The Luck of the Draw?

The summer is behind you. You’ve put your hot dogs on ice and packed up your cotton candy machine. Unfortunately, your soda fountain isn’t the only thing that has run dry at your store. In fact, you haven’t seen an “up” since your last balloon shriveled up and died. Desperate for a little traffic, you want to sweeten the pot a bit to lure potential customers to your neck of the woods.

So, you’re thinking about buying a bunch of space in your local paper and running a full-page ad, letting folks know that if they buy a car from your dealership, they’ll be automatically entered in a drawing to win $1,000 cash. After all, in today’s economy, $1,000 in cold, hard cash just might be enough to bring an “on the fence” buyer to your lot.

You draw up a draft of the ad and decide not to shoot it over to your compliance officer or friendly lawyer to give it a blessing. After all, you’re not advertising any particular cars or financing terms, so there really aren’t any laws out there that you need to worry about. Right?

Not quite. Many states have statutes that regulate these sorts of drawings or prize promotions. For example, some states regulate “prizes,” which are often defined to include gifts, awards or other items or services of value that are different from the goods, services or property typically promoted by the retailer. Other states may regulate a promotional program as a “raffle” if the prize is won by a random drawing of a name or prearranged number of one or more persons. These laws are often triggered when there is an element of chance or when the recipient must spend money or purchase an item in order to win the promotion item.

At first blush, you might think that these statues and regulations would apply only to hard-core gambling and gaming activities, but that’s just not the case. In fact, some laws regulate gaming activities that you’d never believe a lawmaker would take the time to regulate. For example, are you thinking about having a fun game of “pick-up-ducks” or a “duck race” on your lot? You might want to think twice if you’re in Virginia, where “duck races” are regulated as raffles.

What does this mean for you? After all, you never intended to be in the gambling business, did you? Well, don’t pack up your plastic ducks yet. Just take the time to familiarize yourself with the state-specific statutory requirements. For example, the statutes may restrict the types of organizations that may offer such programs, or subject organizations offering prize promotions to registration or licensing requirements. They also may require very specific advertising disclosures, or may restrict the type of prizes that may be given away. And, yes, some states actually contain flat-out prohibitions against “games of chance.” Sometimes these laws are tucked away in unexpected places, such as the state’s criminal code, so make sure you’ve done a thorough job of researching them.

With all these restrictions, you might want to have your prize promotion run by your friendly local lawyer, but then again, maybe you like to gamble and live on the wild side. If so, then you’ll need to ask yourself a simple question: “Do you feel lucky, punk? Well, do ya?”