Understanding Illegal Lotteries and Their Implications

Giving away prizes to paid subscribers without a no-purchase-necessary alternative is an illegal lottery, posing risks for creators and violating platform terms.

### Beware the Pitfalls of Illegal Lotteries in Content Creation
* 🎮 Offering prizes to paid Twitch subscribers or YouTube members in a chat-based giveaway can be considered an **illegal lottery** due to the elements of **chance, prize, and consideration**.
* 📜 "A lottery includes three things: **chance, prize, consideration**. And at least in the United States, you might be interested to know that unless it's run by the government, **this is illegal to do**."
* 🎁 Intent can matter in the court of public opinion, but legally, even well-intentioned giveaways can be considered illegal lotteries if they don't have a **"no purchase necessary" method of entry**.
* 🎗 Even charity giveaways can fall under illegal lottery rules if they don't offer an **equal no-purchase entry method** for all participants.
* 📊 Companies like Om have faced legal challenges for their charity-driven giveaways that were perceived as illegal lotteries due to **lack of clear no-purchase necessary entry options**.
* 🎥 The recent controversy around Mr. Beast's past giveaways highlights how creators can inadvertently **run afoul of illegal lottery laws**, even with good intentions.
* 🛡 It's important for creators to be aware of these laws and regulations, as violating them can not only lead to **legal issues** but also result in **platform violations**.
* 🚫 "So, illegal lotteries maybe, you know, something new, um, and maybe you can use that info in order to **not fall into it yourself**."

let's say you're an up-and-coming creator, and you've got people who are paid subscribers to you on Twitch or members on YouTube, and you think, This is awesome. I really appreciate their support, and I'd love to give something back. Why don't I give away an Xbox to one of my paid Twitch subscribers? I'll just set the chat into sub mode, and I'll have a bot pick someone at random, and I'll send them an Xbox. That would be really cool, right? Well, not only is that a violation of Twitch or YouTube's terms of service, it's also a violation of the government's terms of service. It's illegal. You can't do that. That would be considered an illegal lottery. And this is a concept that the public actually finds itself hearing about a bit as of late because there was a video posted on YouTube talking about Mr. Beast, and among a whole host of allegations, one of them was that he conducted illegal lotteries when giving away t-shirts many years ago. As I've said in videos past, I try not to

hone in too much on YouTube drama. I try to focus on that have wider-reaching implications. So you may think it hypocritical that I would be talking about this Mr. Beast exposed video. And while I've watched the video in full, I'm not really going to be talking about a majority of the allegations made by the former employee, but rather focus on the illegal lottery component because it's a topic of particular interest to me. Because I think illegal lotteries are something that creators can find themselves innocently and inadvertently doing without realizing that they are actually doing something illegal. I have, over the course of making YouTube videos ever since I became aware of what an illegal lottery was, probably over a decade ago, informed probably tens, at least, of other creators so that they wouldn't do the same. And also I've had brand deals before where from the brand side someone has said, Hey, wouldn't it be cool if we maybe gave something away to someone who either signed up for this subscription or purchased our product? And I've had to tell them, No, you can't.

do that. Here's why it's illegal. Before we go further, we might as well go over some definitions so we can all be on the same page about what an illegal lottery is, and therefore what you can and cannot do in the world of giving things away. I suppose the easiest thing to do is to define a lottery and then go from there. I'm sure we're all familiar with the lottery; we'd all like to win it, wouldn't that be nice? But as far as the specifics, I'm going to read off a web page written by lawyers so I don't get anything wrong. A lottery includes three things: chance, prize, consideration. And at least in the United States, you might be interested to know that unless it's run by the government, this is illegal to do. You might wonder why don't more people go, Hey, you know, I've got $1,000, wouldn't it be cool if I sold tickets for a dollar a piece for people to win my $1,000? And I'm sure I'll sell more than a th

