On January 20, 2016, two Utah runners filed a class action lawsuit against New York Road Runners, Inc., the organization that administers the New York Marathon. Each year, the number of runners interested in competing in the marathon far exceeds the spots available. As such, since 2010 the New York Road Runners have conducted a random drawing in which the winners receive a spot in the race. The complaint alleges that the $11 “Processing Fee” that must be paid to the New York Road Runners to enter the drawing constitutes “consideration” (i.e., something of value) that the spot in the race is a “prize,” and therefore the drawing is an illegal lottery that violates New York State law. The plaintiffs seek $10.56 million in statutory damages (on behalf of an estimated 480,000 runners who paid the $11 fee), as well as an injunction to stop the practice unless New York Road Runners complies with New York gaming laws.
Tip: This is a good reminder that a promotion which includes the elements of prize, chance, and consideration, including a purchase requirement, may be alleged an illegal lottery under state and federal law. To ensure that your company’s consumer promotions are not an illegal lottery, be sure to structure the promotions so as to clearly eliminate one of these three elements of an illegal lottery.