Is The Chicago Marathon An Illegal Lottery?
February 4, 2016
by Jerry Glover
Every year dozens of companies sponsor sweepstakes or contests to promote their products or services. What’s the difference between a sweepstakes promotion and a contest?
Since most states prohibit lotteries (except, of course, state-sponsored lotteries which are statutorily exempt from that prohibition), how does a promotion sponsor avoid the illegal lottery label? What does a lottery involve? Three elements are always part of a lottery—prize, chance and consideration.
A legal sweepstakes can involve only two of these elements—prize and chance. The chance element is found in how the winner(s) of the prize are chosen—through a random drawing from all eligible entrants. To avoid being labeled an illegal lottery, a sweepstakes cannot require an entry fee or purchase of a product (the consideration) but if such a fee/purchase is required, the sponsor of the sweepstakes must offer a free alternate method of entry (an “AMOE”). All entries, whether accomplished through purchase or through the AMOE, must be treated equally.
A contest does not involve the element of chance; winners of a prize are selected based on some element of demonstrated skill. For example, to enter the contest people must submit a short, written essay explaining why they should be selected. Winners are chosen based on a stated set of judging criteria (often set out in the contest’s official rules). Since there is no element of chance (i.e., no random drawing to select a winner), sponsors of a contest have the right to charge an entry fee and are not required to offer an AMOE.
The question of what is an illegal lottery is the basic question raised by a class action lawsuit recently filed in New York federal district court alleging that the New York Marathon is an illegal lottery. Konopa v. New York Road Runners, Inc., No. 16CV450 (S.D.N.Y. 2016). The plaintiffs allege that a fee (approximately $11) must be paid in order for runners to be part of the pool of potential marathon entrants. From that pool, a random drawing is conducted to select the actual runners for that year’s marathon. The sponsor of the marathon argues that it cannot accommodate all of those who wish to participate so it has to narrow down the pool of entrants. The plaintiff class argues that the New York marathon is both a sweepstakes (the random drawing to choose actual marathon participants) and a contest (the ultimate winner of the marathon involves skill not chance). The plaintiff class concludes that the fee to enter the pool from which the runners are chosen through a random drawing is prohibited consideration. They do not challenge the conduct of the marathon itself.
Is it possible that the Chicago Marathon may be subject to a similar illegal lottery claim?
No. All who want to participate in the Chicago marathon have to complete an application. Those who are allowed to participate as runners are determined by a random draw from all of these applicants. But no one has to pay a fee to be a part of that random drawing. A fee is charged only to those who are chosen through the random drawing. And this fee is an entry fee for the marathon, a contest of skill; the winners of the marathon are, of course, not determined by chance. As noted above, the sponsors of contests can require entry fees.
So it seems the organizers of the Chicago marathon have avoided any claim of running an illegal lottery.