tickets, and therefore I can profit easily. Well, that would be an illegal lottery in its purest form, and the reason why people don't do it is because it is illegal, unless you are the governments. But wait, you say to yourself, people win money all the time, whether it's in a competition or they bought a cereal box that had the winning thing inside of it. How is that allowed if illegal lotteries aren't? Well, in each of those cases, if being done right, one of these three things is being eliminated: chance, prize, or consideration. In most cases, prize is the common denominator. You're not going to be getting rid of prize because your goal is to give away a prize, so you're either eliminating chance or consideration. In the event you're eliminating chance, you're holding a competition. If I wanted to give a billion dollars away to the person who can run a mile the fastest, I can do that all day long because it is a competition of skill, and the person who runs the mile the fastest will win. They didn't

have to have any financial entry in order to participate and win. On the other hand, consideration is what would normally be considered the financial components of entering: buying the ticket and with the serial box top, that would be a sweepstake. And you know how you probably heard in commercials before, no purchase necessary being said really quickly at the end of the commercial with the fine print? That's because you don't actually have to buy the cereal box or whatever it is in order to enter that giveaway sweepstakes, in order to win the prize. They always have a no purchase necessary method of entry, which is usually sending a postcard with your information to a PO Box that's listed somewhere in really, really fine print in the terms and conditions of the sweepstakes, hidden somewhere on the website. But they have to have that; otherwise, it would be an illegal lottery if they did not have a way for someone to enter without purchasing, because you do have to purchase to buy the box of cereal, right? And the more boxes of cereal you buy, the bigger your entry chance is.

going to be, and that would not be allowed if there was no free alternative entry. But usually, the free alternative entry is just talked really, really far away and super inconvenient to the extent that it's just easier to buy the cereal boxes. So what's all the hubbub like? Why do these laws exist that lotteries are illegal unless they are run by the government? Well, it's to protect people from themselves, really. We don't want people gambling away their life savings hoping that they're going to win whatever the prize is that's at stake. Now, I don't actually know what safeguards the government has with their lotteries to prevent people from dumping their whole life savings into lottery tickets. Maybe there is something, or maybe it's just that, hey, at least if someone's going to dump their life savings, they gave it to us, the government, instead of some scammer out there. So it's a better outcome. I don't know, but it is what it is. And if lotteries were legal across the board, we

would have infinite scams of people dumping their life savings, hoping to win, and then nobody actually gets a prize in the issue where it just flees and goes into hiding. So at least we know with the government lotteries, people do actually get the winnings, which is better than not. But hey, if you don't agree and you think people should be able to throw their life savings at whatever gambling they want, then you can pursue a career in politics and campaign on the platform of making lotteries legal and see how you do. Anyway, hopefully now we're all on the same page about what a lottery is and therefore an illegal Lottery, a sweepstakes competition, so on and so forth. So let's link it back into YouTube and why I think despite the fact that it seems fairly straightforward to not go, Hey, I have $1,000, let me sell tickets to win it for a dollar a piece, illegal lotteries I think are still a pretty easy pitfall for especially newer creators who are unfamiliar with the concept. So like I said at the beginning.

of the video, the simple act of giving away something of monetary value while your chat is in subscriber mode, if it's Twitch or member mode if it's on YouTube, that is an illegal lottery. Because what someone could do, right, is they could create a hundred new accounts, subscribe on all of them, and therefore increase their chances of winning that. Now, I don't necessarily think that the creator is hoping for that to take place. They're not hoping for someone to gamble their life savings, making alt accounts and signing them all up for sub mode. It's just not something you probably think about very much if you're getting into this. You're young, you don't know about the rules, and you're really innocent about the whole thing. Now, I actually think that in this situation, intent matters. Now, it may not matter in a court of law if the Justice Department were to decide to prosecute you, but I think in the court of public opinion, it should matter. I will admit to something here that maybe past the statute of limitations, but the way that I found out

about illegal lotteries to begin with is because I accidentally did one a long long long time ago, and you might, you might be like, wait, what the heck, there's no way that discounts as an illegal lottery, but technically it does. I back in probably 2012 or so, uh, I did a charity live stream, and I said, hey, wouldn't it be cool if the people who donate to the charity I'm raising money for could be eligible to win a prize in a giveaway. You can't actually do that. That is an illegal lottery, even if it is for charity, even if it's someone who has given money to charity. You don't touch any of that is going to a good cause. You cannot pick someone out of the people who have contributed money to that charity to be eligible to win a prize. Everyone still has to be eligible with a no purchase necessary to win that prize. I, I didn't know that. I never got in trouble for it. I don't think it would ever actually be prosecuted 'cause it'd be

