On November 12, 2024, the Court of Common Pleas of Philadelphia County (the “court”) released is decision holding that the promotional effort to award $1 million to persons who indicated their support for the U.S. Constitution did not constitute a lottery under Pennsylvania law.  This decision marks a rare instance in which a court has ruled upon whether the key elements of a “lottery” or similar gambling scheme were present in a consumer-facing promotional effort.  In this case the court held that the key elements of a lottery (prize, chance, and consideration) were not present.

Background

On October 19, 2024, the founder of America PAC (Mr. Elon Musk) stated at a Pennsylvania rally that he would award $1 million per day for the next two weeks to a registered voter who signed America PAC’s petition pledging support for the U.S. Constitution and the First and Second Amendments.  America PAC also announced this promotional program on the website X with a post that stated the PAC “will be randomly awarding one million dollars every day from now until election day, to registered Pennsylvania voters who sign America PAC’s petition, and a surprise member of the audience as the first winner.”  This post also included a video that stated the money would be awarded “randomly” to people who signed the petition and agreed to be a spokesperson for the petition.  Subsequent posts promoting the program mentioned signing the petition for a chance to win $1 million.

On October 28, 2024, the Philadelphia District Attorney (“Petitioner”) filed an Emergency Petition for Injunctive Relief and a Complaint.  After a removal to federal court and then a remand back to State court, a hearing was held on November 4, 2024, at which Petitioner testified that it was clear that the spokespeople were not selected randomly.  Respondent America PAC’s director and treasurer confirmed that the selected participants were not chosen randomly and instead were chosen based on their ability to represent the organization.  That day, the court denied Petitioner’s request for a preliminary injunction.

Pennsylvania State Lottery Law

Like most States, Pennsylvania prohibits lotteries without government authorization and, like most States, it defines the elements of a lottery as: (1) a prize to be won; (2) a winner determined by chance; and (3) payment of consideration by the player.   The court found that Petitioner failed to establish any of the three elements of a lottery.

  • A Prize to be Won: The court found that those selected by the program “earned” $1 million in compensation rather than “won” a prize. The court noted that throughout the program Respondent Musk stated that anyone selected by the program had to choose to represent Respondent America PAC as a spokesperson in order receive the $1 million compensation.  For example, in the video announcing the program, Respondent Musk stated, “So the only thing we ask for the million dollars is that you be a spokesperson for the petition, so that’s it.”
  • A Winner Determined by Chance: The court found that testimony from Respondent America PAC’s director and treasurer established that those selected by the program were not selected by chance.  Instead, they earned the $1 million through a “multi-step process” that involved a social media review and in-person meeting to determine suitability for the spokesperson role.
  • Payment of Consideration: Although Petitioner alleged three forms of consideration – personally identifiable information (“PII”), a political pledge, and serving as a spokesperson – the court rejected all three.  Petitioner alleged that Respondent “scammed” participants by collecting PII tied to political preferences and that this exchange was not made clear to participants.  The court, however, found that the terms of the offer were clear from the program’s initial announcement, including the requirement to become a spokesperson.  Additionally, the court noted that participants did not pay money to enter the program and noted that every Pennsylvania appellate case considering alleged illegal lotteries involved the payment of money.  Petitioner presented non-monetary examples of consideration from breach of contract cases.  The court found this unpersuasive because Pennsylvania law does not contain a uniform definition of consideration and Petitioner did not present a lottery case that relied on a breach of contract case’s definition of consideration.

In ruling against the Philadelphia District Attorney, the court also addressed and dismissed arguments on the applicability of the State’s nuisance laws and Unfair Trade Practices and Consumer Protection Laws.  This ruling indicates that, at least in Pennsylvania, courts may be reluctant to consider a program an illegal lottery if participants did not pay money to enter.  Additionally, if the organizer of an alleged illegal lottery can show that the “prize to be won” was in fact compensation to be earned, Pennsylvania courts may also rule in favor of the organizer.

Photo of Gerard J. Waldron Gerard J. Waldron

Gerry Waldron represents communications, media, and technology clients before the Federal Communications Commission and Congress, and in commercial transactions. Gerry served as chair of the firm’s Communications and Media Practice Group from 1998 to 2008. Prior to joining Covington, Gerry served as the…

Gerry Waldron represents communications, media, and technology clients before the Federal Communications Commission and Congress, and in commercial transactions. Gerry served as chair of the firm’s Communications and Media Practice Group from 1998 to 2008. Prior to joining Covington, Gerry served as the senior counsel on the House Subcommittee on Telecommunications. During his work for Congress, he was deeply involved in the drafting of the 1993 Spectrum Auction legislation, the 1992 Cable Act, the Telephone Consumer Protection Act (TCPA), CALEA, and key provisions that became part of the 1996 Telecommunications Act.

Gerry’s practice includes working closely on strategic and regulatory issues with leading IT companies, high-quality content providers in the broadcasting and sports industries, telephone and cable companies on FCC proceedings, spectrum entrepreneurs, purchasers of telecommunications services, and companies across an array of industries facing privacy, TCPA and online content, gaming, and online gambling and sports betting-related issues.

Gerry has testified on communications and Internet issues before the FCC, U.S. House of Representatives Energy & Commerce Committee, the House Judiciary Committee, the Maryland Public Utility Commission, and the Nevada Gaming Commission.

Photo of Conor Kane Conor Kane

Conor Kane advises clients on a broad range of privacy, artificial intelligence, telecommunications, and emerging technology matters. He assists clients with complying with state privacy laws, developing AI governance structures, and engaging with the Federal Communications Commission.

Before joining Covington, Conor worked in…

Conor Kane advises clients on a broad range of privacy, artificial intelligence, telecommunications, and emerging technology matters. He assists clients with complying with state privacy laws, developing AI governance structures, and engaging with the Federal Communications Commission.

Before joining Covington, Conor worked in digital advertising helping teams develop large consumer data collection and analytics platforms. He uses this experience to advise clients on matters related to digital advertising and advertising technology.