Is Promoting the Opening of Deposit Accounts by Donating Bingo Prize Money Permitted?

Issue/Inquiry

The Bank wishes to make a donation to the prize money of a Bingo contest run by a non-profit senior citizen organization for each deposit account that is opened with it. Is this permissible?

Response Summary

An FDIC-insured financial institution is not permitted to run a lottery or to publicize the existence of one. Consequently, the Bank would not be allowed to promote the opening of accounts by making a donation to the prize money of the Bingo contest, since this would necessarily promote a lottery. It could, however, make donations to a charity for accounts opened, if this was not related to a lottery.

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). A “lottery” is defined as follows:

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 random selection
• A game, race, or contest
• 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. 12 USC 1829a(c)(2).

In this case, the Bank would not be conducting a lottery or raffle, and those opening accounts with it would not be purchasing tickets or making donations for the chance to win anything of value. However, Bingo is considered a lottery since it is a game of chance in which winners are determined by a random selection of numbers matched against numbers on preprinted cards. Consequently, the Bank would not be allowed to promote the opening of deposit accounts by making a donation to the prize money of the Bingo contest run by the senior citizen organization, since this would essentially announce or publicize the existence of a lottery.

Alternatively, the Bank could announce that it was making a donation to a charity for each account opened, as long as the donation was not related to a lottery. Such a donation would not be considered a bonus under Regulation DD, as the customers would not be receiving consideration or anything of value for opening an account. 12 CFR §1030.2(f)

This entry was posted on Monday, April 16th, 2018 at 6:00 am.