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To Lottery or Not to Lottery - What is the Answer?

By Cindy LeBlanc, CRCM 28 Feb 2018

You know how you get this "terrific" idea to generate interest in a new product or service or even a new location? You plan to throw a party for the public. You decide to have cake, cookies, coffee, balloons and PRIZES!!! So, now you have to determine how the prizes will be awarded. Someone suggests that you have a drawing for everyone who opens up a new account. WHOA - back up and rethink this party. The drawing would be a LOTTERY and participation in a lottery is prohibited for the majority of financial institutions.


What about when the chamber is raising money for a local charity and asks you to collect the donations and sell tickets in your lobby? A person must donate $1.00 and their name goes into the drawing to win a beautiful new quilt made by the local quilting society. It is for a good cause - a local charity that collects food for the foodbank. Your institution is very involved in the community and participates in outreach with local charities. Oops, back up and rethink this one too! Selling the tickets would be considered participation in a lottery.


A lottery is defined as, "any arrangement 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; or
  • 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


Now, there are always exceptions to the rules in the compliance world and a lottery is included in that exception to the rule. In most states, if you are sponsoring a savings promotion raffle, that would not be prohibited. A savings promotion raffle involves the entrant opening a savings account for a specified amount for an equal chance to win a prize. This exception is allowed to encourage individuals to save money. There may be some state laws that do not allow savings promotion raffles, so do check your state law before going forward with the savings promotion raffle.


So, back to the party we mentioned at the beginning, how can you offer prizes at your new location party? Allow everyone to enter, with no stipulation that the entrant must have an account with your institution. Ensure that anyone has an equal opportunity to enter the drawing and check your state law with regards to sweepstakes. Once you do, then you can party on!!!

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