A food distributer here wants to sell scratch off phone cards. For $1 you get a phone card worth 2 minutes of air time, plus two scratch off chances to win cash prizes. They have a letter opining that this doesn't violate gambling laws because 1) they are selling a legitimate product and 2) you can request a free card via mail. The cite on the letter is AG Opinion 97-008 and it concludes that "Jester" -- no cite -- is not violated. A Las Vegas concern is marketing the product and looking for a Texas distributer. Any opinions? TIA. Robert

We were hit up a few years back with a proposal to sell phone cards under a similar arrangement. In our scenario, the "phone cards" were tickets issued by an eight-liner-type slot machine. I sent an opinion letter to them and heard nothing further (as far as we know, the cards were never actually sold in our county). I'd be glad to send you a copy of our letter if you like.

Absent stautory authority (charitable raffles, bingo, pari-mutuel betting, state lottery), if you pay money for a chance to win something of value, it's gambling.

Rick,

Doesn't your formulation -- "pay money for a chance to win something of value" -- mean we should be prosecuting McDonalds, Pepsi or any other company which includes scratch-off prizes with their products?

Robert

It seems like nearly every time a buy a coke, there's a bottle cap that says "please try again" -- under the statute, how is this different from the phone card?

The "sweepstakes" argument is that there is no consideration paid for the chance to win the prize, and therefore no lottery. In Jester, consumers inserted a dollar into an 8 Liner and received (1) an "emergency" phone card good for a minute or two of phone time and (2) a chance to win a prize through play on the 8 Liner. The defense was that because the money was paid for something of value (the phone card) and the chance to play the 8 Liner was "free" there was no lottery and therefore nothing illegal. The issue in Jester and similar cases is a fact issue for the jury: did the consumer who made the purchase place any value on the item (in your case, the phone card.) The investigation in Jester showed that the players routinely tossed the "phone cards" onto the floor or into the trash and that when the investigators tried to use them, they did not work. The jury concluded that the whole sweepstakes scheme was a sham designed to skirt the gambling statutes.

The games at McDonalds and the Coke bottle cap give-aways are distinguished by the fact that few if any consumers make a purchase at McDonalds (or at a Coke machine), check out the game piece, and then throw the food product away.

With regard to the grocery store promotion, I would caution the merchant that whether they are breaking the law or not could depend on their customers' behavior.

Hypertechnically (is that a word?), buying a food product with which there is a chance to win something else of value could constitute illegal gambling, in my opinion. However, prosecutorial discretion being a factor, those purchasers still come away with the product they bought at the price normally charged. Where the person can also obtain the same chance without having to buy the product, the offense (if any) is mitigated.

http://www.cnn.com/2005/TECH/internet/04/25/web.sweepstakes.ap/index.html


Here are the first few paragraphs of the linked article:
-------------------------

CASPER, Wyoming (AP) -- D.R. "Doc" Carson made his way to the Internet Cafe every morning and pulled up a chair in front of a terminal. He skipped the keyboard, choosing instead to use the touch-screen monitor. He usually stayed until around 5 p.m., when his wife gets home.

That's a long time on the Internet for a 62-year-old man who describes himself as computer illiterate. But Carson wasn't surfing -- he was playing the sweepstakes.

Carson and dozens of others have bought long-distance phone cards that are loaded with sweepstakes points used to play casino-type games -- and win cash -- on the Internet Cafe's computers.

Operators say it's a legitimate business promotion plan, no different from instant-win twist-off caps on a soda pop bottle. However, authorities claim it is gambling, and therefore illegal.

-----------------------------

The rest of the story is in that link to CNN at the top of this message.

The citation on Jester is Jester v. State, 64 S.W.3d 553 (Tex. App.--Texarkana 2001, no pet.)

Grant Sprarks (then with AG's 8-liner division), Bill Jennings (Gregg Co. DA), and I (former ADA) prosecuted the case against Danny (a former high school classmate of mine). Grant and I did the appeal.

There was some discussion of receiving value for the phone cards prior to trial and during the trial. As I recall, the jury didn't buy Jester's argument that the players were really purchasing phone cards and that the sweepstakes was just a bonus. There was, however, also testimony from some of the investigating officers that some of the phone cards that they tried didn't even work.