Also among those antiquated laws was the ban on payment of interest on demand deposits, also prompted by the Depression bank failures. It only took over 70 years to get rid of that ban. I don't see any legislative interest in lifting the ban on lottery participation, though.

And states have a vested interest in keeping the lottery participation rules in place. Lifting them could endanger the cash cow that many states have in their state-sponsored lotteries.

Reviving an old thread but we have a branch that is wanting to offer a free raffle for anyone. Anyone who enters the bank can put their name and information on a raffle ticket and enter it into a drawing for a free gift card. From reading this, I assume this would not be allowed but want to double check to ensure?

That is different then selling raffle tickets. As long as there is no consideration required to enter and it is open to anyone, customer or not, I don't see any problem with it.

I agree. For a promotion to rise to the problem level, the customers must have some skin in the game. Again, this law was designed to shut down bank involvement in lotteries because lotteries tempt customers to gamble away money that would otherwise go into FDIC-insured deposit accounts.

we are having a similar situation. We are doing a free raffle for a tablet and a camera. This a raffle at a college campus for all. Anyone may enter no requirements to apply or open accounts. Would we have to collect SSN's for all that enter to complete 1099-Misc?

Collect it from the winner before handing over the goods and make sure that is in your disclaimer on the entry form.

thank you!

Our marketing department was thinking about sending a survey to employees of a local business asking about their financial goals. It would be open to all employees of the business, whether they are customers or not. If they complete the survey, they would be entered into a drawing to win a gift card to a local restaurant. The employee will get the electronic communication; click on a link for the survey and then the bank will choose a random entry. Does this fall under the definition of a lottery since there is no fee to enter and it's open to all of the employees at the business?

Same scenario, but instead of a business and their employees, it is on social media?

https://www.federalreserve.gov/aboutthefed/section9a.htm


Section 9A. Participation in lotteries prohibited
(a) A State member bank may not--

1. deal in lottery tickets;
2. deal in bets used as a means or substitute for participation in a lottery;
3. announce, advertise, or publicize the existence of any lottery;
4. announce, advertise, or publicize the existence or identity of any participant or winner, as such, in a lottery.

(b) A State member bank may not permit--
1. the use of any part of any of its banking offices by any person for any purpose forbidden to the bank under subsection (a), or
2. direct access by the public from any of its banking offices to any premises used by any person for any purpose forbidden to the bank under subsection (a).

(c) As used in this section--
1. The term "deal in" includes making, taking, buying, selling, redeeming, or collecting.
2. The term "lottery" includes any arrangement, other than a savings promotion raffle, 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;
B. a game, race, or contest; or
C. any record or tabulation of the result of one or more events in which any participant has no interest except for its bearing upon the possibility that he may become a winner.
3. The term "lottery ticket" includes any right, privilege, or possibility (and any ticket, receipt, record, or other evidence of any such right, privilege, or possibility) of becoming a winner in a lottery.
4. The term "savings promotion raffle" means a contest in which the sole consideration required for a chance of winning designated prizes is obtained by the deposit of a specified amount of money in a savings account or other savings program, where each ticket or entry has an equal chance of being drawn, such contest being subject to regulations that may from time to time be promulgated by the appropriate prudential regulator (as defined in section 1002 of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5481)).

If the completion of a survey is deemed consideration (which I would opine that it is in most jurisdictions) without any other ability to enter, then yes, it would be a lottery.

I would add that IMO limiting it to a specific company also makes the condition of employment at that company a consideration for entering the lottery.

Thank you both for the feedback. That's what I originally thought, then was reading the reg and did not see anything about "consideration" except for the savings promotion raffle (unless I'm missing the interpretation somewhere else).

All I know is that requiring someone to complete a survey in order to have a chance to win is considered consideration in most jurisdictions which would make it a lottery under State law.

http://www.mondaq.com/unitedstates/gaming/54448/pitfalls-of-sweepstakes-and-contests

In some cases, a sweepstakes that would otherwise be classified as an illegal lottery because consideration is present can be made legal by making a "free" method of entry available (e.g., permitting an entrant to send in his name on a postcard without having to purchase the sponsor's product or fill out the survey).

To add clarification to this, contests need to comply with both 1) regulator rules (OCC, FDIC, etc.) as well as 2) state laws. As Randy pointed out, most state laws (at least the ones I've dug into) include "consideration" as a trigger for a lottery. The bottom line is you will want to review applicable state laws in addition to your regulator rules.

Ok....original poster here. I have to say I am starting to hate this time of year. Our annual fundraising for a local organization has started and so have the contests/lotteries that we have discussed in the past. Along with our annual bingo games, which were mentioned earlier in this thread, we are now offering gift baskets to employees that they can buy chances on to win. I nicely reminded everyone yesterday that these would be considered lotteries and are prohibited by FDIC. Apparently, our president of the bank talked to someone at our state banking association last year who agreed with him that holding these contests within the bank for charity fundraising is okay and that the FDIC is pertaining to more "personal enriching type of lotteries" and not the type of contests we are offering to actually raise money for charity. He did state however, that we need to make sure we are following state law regarding gaming. I have an email from our state gaming commission stating the rules of gaming in our state (Indiana) which are basically illegal unless you meet certain exceptions or are a nonprofit. I also have the Indiana Code stating the rules we must follow for contests. However, I feel like this is all a bit over the top considering these are promotions/contests we are holding within the bank (employees only) to raise funds for a charity. I wish I would have never brought any of this up now.

I guess my question is now - do I just say "I've explained the rules set forth by FDIC and the US Code" and leave it at that? I agree that it seems silly that we can't raise money for a charity within our bank. But as the compliance officer, I also know the rules on lotteries on bank premises and the rules on holding contests. I don't feel like anything I say is going to change the situation. I've tried suggesting "jean days" or "spirit weeks"......but it always comes back to bingos and giveaways.

Should I just say "go for it" and worry about something else? I'm starting to feel petty for even bringing it up....

If these are only internal events for the employees - then I would not be worried about it.

Thanks Randy.

I provided Senior Management the documentation you mentioned several years back. That documentation is in my CYA file. As long as the activity is strictly internal I don't pay attention to it.

Thanks Dan. I too have the documentation tucked away along with all emails that were sent. I will take you and Randy's advice and move on from worrying about it at this point.