by Kent J. Perez
Feeling amazingly upbeat and positive for a lawyer,one Saturday morning you
come out of your local K-Mart after dashing in for a few sorely needed items when you are approached by a young man who asks if you would like to buy a chance to win a vintage 1965 Mustang convertible for only $10 a ticket. The convertible belongs to the local antique auto club. He advises you that the money is for a worthy cause and that a drawing will be held sometime the week before Christmas.
Having graduated from law school clueless and then becoming educated through the practice of law, the first thought that comes to your mind is, “This can’t be that easy.” Your second thought is, “I wonder who represents them?” After asking to see at least a picture of the Mustang, you slowly fork over $10 to receive a little ticket with a number on it and a tab that requires filling out your name, address, and telephone number. You tear off the completed tab and hand it back to the young man, then stuff the ticket of chance into your pocket soon to be forgotten.
Charities and other not-for-profit organizations are always addressing ways to increase revenues and solicit more funds. An attractive way to do this is to hold a raffle or drawing by chance. A drawing by chance is really nothing more than a lottery.1 It consists of the three elements of a lottery which are prize, chance, and consideration.2
As a practicing attorney, what do you need to know to advise the local antique auto club on how to lawfully hold this drawing of chance? Well, for starters, Florida has a general prohibition against gambling with the exception of pari-mutuel wagering, and the State of Florida Lottery.3 Ch. 849 of the Florida Statutes is entitled “Gambling,” and proscribes a host of activities including conducting a lottery, keeping a gambling house, playing games of chance, unlawfully betting on the results of trial or contest of skill, and possessing gambling paraphernalia, among others.
When one thumbs through Ch. 849 and the various types of conduct that constitute gambling activity, it becomes apparent that the legislature intended to recognize certain exemptions to gambling prohibitions, provided that the activity is conducted in a manner that by strict definition does not equate to gambling. This may seem to be a somewhat backward approach, yet one of these so-called exemptions would be your first stop and your main stop in the Florida Statutes, as you seek to give the local auto club legal advice.4
Since a pure drawing of chance or raffle is nothing more than a lottery consisting of the elements of prize, chance (the drawing of the winning ticket), and consideration (price paid for a chance), these statutory exemptions permit activities which appear to be a form of gambling conduct only if one of those elements has been removed. This is really not so much an exemption as it is an acknowledgment that removing one of the elements of a lottery allows a lawful activity to exist. Here, it is important to distinguish the difference between a drawing of chance conducted by charitable not-for-profit organizations pursuant to F.S. §849.0935 and the same type of activity similarly conducted by retail businesses as for-profit organizations pursuant to F.S. §§849.092 and 849.094.
How many times have you driven through McDonalds to receive a game piece in hopes of winning a large cash sum or at a minimum, a Big Mac? This type of activity is addressed in F.S. §§849.092, “Retail Merchandising Business,” and 849.094, “Game Promotions in Connection with the Sale of Consumer Products or Services.” In these two statutes, the Florida Legislature allows the retail marketplace to conduct chance activities; however, the element of consideration necessary to comprise a lottery is clearly and conspicuously prohibited.5 This is best known to you by the key phrase of “No purchase necessary.” These “game promotions” are strictly regulated by the Department of State requiring registration and bonding if the prizes are in excess of $5,000.6
Of course, it becomes confusing when you walk into your local supermarket and find out that hidden under a bottle cap is a star icon worth $500,000 if only you had purchased the right six-pack of your favorite beverage. In these retail for-profit game promotions, what the marketing world doesn’t make extremely obvious is the fact that you are afforded just as much right under the law to participate in this sweepstakes promotion with no requirement of making any purchase or expending any consideration. This is the same way that your local hardware store operates when they want to give away a new riding lawn mower. They can advertise for customers to come into the store and put their name, address, and telephone number into a box and conduct a random drawing to give away this wonderful piece of machinery.
