Is a real estate marketing program where sellers pay into a fund that funds a drawing for a $10,000 broker cash prize and a buyer trip an illegal lottery under New York law?

Subject

Whether the "Good as Gold" real estate marketing promotion, which uses seller-funded prize pools to drive incentive drawings for brokers and buyers, constitutes an unlawful lottery under N.Y. Const. art. I, § 9 and Penal Law § 225.00.

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/96-F1_pw.pdf

Plain-English summary

The Secretary of State asked the AG to review a proposed real estate marketing program called the "Good as Gold" promotion. The plan worked this way: Longley-Jones Associates, a real estate marketing firm, would invite sellers listing properties with the firm to pay $300 each (on top of the usual commission) into a special prize fund. After fifty participating homes sold, the firm would throw a "Gold Party" and draw from the names of the real estate brokers and sales associates who had sold the participating homes. The winning broker or agent would receive $10,000. The buyer who had purchased through the winning agent would receive a trip to a predesignated location.

The AG concluded that the program is an unlawful lottery on either of two analyses.

First, looking at the buyer's prize: the three elements of an unlawful lottery (consideration, chance, and prize) are all present. The buyer pays consideration by purchasing one of the participating homes (Miller; Hull v Ruggles); the buyer wins by chance because selection turns on a drawing from among the brokers who sold "Good as Gold" homes; and the prize is the trip. The AG drew on the long line of cases holding that buying a movie ticket, a candy package, or any other product at the regular price, while also receiving the chance to win a prize, supplies the consideration element. The fact that the buyer receives a house in exchange for the purchase price does not remove the consideration; the inclusion of the chance to win a prize alongside the home purchase is enough.

Second, the AG addressed the question whether the program could be saved by deleting the buyer's prize and leaving only the $10,000 broker drawing. The answer was still no. The element of consideration is supplied by the broker's services. Brokerage services are "something of value" within the meaning of Penal Law § 225.00(a) just as money would be. Under contract principles, valuable consideration includes "some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other" (Holt v Feigenbaum). Brokerage services fit that definition; they are sold and have ascertainable market value. The fact that the broker also earns a separate commission for the underlying sale does not remove the lottery element, just as movie-ticket buyers earning the entertainment they paid for did not negate the lottery in Miller.

So either way, the AG concluded, the "Good as Gold" promotion is an unlawful lottery prohibited by Penal Law § 225.00 and N.Y. Const. art. I, § 9.

Currency note

This opinion was issued in 1996. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What are the three elements of an unlawful lottery in New York?
Consideration, chance, and prize. The Court of Appeals stated the test in People v Miller in 1936 and the Second Department reaffirmed it in Harris v Economic Opportunity Commission. All three must be present. If one is missing, the activity may be a sweepstakes, contest, or skill game rather than a lottery.

Why is the constitutional prohibition so strict?
N.Y. Const. art. I, § 9 declares that no lottery, sale of lottery tickets, pool-selling, book-making, or any other kind of gambling shall be authorized or allowed in the State, except as the Constitution specifically provides. The exceptions cover State-operated lotteries, parimutuel horse racing, and certain games of chance by religious, charitable, or non-profit organizations with prizes capped at $250. Everything else is forbidden. The drafters of the 1894 constitutional revision wanted to close earlier loopholes that had allowed widespread gambling under one name or another.

Does the buyer "pay" consideration by purchasing the house?
Yes. The opinion notes that the most common way a player pays consideration in a lottery is by purchasing a regular product (a movie ticket, a candy package, a banking product) at the regular price, with the chance to win a prize included alongside the product. The buyer's money is the consideration; the product is something of value received in return, but it does not negate the consideration for lottery purposes.

Why are brokerage services consideration?
Because they have market value and are bargained for. The "Good as Gold" promotion was explicitly designed to incentivize brokers to find buyers for participating homes. The broker's effort, time, and professional services were the "something of value" the broker was contributing in exchange for the chance to win the $10,000 drawing. That is enough for the Penal Law § 225.00 consideration element.

What about raffles?
Penal Law § 225.00 expressly excludes raffles as defined in General Municipal Law § 186(3-b). Raffles run by religious, charitable, educational, fraternal, or service organizations under General Municipal Law Article 9-A can be lawful. The "Good as Gold" promotion was not a raffle in any sense; it was a commercial marketing scheme by a for-profit real estate firm.

Could the firm restructure the program to make it lawful?
Possible restructurings would have to eliminate at least one of the three elements. Removing the chance element (by making the prize predictably tied to a measurable performance metric, say, the broker who sold the most homes) might convert the program into a contest of skill or sales rather than a lottery. The AG opinion did not bless any specific restructuring; it simply identified why the original and the buyer-prize-removed versions both fell.

