Youtoo has spent over $1 million with legal council to ensure the Youtoo Premium Sweepstakes Engine (PSE) complies with sweepstakes regulations in 44 states in the US and in most advanced nations while not being considered gambling, internet gaming, or a lottery. In the process, Youtoo created a valuable patent portfolio that includes five issued patents.
The PSE method of viewer participation in premium sweepstakes avoids inclusion in US federal or state gaming and lottery laws. The element of consideration has been eliminated because there is a free method of entry (“FMOE”) that also complies with “equal” dignity rules and allows free-to-play participants to have the same opportunity to compete as those who pay-to-play.
The PSE has also addressed the “games for games sake” issue by offering pay-to-play participants an item of value equal to their entry fee, or consideration, by providing them with virtual credits that may be redeemed for products in an online store. It is the same legal framework as a national fast food chain selling an item and offering a premium sweepstakes player token.
For a game to be considered gambling or a lottery, each of three elements must be present:
Prize: Generally defined as anything of value that is awarded to a winner as a result of their participation.
Chance: Chance is present whenever determination of the winner involves an element of randomness. The “dominant factor” test is used to determine if a game is a game of skill or a game of chance. In a game of poker for example, skill is the dominant factor in determining whether or not a participant will win. In the instance of a lottery however, chance alone, not skill, will determine the winner and is considered the dominant factor.
Consideration: Consideration is a legal term for the giving of anything of value as by making a purchase, paying a fee, undertaking a significant effort, or anything of a similar nature.
Eliminating Gaming Elements
To avoid violating the lottery laws, one of the three elements of prize, chance or consideration must be eliminated. Since the PSE allows viewers to play along with television programming or online video for real cash and/or prizes, the element of prizing cannot be eliminated. Since the winner is randomly drawn from a pool of correct respondents, the dominant factor in the PSE is chance. Therefore, the element of chance cannot be eliminated with the PSE. Accordingly, the PSE focuses on eliminating consideration.
Providing a FMOE eliminates “consideration” under lottery laws. The PSE’s Terms and Conditions provides “clear & conspicuous” disclosure about the FMOE and complies with “equal dignity” rules, meaning that it is relatively as easy to play the game via a FMOE as it is under the pay-to-play method. The PSE provides multiple methods of FMOE depending on the length of the sweepstakes. For daily games, the FMOE includes Interactive Voice Response (“IVR”) which, depending upon the state, may contain paid advertisements. For weekly games, the FMOE may include mailing in an entry or entry in person in the case of a weekly casino game.
Credits for Game’s Sake
Generally, the FMOE will eliminate the element of consideration from lottery law analysis. However, some states attorney generals have suggested that, even though there is a FMOE, if a paid player does not receive an item of equivalent value (consideration), then players are gambling. Therefore, the FMOE does not entirely eliminate the element of consideration. To comply with lottery laws, the PSE issues all pay-to-play participants virtual credits that may be redeemed in an online store. Pay-to-play participants are automatically given an online account that maintains an account balance of credits from which participants may make their online store purchases. Such store items may range from no-cost virtual items (e.g. autographed celebrity photos delivered digitally, meet-and-greets, etc.) to low cost items (casino comp points, food, beverages, hotel rooms, etc.) to sponsored merchandise and trips. FMOE players and general viewers may purchase the same items in the online store, which establishes a secondary market for the items.
Thus, the PSE avoids gambling and lottery law analysis while complying with sweepstakes regulations in 44 states by providing an item of consideration, via virtual currency, that is of equal or greater value than the consideration paid.
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