like okay well well it's you know clearly this is for charity. He didn't have malicious intent. That's why I think intent matters. Um, but even that's not allowed. And so, when I went to do my next charity stream, I was talking with someone from Twitch and they were like, Yeah, no, no, no, no, don't do that anymore. And I was like, Seriously, I can't give something away to someone who donated money to the charity? No, you can't do that. I know it's silly, but you just can't do that anymore. And that was what allowed me to get acquainted with illegal lottery rules. As silly as they are when it comes to a charity giveaway, they are in place because when you extrapolate that specific scenario to the extreme, you actually get something I will show you in just a moment. So, bringing it all the way back to the Mr. Beast thing, is that what he did is many years ago, he had a live stream where he was trying to move a bunch of

merchandise sell a bunch of shirts, and every now and again during the live stream, he would say, hey people who order shirts in the next X amount of minute, I'm going to throw in a bonus thing, whether it's a a prize or money, into some random person's order. Now, obviously, this means there is a chance, however small it may be, that someone goes, you know what, I really want to win that prize, so I'm going to spend way more money than I should. I'm going to buy the next 50 shirts, so that hopefully I'll be the one who wins the prize that's supposed to be given away in the next 10 minutes. And that is what the government is trying to protect people from doing by making lotteries illegal. Now, does this mean that Mr. conducted illegal lotteries within this live stream? Yes, however, as I had mentioned, I think intent does matter, or at least it should in the court of public opinion. Now, I'm not a psychic, I'm not a mind reader. Do I

think that his intent with saying hey, I'm going to include a bonus prize in the next few orders, was meant to prompt people to put in way more duplicate orders than they ever should and spend way more money in the hopes of winning the prize. I don't really think so. It was probably more, hey, it'd be cool to just give some people a bonus who are supporting me. I could be wrong, but it doesn't strike me as something inherently malicious. Now, if people didn't actually end up getting prizes they were supposed to get, which was another accusation made here, well, yeah, that's wrong. If you promise to give someone something in a giveaway, even if it is an illegal lottery, they should get what they were promised. Um, but as long as people actually received what they were promised, again, it doesn't strike me as a malicious thing to do. It seems more like an oversight and not realizing that you're not allowed to do it. But like I said, I'm not a mind reader. And if we're going specifically letter of the

law yes, it was an illegal lottery because there was no means of a no-purchase-necessary entry. But I would imagine this was a learning experience for him, and I would think that since that stream and long before now, he learned of what it would mean to run an illegal lottery and has probably been a lot more careful since, including no-purchase-necessary methods of entry in future giveaways. So, there was one more thing I wanted to loop back to when I was incriminating myself, talking about my charity live stream giveaways of yesteryear, and that is how I had mentioned that even though that's an extremely well-intentioned concept of just hey, you know, we'll give away prizes to people who've donated, hopefully it'll motivate more people to donate to charity, and it's kind of a win-win for everyone. That idea, if taken to a large scale, can prove to be problematic. So, there's this company called Om, maybe you've heard of it at some point, they've done lots and lots of giveaways.

that have been seen on on YouTube, and their concept as a company was they would try to raise money for Charities. Um, but every donation would count as tickets towards some big prize. They would do cars, they would do houses, and I knew they had actually run into some problems with the California attorney general. I hadn't visited their website in a super long time, um, but I just went while, uh, you know, making this video, and I find that they are now UK-based, and everything is in British Pounds. They raise money for British Charities. Um, and I, I was like, I was unaware of this pivot, but I don't know if the UK is more LAX when it comes to regulation around integrating lotteries with charity, and it's more of a gray area, but, but in any case, I don't know if this took place as a result of there were some settlements between the Attorney General of California and, uh, and om where I don't know if there no purchase necessary method of entry into the

