Yes, we believe this type of giveaway is permissible under both Illinois and federal law since no consideration is required to participate. Further, your bank will not be required to file an IRS Form 1099-MISC for the prizewinners if the value of the tickets is less than $600.

The Illinois Criminal Code defines an illegal “lottery” 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” and provides an exemption for drawings for money or prizes “where no payment or purchase is required to participate.” We do not believe that requiring contest participants to be bank customers, to have an email address, and to fill out a survey would be considered a “payment or purchase” in exchange for entry. Consequently, we do not believe that this giveaway would be considered an illegal “lottery” under Illinois law.

Similarly, under federal law, banks generally are prohibited from dealing in lottery-related activities where participants advance money or credit in exchange for the possibility of winning more than the amounts advanced. We do not believe that your bank’s proposed giveaway would constitute a lottery under federal law, because your customers are not advancing money or credit to participate.

Further, the OCC has taken the position that a bank may limit participation in a contest to its customers without violating the federal lottery prohibition, provided that “the customer pays the normal fee for the banking service and does not pay anything extra to enter the contest.” The FDIC’s Chicago Regional Office and the Illinois Department of Financial and Professional Regulation also have confirmed that limiting a contest to customers only, where no additional fees are required for entry, would not violate the federal lottery prohibition.

Additionally, we note that the Illinois Consumer Fraud and Deceptive Business Practices Act requires a business that is offering a free prize to clearly and conspicuously disclose the giveaway’s material terms and conditions.

For resources related to our guidance, please see:

• IRS Webpage, Form 1099-MISC (“File Form 1099-MISC for each person to whom you have paid during the year: . . . at least $600 in: . . . prizes and awards; . . .”)

• Illinois Criminal Code, 720 ILCS 5/28-2(b) (“A ‘lottery’ is 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, whether such scheme or procedure is called a lottery, raffle, gift, sale or some other name, excluding savings promotion raffles. . . .”)

• Illinois Criminal Code, 720 ILCS 5/28-1(b) (“Participants in any of the following activities shall not be convicted of gambling:. . . . (13) Games of skill or chance where money or other things of value can be won but no payment or purchase is required to participate.”)

• Federal Deposit Insurance Act, 12 USC 1829a (Prohibiting state nonmember banks from involvement with a “lottery,” defined as “any arrangement, other than a savings promotion raffle, whereby three or more persons (the ‘participants’) advance money or credit to another in exchange for the possibility or expectation 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.”)

• Federal Reserve Act, 12 USC 339 (Lottery prohibition for state member banks.)

• National Bank Act, 12 USC 25a (Lottery prohibition for national banks.)

• OCC Interpretive Letter 1153 (May 11, 2015) (“OCC precedent has taken the position that where a banking transaction is required in order to enter a contest, there is no consideration if the customer pays the normal fee for the banking service and does not pay anything extra to enter the contest.”)

• Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2P (“It is an unlawful practice for any person to promote or advertise any business . . . by means of offering free prizes, gifts, or gratuities to any consumer, unless all material terms and conditions relating to the offer are clearly and conspicuously disclosed at the outset of the offer so as to leave no reasonable probability that the offering might be misunderstood.”)