ATM Prize Money as Promotion

Issue/Inquiry

As a promotion for the opening of a new branch office, the Bank wants to randomly insert $50 bills in place of $20 bills in the ATM of the branch. Would this be considered a lottery under federal law?

Response Summary

This promotion would be considered a drawing, in that whether a person received a $50 bill would be determined by random selection. If anyone can use the ATM without paying money or other consideration to do so, the promotion would not be considered a lottery for the purposes of the Federal Deposit Insurance Act.

Response Detail

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

The term “deal in” includes making, taking, buying, selling, redeeming, or collecting. 12 USC 1829a(c)(1).

The term “lottery” consists of any arrangement, whereby three or more persons advance money or credit to another in exchange for the possibility that one or more of the participants, but not all, will receive more than the amount they have advanced. The identity of the winners is determined by any means that includes:

• 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 distribution of $50 bills in the ATM reserve would be considered a drawing because whether someone accessing the ATM receives a $50 bill instead of a $20 bill would be determined by random selection. Since anyone can use the ATM, the contest would not be limited to customers of the Bank, and, thus, the consideration of a relationship with the Bank would not be required. Likewise, a fee must not be charged for non-customers to use the ATM, to avoid the implication that such fee is required to participate in the drawing.

While the contestants would be participating in a drawing, if they are not advancing money or credit to do so, the drawing would not be considered a lottery for the purposes of the Federal Deposit Insurance Act.

The Bank should also determine whether there are any requirements under the laws of the state in which it is located that may be applicable to this promotion. Generally, where there is no consideration, such drawings are not considered lotteries under the laws of most states.

This response is for informational purposes only and is not intended for legal guidance.

This entry was posted on Monday, August 24th, 2020 at 6:00 am.