Our marketing group has put together a survey that is going through e-mail to customers that use our on-line banking service. As an incentive to fill out the survey, the respondents have an opportunity to win by drawing a $100 gift card. The question has come up about whether or not this could be looked at as a lottery. However, it is only for those who respond and they don't have to "pay" to have a chance to win. Are there any concerns with doing this? Thank you.

12 USC Ch2, Sec. 25a - "The term "lottery" includes any arrangement whereby three or more persons (the "participants") advance money or credit to another in exchange for the possibility or expectation that one or more but not all of the participants (the "winners") will receive by reason of their advances more than the amounts they have advanced, the identity of the winners being determined by any means which includes --

(A) a random selection;..."

Interpretations in the past have held that the fees a customer pays the bank fits the "advance money to another" requirement and they hope to win more than they pay. This could classify your program as a lottery. For this reason these programs are generally open to the public. That is what gets them away from being a lottery.

I can't say that your program is or isn't. While you might assume there is a bright line test here, this isn't always the case. How conservative are you, what risks would you assume making your own interpretation, and will state laws come into play? You must answer these questions, or simply contact counsel.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

Lotteries usually have to have 3 elements: prize, chance and consideration. From you description, I don't think you all three elements. Not sure how respondents can register for the gift card. Are all respondent names put in a hat and the winner's name drawn? If so, probably should make that clear in the survey.
Good luck! Please post your results here for all to share.

I agree ... but even if you conclude it is not a lottery, some states have "sweepstakes" laws for prizes short of lotteries. These laws typically require disclosures of eligibility (eg., age, U.S. citizen, residence), date entries end, odds of winning (or "odds of winning depends on number of eligible entries received"), name of sponsor, restrictions (eg. travel dates)).

Only those responding to the survey would be eligible for the drawing of the gift card. There is no consideration given on their part to participate. This is disclosed in the communication.

Angela, you said, "There is no consideration given on their part to participate". You also said "customers that use our on-line banking service" will be the ones asked to respond.

I had counsel's opinion that a customer's doing business with us, and paying account fees, could loosely be considered their payment, their consideration. That is why I am suggesting you determine the risks you'll accept (based on other opinions expressed here) and your own interpetation.

There were state (TX) specific issues that influenced the opinion our counsel provided. You may or may not have the same issues. But your definitions of consideration may differ from someone else's.

This could be a touchy subject ripe for litigation or a "who really cares" when all is said and done.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

I checked with the FDIC - Kansas City RO on this and according to Dick Anderson "making a deposit or opening an account is NOT an 'advance' under Section 20 of the Federal Deposit Insurnace Act". For instance, it is OK for me to offer a prize to everyone that opens up a new deposit account, even if there is a minimum balance to open the account and we charge a monthly maintenance fee. The reason is that the money still belongs to the customer. They are not advancing money to the bank for a chance to win - they are advancing money to themselves.

Obviously, you should check any State laws.

Under our state law, for example, a drawing would be considered an unlawful sweepstakes if an individual must give something of value to enter. Our Attorney General's office said that requiring someone to open a deposit account or apply for a loan as a condition of being entered in the contest would constitute "consideration" and would render the drawing an unlawful sweepstakes. Their thought was that when an individual gives you his business, he is giving you something of value.

On the other hand, if you offer existing customers the opportunity to participate and all they have to do is answer your questions, I don't believe there would be a problem under our state law. See if your state statute is similarly constructed.