Background and statutory framework

N.Y. Const. art. I, § 9 has prohibited lotteries in some form since the 1846 Constitution. The current version dates to the 1894 revision, which strengthened the prohibition after a string of legislative end-runs in the 1870s and 1880s allowed quasi-lotteries to flourish. Twentieth-century amendments added the State lottery exception (1966), parimutuel wagering (1939), and games of chance for nonprofit organizations.

Penal Law § 225.00 implements the constitutional prohibition. It defines "lottery" as an unlawful gambling scheme with three elements: (a) players pay or agree to pay something of value for chances, represented by numbers or some other media, designated to be winning ones; (b) winning chances are determined by a drawing or other chance-based method; (c) holders of winning chances receive something of value. Article 225 of the Penal Law sets out the criminal penalties, ranging from a violation to a class E felony depending on the conduct.

The case law on "consideration" is rich. People v Miller (1936) found the element present in a chain-letter scheme tied to movie-ticket purchases. The Carl Company v Lennon (1914) found it in a "small banks" promotion where customers received chances by saving in small denominations. Hull v Ruggles (1874) found it in a candy promotion. People ex rel. Ellison v Lavin (1904) found it in a cigar-purchase incentive scheme. The 1996 opinion drew from this line to extend "consideration" to brokerage services, a logical extension because the Penal Law definition uses "something of value" rather than "money."

Citations

• N.Y. Const. art. I, § 9 (prohibition of lotteries)
• Penal Law § 225.00 (definition of lottery)
• General Municipal Law § 186(3-b) (raffle exception)
• Harris v Economic Opportunity Commission of Nassau County, 171 AD2d 223 (2d Dept 1991)
• People v Miller, 271 NY 44 (1936)
• The Carl Company v Lennon, 86 Misc 255 (Sup Ct, Niagara Special Term 1914)
• Hull v Ruggles, 56 NY 424 (1874)
• Holt v Feigenbaum, 52 NY2d 291, 299 (1981)
• People v Psallis, 12 NYS2d 796 (NYC Magistrate's Court, 1939)
• People ex rel. Ellison v Lavin, 179 NY 164 (1904)

Original opinion text

Opn. No. 96-F1
NY CONST ART I § 9; PENAL LAW § 225.00.
A proposed real estate sales program called the "Good as Gold" promotion would violate the
anti-gambling provisions of New York State law.
January 29, 1996
Hon. Alexander F. Treadwell Formal Opinion
Secretary of State No. 96-F1
162 Washington Avenue
Albany, NY 12231-0001
Dear Secretary of State Treadwell:
Your counsel has inquired whether a proposed real estate sales program called the "Good as Gold"
promotion would violate the anti-gambling provisions of New York State law. You indicate that the
"Good as Gold" promotion would provide sellers of real estate with the opportunity to offer a special
incentive to buyers, real estate brokers and their sales associates. The promotion under review would be
offered to those sellers who choose to list their properties with Longley-Jones Associates, Inc., a real
estate marketing firm. In addition to the usual commission that would be due Longley-Jones,
participating sellers would each pay $300 into a special fund created and administered by Longley-Jones.
After fifty participating homes have been sold, Longley-Jones would host a "Gold Party" at which there
would be a drawing from the names of the real estate brokers and sales associates who sold the
properties. The winning real estate broker or sales associate would receive $10,000 and the buyer who
purchased the property through the winning agent would receive a trip to some predesignated location.
Article I, § 9 of the New York State Constitution provides, in pertinent part: "no lottery or the sale of
lottery tickets, pool-selling, book-making, or any other kind of gambling [except as otherwise provided
herein], shall hereafter be authorized or allowed within this state." The exceptions include State-operated
lotteries, parimutuel wagering on horse races, and certain specified games of chance conducted by
religious, charitable or non-profit organizations in which the prize does not exceed $250. Generally, "[t]
hree elements cause an event to constitute an unlawful game of chance, or lottery, . . . consideration,
chance, and a prize." Harris v Economic Opportunity Commission of Nassau County, 171 AD2d 223
(2d Dept 1991) (citing People v Miller, 271 NY 44 [1936]).
The constitutional provision directs that the Legislature pass "appropriate laws" to enforce the lottery
prohibition. Although the term "lottery" is not defined in the Constitution, the term is defined in Penal
Law § 225.00 as follows:

"Lottery" means an unlawful gambling scheme in which (a) the players pay or agree to pay
something of value for chances, represented and differentiated by numbers or by
combinations of numbers or by some other media, one or more of which chances are to be
designated the winning ones; and (b) the winning chances are to be determined by a drawing
or by some other method based upon the element of chance; and (c) the holders of the
winning chances are to receive something of value provided, however, that in no event shall
the provisions of this subdivision be construed to include a raffle as such term is defined in
subdivision three-b of section one hundred eighty-six of the general municipal law.