In both of these scenarios, a prize is being offered by a retail merchant in connection with the sale of a consumer good or service, and chance is the method by which this prize shall be given away. Entry into these promotions is open to the entire world and no consideration, that is, at least no monetary consideration, can by law be required. F.S. §849.0935, on the other hand, is entitled “Charitable non-profit organizations; drawings by chance; required disclosures; unlawful acts and practices; penalties” and implicitly recognizes that tangible monetary exchange can occur in the form of a donation or contribution to a lawfully registered charitable cause, provided that this consideration is not required as a condition of entering the drawing.7 This section will be the focus of this article.
F.S. §849.0935 exists fundamentally the same as when it was originally passed in 1984.8 While materials expressing the legislative intent of this section are lacking and case law is nonexistent, it would seem safe to presume that the original statute as passed in 1984 was intended to provide some authorization and guidance to your local church or other charitable organization wanting to conduct their annual raffle and giveaway in order to raise money for their organizations.9 As the law currently exists, subsection 849.0935(1) sets forth the definitions of a “drawing by chance” and “operator.” A drawing by chance simply includes the random selection of a winner from entries submitted by the public. It does not by definition include those enterprises commonly known as matching, instant winner, or preselected sweepstakes promotions that involve, for example, a mailing of previously designated winning numbers to the public. The law also defines the term “operator” as an organization qualified under federal law as a 501(c)(3) not-for-profit corporation. This is key to the existence of this statute.
Building on these definitions, subsection 849.0935(2) says that the prohibition against an illegal lottery in this state shall not be construed to prohibit an organization from conducting a drawing by chance for fund-raising purposes if the operator is an organization qualified under 26 U.S.C. §501(c)(3), and has complied with the applicable provisions of F.S. Ch. 496, The Solicitation of Contributions Act.10
Subsection 849.095(3)(a)-(d) sets forth disclosure requirements of a specific nature for all brochures, advertisements, notices, tickets, or entry blanks used in connection with a drawing by chance. It requires disclosure of the rules governing the conduct and operation of the drawing, the name of the organization or operator and its principal place of business, the source of the funds used to award cash prizes or purchase prizes, and the date, hour, and place where the winner will be chosen unless advertisement of the drawing is not offered to the public more than three days prior to the drawing.
Subsections 849.0935(4)(a)-(f) set forth a list of prohibitions making it unlawful for any operator who engages in a drawing by chance or promotes, operates, or conducts a drawing by chance to conduct any drawing in which the winner is predetermined by means of matching, instant winner, preselected sweepstakes, or otherwise in which the selection of winners is in any way rigged; require monetary consideration as a condition for entering the drawing; remove, disqualify, disallow, or reject an entry or discriminate in any manner between entrants who gave contributions; fail to notify at the address on the entry blank, any person whose entry is selected to win, of the fact that they are a winner; fail to award all prizes offered in the manner and at the time stated; and print, publish, or circulate literature or advertisement used in connection with the drawing that is false, deceptive, or misleading.
In this subsection list of prohibitions, (4)(b) specifically states it is unlawful “to require an entry fee, payment, proof of purchase, or contribution as a condition of entering the drawing or being selected.” As in F.S. §§849.092 and 849.094, the express prohibition of consideration as a condition of entering a retail game promotion or drawing by chance is fundamental to these exemptions allowing for chance activities. The argument also exists that this specific expression overrules Florida case law defining the lottery element of consideration, at least for purposes of these sections.11 That is, by reading these subsections .092, .0935, and .094, one could argue that the focus is now directed toward tangible monetary consideration only and no longer the case law interpretation of any consideration sufficient to enter into a contract.
Finally, subsections 849.0935(5) and (6) set forth the penalties for anyone who violates this law and exempts the state lottery operated pursuant to Ch. 24. The penalty for a violation of F.S. §849.0935 is a second degree misdemeanor with the exception of a violation of the advertising disclosures of date, time, and place, punishable as a second degree misdemeanor by fine only.
