Web Charity Auction

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Question:

My bank recently had to cancel a charitable event. Many of the items that had been donated for a raffle are time sensitive and we would like to auction them off before the reschedule date. We have developed a web page to auction these items from and are only inviting those people whom would have originally attended the charitable event to bid on the items. The auction page will in no way be associated with our bank's website. Do you foresee any regulatory, compliance or marketing issues with this?

Answer:

My immediate question is about the rules. Could this fall under the definition of a lottery?

12 U.S.C. Sec. 25a, (these are OCC rules, other agencies have similar definitions) The term “lottery” includes any arrangement whereby three or more persons (the “participants”) advance money or credit to another in exchange for the possibility or expection that one or more but not all of the participants (the “winners”) will receive by reason of their advances more than the amounts they have advanced, the identity of the winners being determined by any means which includes —

(A) a random selection;

(B) a game, race, or contest; or

(C) any record or tabulation of the result of one or more events in which any participant has no interest except for its bearing upon the possibility that he may become a winner.

If this is restricted to customers only, their payment of fees or deposits in your bank qualify as consideration or payment by them to "play" in the raffle. This is true whether your bank uses its web site or just participates. Check with counsel based on federal prohibitions on activities involving lotteries and state laws that apply as well. If this is a pure auction (you used both the term auction and raffle) and both customers and non-customers may bid to win and it is clearly not a lottery, you have only your state laws and auction rules that may apply.

First published on BankersOnline.com 9/15/08