Benevolent v. State – 1/21/2016

February 1, 2016

Arizona Court of Appeals Division One holds that a sweepstakes may constitute illegal gambling under A.R.S. § 13-3301(4) even if it offers free chances to win or is offered for a charitable purpose.

In 2010, a non-profit organization entered into a contract with a company to run a sweepstake for the stated purpose of charitable fundraising, under which the non-profit organization and the company would split any revenue generated from the sweepstakes.  The sweepstakes operated by allowing members of the non-profit organization to obtain chances to win up to $1,199 in three ways:  (1) members received one free chance to win every day; (2) members could obtain additional free chances to win via mail-in request; and (3) members could pay $1 per additional chance to win.

The Arizona Department of Liquor Licenses and Control concluded that the sweepstakes constituted unlawful gambling in violation of A.R.S. § 4-244(26), under which it is unlawful for a liquor licensee or employee to knowingly permit unlawful gambling on its premises.  In Arizona, unlawful gambling is defined by statute as: (1) the payment of consideration, (2) for the chance, (3) to win a prize or obtain some benefit.  A.R.S. § 13-3301(4).  Raffles are exempt from this definition if no person except a bona fide local member of the sponsoring organization participates in the management, sales, or operation of the raffle.

The Court of Appeals held that the sweepstakes constituted unlawful gambling under the plain language of the statute, and neither the availability of free chances to win nor the stated charitable purpose for the sweepstakes negated the fact that members were paying consideration for additional chances to win cash prizes.  The Court further held that the raffle exception did not apply because the non-profit had contracted with an outside company that participated in the raffle by monitoring the transactions, providing operational support, and splitting the net proceeds from the sweepstakes.

Judge Gould delivered the opinion, in which Presiding Judge Kessler and Judge Norris joined.