Now that we have read the statute, how do we apply the law? Facing an absence of case law, a further understanding of F.S. §849.0935 in today’s marketplace and the current gambling fervor can be found in two opinions of the Office of the Attorney General. AGO 93-59 repeats the statute, but AGO 93-85 provides insight. AGO 93-85 was issued December 3, 1993, as a result of a request from the Office of the State Attorney, Ninth Judicial Circuit. Certain law enforcement agencies and prosecutors in Orange and Seminole counties were experiencing resistance from individuals who chose to interpret F.S. §849.0935 in what the state attorney considered to be an incorrect application and abuse of the law.
Television commercials were appearing all over the Orlando/Disney World area inviting individuals to enter into a sweepstakes being conducted by a well-known community not-for-profit charitable organization. This particular organization, in conjunction with a third party promoter, was soliciting the public to purchase tickets of $100 per entry in exchange for the opportunity to win a house and a yacht, but with the giveaway contingent upon the receipt of at least the sum of money necessary to pay for the house and the yacht. Any additional monies would then go to the not-for-profit organization. The advertising for this sweepstakes also expressed the reserved right to cancel this giveaway promotion. State Attorney Lawson Lamar asked some basic questions regarding the application of this statute.12
First, may a promoter who is a Ch. 496 registered professional solicitor, conduct and profit from a private lottery or drawing by chance operated by a charitable organization, if some of the proceeds benefit the charitable organization? The Attorney General opinion answers this question by stating that a drawing by chance may be lawfully conducted by a promoter provided that the operator is an organization qualified as a 501(c)(3) and is in compliance with F.S. Ch. 496, The Solicitation of Contributions Act. That act further imposes restrictions and registration requirements on charitable organizations, sponsors, and professional solicitors, who solicit funds. The opinion concludes that a professional solicitor is not precluded from assisting a qualified operator in a drawing by chance provided the professional solicitor is an employee, officer, or agent of the qualified organization and is acting in compliance with the requirements of Ch. 496. This interpretation would seem to make it clear that the application of §849.0935 could arguably go beyond your local neighborhood charitable organization to assist a large group like the Red Cross in conducting a commercial drawing by chance. However, it seems that the possible commercialization of the privilege to conduct a raffle lacks a practical application in the marketplace with little pecuniary benefit when AGO 93-85 declares the entire world is entitled to a ticket without contributing, and the giveaway prize must exist independent of the drawing.
Second, the state attorney asked whether advertising a drawing by chance without indicating that no purchase or contribution is necessary to enter the drawing, and displaying a dollar amount in connection with the advertisement, is in violation of subsection (4) of §849.0935. The opinion responds succinctly, stating that in light of the requirement for the advertisements to refrain from the use of false, deceptive, or misleading information, literature, and materials, and the prohibition on requiring an entry fee, payment, proof of purchase, or a contribution as a condition of entering the drawing, a promotion that states a dollar amount in conjunction with the drawing and then fails to provide additional language stating that no purchase or contribution is necessary in order to participate in the drawing, is misleading and deceptive in violation of the prohibitions set forth under F.S. §849.0935. This interpretation, in the opinion of this author, is crucial to any charitable or not-for-profit organization that desires to engage in a drawing by chance and offers that drawing by chance to the general public. The focus must remain on the fact that no consideration is necessary to enter into a drawing by chance, and the fact that this drawing is being conducted in conjunction with the organization’s request for a donation in their lawful solicitation of contributions. While the statute, as currently written, does not require the phrase, “no purchase or contribution is necessary for participation,” using language such as “tickets cost $100" or “entry fee is $100/person” will create a false impression among the consumer public that a contribution is necessary to enter the drawing. The impression created, however, should be viewed as a whole. Allowing the organization to suggest a minimum contribution or donation along with the disclosure that no contribution is necessary seems an acceptable alternative.
