RSK.IQ Question of the Week 2/16/16

Savings Promotion Raffle


The Bank wants to offer customers opening a new savings account a chance to win $100 deposited into the new account. Is it legally able to do this?

Response Summary

FDIC-insured banks are prohibited from participating in lotteries, but savings account raffles are excluded from this prohibition. The sole consideration for a savings account raffle is the deposit of a specified amount of money into a savings account or other savings program.

Response Detail

Under the Federal Deposit Insurance Act, an insured state bank is not allowed to deal in lottery tickets, deal in bets used as a means or a substitute for participation in a lottery, or announce, advertise, or publicize the existence of any lottery or the winner of any lottery. 12 USC 1829a(a).

The term “lottery” includes any arrangement whereby three or more persons advance money or credit to another in exchange for the possibility that one or more but not all of the participants will receive by reason of their advances more than the amounts they have advanced. 12 USC 1829a(c)(2).

A “savings promotion raffle,” however, is excluded from the prohibition against lotteries:


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 5481 of this title). 12 USC 1829a(c)(4).

The “appropriate prudential regulator” would be the Federal Deposit Insurance Corporation. 12 USC 5481(24).

The National Bank Act, Federal Reserve Act, the Federal Deposit Insurance Act, and the Home Owners' Loan Act were amended by the American Savings Promotion Act in order to promote savings accounts in the United States. The idea was that offering a chance to win prizes based on deposit account activity would result in an increase in deposits to those accounts. For that reason, a savings promotion raffle was excluded from the prohibition against a covered financial institution's dealing in lottery tickets, provided that the consideration for participating in the raffle was a deposit in a savings account or other program.

If the Bank offered to open savings accounts with some minimum specified deposit, and if those who opened accounts or made deposits to existing accounts were eligible to win a prize (in this case, the deposit of $100 into the new account), that kind of raffle would be permitted under Federal law and would not be considered a lottery.

This entry was posted on Tuesday, February 16th, 2016 at 2:00 pm.

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