Although we cannot offer any legal advice, we would recommend examining the federal lottery prohibition, as well as the Illinois laws discussed below, before going forward with the promotion you described.

As to federal law, the National Bank Act states that a bank may not (among other acts) “announce, advertise, or publicize the existence of any lottery.” 12 USC 25a. It defines “lottery” as an arrangement in which participants “advance money or credit to another in exchange for” a chance to win. Therefore, the iPad/iPhone promotion could be considered a lottery if the participants “advance any money or credit” when downloading the mobile app. For example, if participants must have an account with the bank in order to qualify for a chance to win an iPad/iPhone, the promotion could fall under the “lottery” definition. But, provided that the drawing is open to the public and participants are not required to advance any money or credit to participate, then the drawing would not be deemed a lottery.

Illinois law similarly includes an exemption for promotions that do not require a payment or purchase to enter (but note that a few laws regulate such promotions, as explained in the next paragraph). The Criminal Code defines lotteries as “any scheme or procedure whereby one or more prizes are distributed by chance among persons who have paid or promised consideration for a chance to win such prizes . . . .” 720 ILCS 5/28-1(a)(9), (1)720 ILCS 5/28-2(b). But the Code exempts drawings in which “money or other things of value can be won but no payment or purchase is required to participate.” 720 ILCS 5/28-1(b)(13).

Note that other Illinois laws apply to promotional giveaways. Even if the promotion was restructured so as not to violate the lottery and gambling prohibitions under federal and Illinois law, these notice requirements would still apply:

• The Prizes and Gifts Act prohibits any requirement of payment as a condition to winning, competing for, or obtaining information about a prize. 815 ILCS 525/20(a). It specifies nine disclosures which must be made in a written promotional prize offer. 815 ILCS 525/25.

• The Consumer Fraud and Deceptive Practices Act prohibits advertising any business by offering free prizes to a consumer unless all material terms and conditions relating to the offer are clearly and conspicuously disclosed at the outset of the offer. 815 ILCS 505/2P.

Also, note that you may have to report winnings to the IRS, depending on the value of the iPads. Any prizes that are worth $600 or more should be reported under “Other Income” on a 1099-MISC form (see the instructions here). It is not clear that you would have to issue a form 1099-INT for any existing customers that receive a prize, as the prize would not be tied to the customer’s deposit account, and would not be provided as an inducement to opening an account, but would be tied merely to downloading the mobile app; we recommend that you speak with your bank’s tax advisor on this question.