First, let's look first at IL #923. In it, the OCC looks at seven different allegations of banks violating 12 U.S.C. Section 25a by advertising lotteries. That section of law prohibits national banks from participating in certain lottery-related activities, such as announcing, advertising, or publicizing the existence of any lottery.
In each of six cases, the OCC's letter found no violation of Section 25a. In a seventh case, the OCC merely declined to give an opinion because the financial institution was not a national bank. The highlights are as follows:
TYPE OF ACTIVITY/CONDUCT
WHY IT DOESN'T VIOLATE SECTION 25a
Newspaper ad that advertises a raffle to be held during a fashion show states it is sponsored by the bank. The complainant alleged the bank was therefore advertising tickets being sold for a raffle in violation of the lottery statute.
OCC says it is not a problem because the bank didn't pay for the ad. The bank was listed as a sponsor because it donated money for the event. The bank didn't "publicize" the lottery, so no violation.
Newspaper ad promoting the bank's home equity loans with a statement in the ad that says: How can the 89,545,673 people who didn't win the lottery this weekend make those much-needed home improvements? Introducing our great rates on a home equity line of credit.
The phrase "win the lottery" in the ad was simply a figure of speech and did not constitute "announcing the existence" of or "publicizing" a lottery.
Promotional mailing for the bank's credit card included with the "terms and conditions" a transaction fee for the purchase of "betting or casino chips or similar items."
This didn't publicize an actual, identifiable lottery.
Newspaper ad for an 8K race. The race had an entry fee and offered monetary prizes.
Although the bank paid for the ad and sponsors the event, this did not constitute publicizing a game race, or contest which, in turn, is a lottery. OCC notes that one of the essential elements of a lottery is that the winners are selected by chance. In a race, the winner is determined by skill rather than chance, so the race is not a lottery.
Newspaper ads where the bank is listed as a sponsor of bowling party and pro cup events in which entry fees are charged and winners are given prizes.
The bank didn't pay for the ads, plus the OCC believes the events probably are not lotteries for the same reasons discussed above.
Promotional mailing for a credit card offered by a bank that lists transaction fees for the purchase of "bets, lottery tickets, and casino gaming chips."
Not a problem because it didn't publicize an actual, identifiable lottery.
A bank reading this Interpretive Letter, particularly if it's a nationally chartered bank, may mistakenly conclude that the activities described above are perfectly legal. Unfortunately, that is not necessarily the case because many state laws prohibit lotteries. So, even where the bank doesn't pay for an ad that promotes the lottery, the state law may make the lottery itself illegal. And if the lottery itself is illegal, a financial institution should not associate itself with the lottery in any way.
Two points:
If the activity constitutes a lottery under state law, your bank should not be associated with it in any way;
The definition of lottery may be fairly broad under state law. For example, under some state statutes, participants don't necessarily have to pay money in order for the chance to win to constitute a lottery. They simply must be required to give "valuable consideration". One assistant attorney general I spoke to said that he believed if an individual had to give a financial institution his business - open an account, obtain a loan, etc., that would constitute "giving valuable consideration" within the meaning of his state's atatute. So if everyone who opened an account within a certain time period was entered into a drawing for a chance to win a prize, his view was that it would be a lottery under his state law. Talk to your lawyer to find out what your state's law says.
The original version appeared in the January/February 2002 edition of the Oklahoma Bankers Association Compliance Informer.
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