ability to win the prize was not clear enough, and therefore they had to agree free entries. Will be offered to all participants on the same terms and conditions as entries for which a payment is made. The payment being you are donating to om on behalf of the charity, and om will ensure that everybody who does the no purchase necessary method of Entry. The postcard will be on the same terms and conditions so you will have the exact same experience. You will not get an advantage by doing the charity donation instead of the no purchase necessary postcard. So this is actually something that has previously caught the attention of regulators, and they have taken action. Uh this was back in 2019, and I went on om's Wikipedia, and it says as of January 28th, 2023, om ceased operations in the United States, despite the fact that they were actually founded in Culver City in La. Um it does say though that there was a case dismissed against om, so I don't know that they actually received punishment as much as just they had to

agree to ensure that there's no purchase necessary method of Entry was fair for everyone. If it wasn't prior, but the same concept again of, you know, doing charity contributions, and giving away prizes as a result, you have to make sure that you're checking all your boxes with having a no purchase necessary in order to eliminate that consideration element that would cause it to be an illegal Lottery. So, all that said, if you are a Creator, beware the pitfalls of well-intentioned illegal lotteries. You may think it's just cool to be able to reward your biggest supporters with something, but you have to figure out another way to do that because you really can't. And again, even if you don't think that you will ever be prosecuted for it, it is probably against the terms of service of any website you are using as well because this site does not want to be targeted and prosecuted for hosting and facilitating illegal lotteries. So again, I think it's a totally innocent Pitfall that you

could fall into, but it's still something you should absolutely be aware of because of how easy it is to fall into it. So, illegal lotteries maybe, you know, something new, um, and maybe you can use that info in order to not fall into it yourself. So, thanks for watching and, uh, I'll see you next time.

MrBeast And The Illegal Lottery

CaptainSparklez

The Legality of Giveaways: A Cautionary Tale

Giving away prizes to paid subscribers on platforms like Twitch and YouTube is not only a violation of their terms of service but is also illegal as it is considered an illegal lottery.

Beast brought attention to this issue, highlighting how creators can unknowingly engage in illegal lottery activities.

An illegal lottery involves chance, a prize, and consideration, and unless run by the government, it is illegal in the United States, leading to potential legal implications for creators and brands.

Illegal lotteries are prohibited, except when run by the government, to protect people from excessive gambling.

Legal alternatives must eliminate either chance, prize, or consideration, as seen in competitions and sweepstakes with a no-purchase necessary option.

The purpose of these laws is to prevent individuals from risking their life savings in the hopes of winning a prize, with government-run lotteries serving as a regulated alternative.

The Pitfalls of Illegal Lotteries on YouTube

Running illegal lotteries on YouTube, whether intentionally or not, can lead to serious consequences for creators, especially for those who are new to the platform.

The act of giving away prizes in exchange for subscriptions or memberships violates the law and can result in potential exploitation by others.

While intent may matter in the court of public opinion, it holds little weight in the eyes of the Justice Department, highlighting the importance of understanding and adhering to lottery regulations.

Beast faced criticism for potentially conducting illegal lotteries during a charity livestream.

The government's aim to protect people from overspending in the hopes of winning prizes is the reason behind lottery laws.

Despite the potential legal issue, the intent behind Mr.

Beast's actions and ensuring that participants received promised prizes is crucial in the court of public opinion.

Om, a company known for charity giveaways, faced legal issues with its lottery model, leading to a pivot to the UK.

The company's approach raised concerns about integrating lotteries with charity and the clarity of no-purchase-necessary entry methods.

As a result of regulatory attention, Om ceased its operations in the United States in 2023.

The Importance of Ensuring No Purchase Necessary in Giveaways

It is crucial to have a no purchase necessary method of entry to avoid illegal lotteries when conducting giveaways or prize rewards.

Creators need to be aware of the pitfalls of unintentionally hosting illegal lotteries, as it can lead to prosecution and violation of website terms of service.

Ensuring compliance with regulations and terms of service is essential to avoid legal issues and maintain ethical practices in rewarding supporters.