Pennsylvania Court Finds Promotion Program During Presidential Campaign Not a Lottery

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.