participants would have to buy something or otherwise pay you for the chance to win, you're likely running a lottery.
You should talk to an attorney about your idea. You don't want to run afoul of this administration and it's anti-gambling stances.
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2 lawyers agree
Gambling requires three elements: 1) consideration 2) chance and 3) a prize.
What you are describing would eliminate the consideration element (where someone has to offer something of value in exchange for the chance of winning the prize).
Assuming we eliminate this element, you will not be considered illegal gambling but you are still operating a contest.
Online contests are regulated under state law. This is why you often see in the rules a disclaimer such as: NOT AVAILABLE TO RESIDENTS OF THE FOLLOWING STATES: FL, VT, NY, CA...
This is because some states will require a proper registration and in some cases even a the placement of a bond. Remember, state Attorneys General seek to protect their citizens from SCAM operators.
Many webmasters will never bother to comply with any of this and will never face a problem. Others end up having to hire criminal lawyers in a multitude of states. What is typically done is to walk through the various state requirements for each state you care to extend the contest in and see what if anything will be required.
I suggest you discuss with a lawyer that has experience in this area.
Most of us here, including myself, offer a free phone consult.
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Gaming Law Attorney
I'd caution my colleagues that in Alabama, while the state's definition of a lottery appears to require money payment, what the asker is describing may still be gambling, if they require participants to provide something of value to play. A brief search shows that "something of value" is defined in Alabama Criminal Code as "Any money or property, any token, object or article exchangeable for money or property or any form of credit or promise directly or indirectly contemplating transfer of money or property or of any interest therein, or involving extension of a service entertainment or a privilege of playing at a game or scheme without charge." If the players have to give something that qualifies as "something of value", then you could still be running afoul of Alabama's gaming laws.
The author is a Maryland attorney; however no answer given on Avvo is intended as legal advice or intended to create an attorney-client relationship. Dan's expertise lies in the electronic entertainment (video game) industry, as well as complex internet law issues, electronic free speech, entertainment law, copyright and trademark law, and computer fraud. He primarily represents game developers and founders of emergent internet technologies.