Third, the state attorney asked whether a drawing by chance that sets forth rules allowing the operator to fail to award prizes if no contributions are received or if the promoter is not satisfied with the amount of contributions received violates this law. The Office of the Attorney General again replies in keeping with what appears to have been the original intent of this particular statute. Section 849.0935(4)(e) clearly makes it “unlawful for any operator to fail to award all prizes offered in the manner and at the time stated.” This, coupled with the fact that §849.0935 constitutes a limited exception to the general prohibition against gambling in this state, leads the Attorney General to conclude that since this statute contemplates that a prize will be awarded, accordingly, there is no grant to an operator to cancel a drawing or refuse to award a prize regardless of the reason. The Attorney General clarifies §849.0935(4)(e) by its literal language of prohibiting an operator from failing to award all prizes offered. Here again, it seems the intent of this statute was to allow a local nonprofit charitable organization to solicit funds by offering a prize in exchange for donations received without tying the giveaway prize to the amount of contributions received.
Fourth, the state attorney essentially restates question three. “May the operator of a drawing by chance reserve the right to cancel?” The opinion answers again that as no contingencies appear to be allowed, i.e., the drawing cannot require a level or amount of contribution, and as §849.0935(3)(d) requires specific disclosures on advertisements, brochures, notices, tickets, and entry blanks, as to the date, hour, and place where a winner will be chosen, the statute does not authorize or contemplate the canceling of the drawing at the mere discretion of the operator.
Finally, the state attorney asked whether an operator under §849.0935 must have an independent source for the prize giveaway, as opposed to using funds received to purchase the prize to be awarded. The Attorney General opinion responds that an operator who does not have the prize at the time the tickets or entries are offered, but relies on contributions to obtain the prize, violates F.S. §849.0935. This conclusion follows the presumed intent to keep the prizes and expenses of the drawing independent from the solicitation of contributions as there can be no guarantee that sufficient contributions will be received. To permit otherwise would have the impact of placing unknown numbers of charities and not-for-profit organizations on par with the likes of Las Vegas and Atlantic City, effectively, allowing these entities to engage in drawings by chance at the level of a commercial enterprise. A simple examination of the historical abuses behind Florida’s statutory bingo exemption to unlawful gambling would provide the nightmarish glimpse of how this drawing by chance privilege could also be abused.13
During the 1994 and 1995 legislative sessions, attempts were made to provide statutory amendments to the drawings by chance law. In the 1994 session, a bill was sponsored by Rep. Elaine Bloom and Sen. Donald Sullivan that incorporated clarification of the interpretations set forth in AGO 93-85. In the provision of law requiring disclosure of date, hour, and place where the winner will be chosen, language was added to specifically require the disclosure of the place the prizes will be awarded. The proposed language made it abundantly clear that all brochures, advertisements, notices, tickets, etc., used in connection with the drawing must conspicuously disclose that no purchase or contribution is necessary. Further, the 1994 proposed changes to F.S. §849.0935 made it unlawful to require a donation, or substantial consideration, in addition to an entry fee, payment, proof of purchase, or contribution as a condition of entering the drawing or being selected to win a prize. It set forth specific prohibitions to canceling a drawing, or purchasing or obtaining a prize with voluntary donations or contributions, and identified a violation of §849.0935 as a deceptive and unfair trade practice actionable under Florida’s Little FTC Act.14
The 1994 bills carrying these changes to F.S. §849.0935 also contained revisions requested by the Department of State to F.S. §849.094, “Game Promotions in Connection with the Sale of a Consumer Good or Service.”15 Presented as a cleanup piece of legislation, it easily passed its House committees and the full member body of the House only to die on the Senate special calendar a victim of time during a hectic 1994 session.
A worthy endeavor, the same piece of legislation was picked up in the 1995 session as a proposed committee bill and interim project by the House Committee on Regulated Industries. The bill traveled in essentially the same form as 1994 during the 1995 session with some minor changes to the proposed revisions of §849.0935. Two key changes to the 1995 revisions were changing the word “operator” to “organization” to clarify who may conduct a drawing by chance, and adding language to state that nothing would prohibit an organization from suggesting a minimum donation or from including a statement of any suggested minimum donation on their advertising material. Specific language was also added to make it unlawful for an organization to condition a drawing on a minimum number of tickets having been dispersed to contributors or on a minimum number of contributions having been received. The 1995 version of the bill again traveled with revisions to F.S. §849.094, “Game Promotions in Connection with the Sale of a Good or Service,” that would make it easier for the Department of State to register and enforce proper compliance with those retail game promotions.