The promotional scheme contemplated here does not fall within the exceptions set forth in Article I, § 9
of the Constitution. Thus, we must determine whether the elements of a prohibited lottery are present
under the fact pattern you have presented.
It is clear that each of the elements of a lottery are present where the buyer of the "Good as Gold" home
earns the chance to win a trip by buying one of the promotion homes. The element of consideration is
present because the buyer became eligible to win the vacation prize by purchasing one of the promotion
homes. The purchase of goods or entertainment is perhaps the most common means by which the player
pays consideration for the chance to win a prize in an unlawful lottery. See, e.g., People v Miller, 271 NY
44 (1936) (purchase of movie ticket); The Carl Company v Lennon, 86 Misc 255 (Sup Ct, Niagara
Special Term 1914) (small banks); Hull v Ruggles, 56 NY 424 (1874) (purchase of package of candy).
(The receipt of something of value in addition to the chance to win the prize does not remove the
consideration element of the lottery. See, discussion, infra, footnote 1.) Furthermore, the buyer who wins
the trip is selected by chance as a result of a drawing from among the brokers who sold the "Good as
Gold" promotion homes. The vacation constitutes a prize, satisfying the third element of an unlawful
lottery. Therefore, the scheme constitutes a lottery prohibited by the Penal Law and the New York State
Constitution.
You have asked if the promotion would be prohibited if the buyer's prize was deleted from the program
and only the chosen broker or sales associate would win a prize. Obviously, under those circumstances,
the elements of chance and a prize remain. However, it is less clear that the element of consideration is
present because the broker has not purchased anything in order to become eligible to win the cash prize.
Instead, the broker or sales agent performs compensated services.
Under the lottery statute, consideration is present if the "players pay or agree to pay something of value."
Here, the broker has not paid any money in exchange for the chance to win a prize. However, the broker
has provided services which qualify him or her to win a prize. Although we have found no cases which
address whether services may constitute consideration for an unlawful lottery, for the following reasons
we conclude that the furnishing of brokerage services constitutes payment of something of value and,
therefore, fulfills the consideration element of a prohibited lottery.
First, under principles of contract law, valuable consideration is defined broadly as "some right, interest,
profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given,
suffered or undertaken by the other." Holt v Feigenbaum, 52 NY2d 291, 299 (1981) (citations omitted).
Clearly, brokerage services fall within that definition. Brokerage services are sold and have
ascertainable value in the marketplace.
The phrase "something of value" as used in subdivision (a) of Penal Law § 225.00, the consideration
requirement, is used in subdivision (c) of the statute to describe the prize awarded to the winning player.
In the latter context, it is clear that "something of value" is not limited to money but can be any other
kind of prize. People v Psallis, 12 NYS2d 796, 798 (NYC Magistrate's Court, 1939); see, Hull v Ruggles,
56 NY 424 (1874) (silverware); Harris v Economic Opportunity Commission, supra (new automobile).
Significantly, the "Good as Gold" promotion is intended to provide an incentive to brokers and sales
associates to work, with special diligence, to find eligible buyers. Thus, under the concept of the
promotion, these brokerage services are provided, at least in part, as a means of entering the "Good as
Gold" lottery. While the broker earns a commission by providing services which result in the sale of the
"Good as Gold" promotion home, in addition, he or she receives a chance to win prize money. Thus, at
least to some extent, the brokerage services supplied constitute consideration for eligibility for the
"Good as Gold" lottery.
We conclude that the "Good as Gold" promotional scheme is an unlawful lottery prohibited by Penal
Law § 225.00 and Article I, § 9 of the New York State Constitution.
Very truly yours,

DENNIS C. VACCO
Attorney General

1 In any event, there is authority for the proposition that consideration is present when the player
purchases goods or entertainment at the regular price and receives, in addition to the thing purchased,
the chance to win a prize. See, People v Miller, 271 NY 44 (1936); People ex rel. Ellison v Lavin, 179
NY 164 (1904). For example, in People v Miller, supra, the Court found the element of consideration
present in a case where the player paid the regular price to see a movie and, with that purchase, received
the chance to win a prize. Similarly, consideration was found to be present in a case where the player
purchased cigars at their regular prices and also received the chance to win a prize. People ex rel.
Ellison v Lavin, supra. Thus, receipt of something of value, in this case a commission for brokerage or
sales services, does not remove the consideration element of the lottery.