What laws are involved in setting up a contest where there is an entry
fee to play, and the winner is awarded some portion of the pooled
entry fees.

Is this considered gambling?
Does it matter if the contest is a game of skill or of luck?

Mostly interested in North Eastern States.

Any good answer gets the 2$ 

Will follow up with pricier questions requiring deeper analysis if
there are any takers.

Disclaimer: Google Answers is not a substitute for real legal advice.
I am not a lawyer. Please speak to a real lawyer if you are seriously
considering doing this.

What you are describing may be a type of lottery. According to the
following page, lotteries  are generally illegal in the USA:

"Crimes of Persuasion" -- Consumer Laws
[ http://www.crimes-of-persuasion.com/Laws/US/consumer_laws.htm ]

Also note the Mail Fraud section on the following related page:

[ http://www.crimes-of-persuasion.com/Laws/US/criminal_laws.htm ]

The United States Postal Service (USPS) lists the sections of law
which deal with Lotteries and Mail Fraud in regards to using the mail
to transport lottery tickets. Look here: [
http://www.usps.com/postalinspectors/jurislaw.htm ]. You may need to
scroll down to these sections (which are listed alphabetically).

Whether or not the game is pure chance or a game of skill appears to
have some bearing on whether or not a "video lottery" is legal or not.
The following page lists information about this by state:

[ http://www2.als.edu/glc/wagering/whatisvlt.html ]

Parry Aftab, a well-known lawyer who writes about internet issues,
discusses web sites that offer contests at [
http://www.aftab.com/forlawyersstatelaws.htm ]. (Again, scroll down to
the part of the page that discusses "Contests.") She explains the
difference between a lottery and a contest as follows:

"The main fear if website operators don?t retain knowledgeable contest
counsel is that they may end up not running a contest at all, but
rather an illegal lottery.  Generally speaking, a lottery requires
three elements: (1) prize, (2) chance, and (3) consideration. 
Requiring someone to register at the site to enter a contest may be
deemed consideration.  At a minimum, all internet contests need to
offer a free alternative method of entry."

Aftab also explains that there are very different laws in each of the
50 US states governing contests, so your decision to restrict entry to
NE states may be a good idea.

So, the short answer is that whether or not this is a game of chance
or skill may define whether or not your contest is an illegal lottery
or not. There are many other issues at stake, from interstate commerce
laws, to mail fraud law, to gambling law. Some of this law is federal
and some is different by state. I recommend that you speak to a lawyer
specializing in these areas if you want more information.

Search Strategy:

"lottery" ("law" OR "laws")

[ ://www.google.com/advanced_search?q=lottery+law+or+laws&hl=en&lr=&ie=UTF-8 ]

/ephraim

---

Request for Answer Clarification by shockandawe-ga on 05 Aug 2004 14:37 PDT

I'm sorry.. my use of the word "contest" seems to have steered you in
the wrong direction. I meant the more general meaning...
For instance, consider a bowling league which costs money to enter and
the winning team receives some amount of money greater than their
individual entry fees. I wanted to include this type of contest in the
answer.

---

Clarification of Answer by ephraim-ga on 05 Aug 2004 15:22 PDT

Shockandawe,

My advice also applies in the case of a game of skill like a bowling
league. As I said above, pure games of chance are largely illegal.
Games of skill may be highly regulated, depending on the jurisdiction.

Some more information that may guide you in your search:

"Is Online Poker in the U.S. a Game of Skill?" by Chuck Humphrey at [
http://www.gambling-law-us.com/Articles-Notes/online-poker-skill.htm ]
adds some detail that you may be interested in. While the general
topic of his article covers online games of chance, he devotes a
section ("Where are online games of skill permitted?") to ESPN fantasy
leagues which require an entry fee in order to win a prize. He also
provides a link to the ESPN legal terms and conditions at [
http://games.espn.go.com/content/ffl/2004/rules?page=legal ] some of
which restrict the game in particular states. I believe you will find
these pages helpful.

"100% legal gambling on the internet" at [
http://www.gamblingandthelaw.com/legigamb.html ] makes the following
claim:

"If an activity offers valuable prizes and requires consideration, but
the outcome is not determined by chance, it is a game of skill and not
gambling." Again, this article discusses online gambling, but this
tidbit of information will be useful to you.

Office.com provides an essay on how to "Plan a Successful, Legal
Sweepstakes" at [ http://www.office.com/templates/page3.asp?docid=51
]. This advice also applies to games of skill and how to run them.
Some of the advice here includes the warning that "Take extraordinary
care in developing your game of skill, however, because if a regulator
finds that there is an element of chance involved, he or she may well
prosecute your company for conducting an illegal lottery." The article
goes on to explain various conditions that should probably be met to
prevent a regulator from concluding that your game is a game of
chance. Obviously, your mileage may vary depending on the laws of the
state.

I hope this clarifies your request.

Search Strategy:

win money law OR laws "game of skill"

[ win money law OR laws "game of skill" ]

/ephraim

Ephraim wrote: 

"My advice also applies in the case of a game of skill like a bowling
league. As I said above, pure games of chance are largely illegal.
Games of skill may be highly regulated, depending on the jurisdiction."

Didn't provide me with convincing evidence that bowling leagues may be
highly regulated.

Gave a lot of info on lotteries, mail fraud and internet issues that I
never aasked for.

My question was a bit vague, and 2$ is not a lot of money. I can't be
too harsh. 3 stars.