The 1995 bill, explained by committee to provide greater consumer protection and to assist not only organizations authorized to conduct drawings by chance but also legitimate businesses, found itself as perhaps the only bill addressing revisions to F.S. Ch. 849 to pass both the House and Senate chambers. Needless to say, any piece of legislation that was moving with a high probability of success and dealing with changes to Florida’s gambling laws became extremely attractive to varied legislative interests. After several attempts by interests to use this bill as a vehicle to make changes to other provisions of Ch. 849, it became apparent that this piece of legislation would not survive.16
Changes to §849.0935 based on AGO 93-85 surfaced again in the 1996 session as a “strike everything after the enacting clause” to House Bill 407 by Rep. Mike Fasano. Rep. Fasano’s original HB 407 was amended in the House Regulated Industries Committee and became CS/HB 407 which, after being withdrawn from the remaining committees of reference, was placed on the House calendar. A similar bill in the Senate was amended to conform to the House version and passed the Senate Regulated Industries Committee.
CS/HB 407 passed the full House the last week of session with a floor amendment that restated the prohibited nexus between receipt of donations and the purchase of the prize to be awarded. The language was reworded to make it unlawful to condition the acquisition or giveaway of any prize upon the receipt of voluntary donations or contributions. This would allow an organization to effectively use its receipts for any debt incurred, even those connected with the prize to be awarded, as long as the receipts and acquisition remain two separate and independent functions of the giveaway. In the final days of the 1996 session, CS/HB 407 also passed the Senate. It became law without the Governor’s signature.
For the most part, charitable and not-for-profit organizations are worthwhile endeavors that seek to make life better for needy people in their communities. It is probably for this reason that the legislature will continue to grant these organizations the privilege to conduct drawings by chance and other solicitation activities. These activities are about being free and unregulated and are truly intended to benefit a worthy cause. However, this privilege must always be balanced against the legis-lature’s commitment to protect the public from fraud and abuse and the current will of the public to prohibit gambling in the State of Florida.
Your local charitable or civic organization will be able to give away their donated prizes at the Fourth of July picnic by requesting contributions and placing everyone’s name in a hat. The antique auto club may even choose to raffle off a vintage Mustang, depending on the structure of their organization. However, an attempt to use this statute to take charitable not-for-profit organizations from a community giveaway level to the sophisticated business of a questionable commercial enterprise, raises significant questions of state policy and can only result in potential abuse to the general public. q
1 At common law lotteries were illegal only when they became public nuisances. See Lee v. City of Miami, 121 Fla. 93, 163 So. 486 (1935).
2 See Little River Theater Corporation v. State ex rel. Hodge, 185 So. 855 (1939), Dorman v. Publix-Saenger-Sparks Theaters, 184 So. 886 (Fla. 1938). And see AGO 90-58 and AGO 58-266.
3 See Fla. Const. art. 10, §§7 and 15, Fla. Stat. Ch. 849, “Gambling,” and Barron v. State, 271 So. 2d 115 (1972). Note, however, Fla. Stat. Ch. 849 does permit bingo and certain penny-ante games.
4 Depending on the nature of the activity, several other Florida statutes may have application to the practices undertaken by not-for-profit charitable organizations. See also Fla. Stat. Ch. 496, The Charitable Solicitations Act, and Fla. Stat. Ch. 501, Part II, The Deceptive and Unfair Trade Practices Act.
5 See Fla. Stat. §849.092(3)(a) (no person to be eligible to receive such a gift shall ever be required to pay any tangible consideration to such licensee in the form of money or other property or thing of value), and Fla. Stat. §849.094(2)(e) (unlawful to require an entry fee, payment, or proof of purchase as a condition of entering a game promotion).
6 See id. §849.094.
7 See id. §849.0935(4)(b).
8 Id. §849.0935, as passed in 1984, was amended by HB 1193, Fla. Laws ch. 88-115 (1988), to add the word “tickets” to §849.0935(3) requiring all brochures, advertisements, notices, tickets, or entry blanks used in connection with a drawing by chance to conspicuously disclose the rules of the drawing, the name of the operator and its place of business, and the source of funds used to award the prizes. Also added to this list of disclosure requirements, was “(d)” requiring the date, hour, and place where the winner will be chosen to be disclosed unless the brochures, advertisements, notices, tickets, or entry blanks are not offered to the public more than three days prior to the drawing. In keeping with this newly required disclosure, additional language was added to §849.0935(5), providing that any operator or other person who sells or offers for sale in this state a ticket or entry blank for a raffle or other drawing by chance without complying with the requirements of (3)(d) is guilty of a misdemeanor of the second degree punishable by fine only. See Fla. Laws ch. 88-115.
9 When Fla. Stat. §849.0935 was enacted in 1984 as an exception to the general prohibition against any person conducting a lottery in this state, a key feature was the provision that no donation or minimum payment could be required as a condition for participating in the raffle. The absence of the consideration requirement in the raffles authorized by Fla. Stat. §849.0935, ensured that such activities would, if conducted according to the statute, not violate the lottery prohibition. Organizations conducting fund-raiser drawings by chance are allowed only to ask for a donation but not require a donation for a chance at winning the prize to be given away. Even persons who elect not to make a contribution must be given a chance to win the prize if they request one.
10 See §§496.401-496.424, cited as the Solicitation of Contributions Act. This law is regulated by the Department of Agriculture and Consumer Services and requires registration of organizations, fund-raising consultants, professional solicitors, charitable organizations, and sponsors. It specifies prohibited acts and sets forth available remedies.
11 Where only tangible monetary consideration is specifically prohibited, would the use of other consideration with the elements of prize and chance, for the purposes of the activities identified by these statutes, constitute an illegal lottery? The argument could be made that the enactment of Fla. Stat. §§849.092 and 849.094 referring explicitly to tangible monetary consideration, does for purposes of these sections overrule the standing case law interpretations of lottery consideration. (See Blackburn v. Ippolito (App., 156 So. 2d 550 (1963), cert. denied, 166 So. 2d 150). Pecuniary consideration is not necessary to constitute a lottery. Consideration necessary to establish a simple contract is sufficient.)
12 Fla. Stat. §849.0935 in its current form is entitled, “Charitable, non-profit organizations; drawings by chance; required disclosure; unlawful acts and practices; penalties.”
13 See report of the 12th Statewide Grand Jury regarding the operation of commercial bingo halls in the State of Florida, case no. 83,964, Supreme Court, State of Florida.
14 The Florida Legislature has no less than 16 specific statutory locations identifying acts or practices that would be literal per se violations of §501.203(3)(c) of Florida’s Deceptive and Unfair Trade Practices Act. Recent legislative changes to this law should make it applicable to charitable not-for-profit organizations.
15 See HB 1733 and SB 2100 from the 1994 Legislative Session.
16 See CS/HB 2483 and CS/SB 1008 of the 1995 Legislative Session.
Kent J. Perez is a senior assistant attorney general in the Tallahassee Office of the Attorney General. He is a former bureau chief in the Division of Economic Crimes and now works as chief cabinet aide to Attorney General Bob Butterworth, assisting with cabinet, legislative, and litigation issues. He earned a J.D. from Florida State University College of Law in 1982. Mr. Perez gratefully acknowledges John Topa, attorney for the House Committee on Regulated Industries, for his assistance in editing this article.
This is column is submitted on behalf of the Government Lawyer Section, Thomas W. Hall, chair, and Allen Grossman, editor.