July 04, 2005
Are Stanford Students Running an Illegal Gambling Business?
Posted by Christine Hurt

UPDATE:  The JD2B link below is broken.  The post linking to winbutton no longer appears there.

I noticed on JD2B a link to this website, The Winbutton, which JD2B says was started by students at Stanford.  All you do is click on the winbutton, and you could win "the pot," which starts at $5.  You don't put money at risk.  The pot comes from the advertising revenue raised by the clickers.  (The ads don't appear until you click.)  If you click on the "about" link, you'll see that you could add the winbutton to your website, too.

Because I have been working on my retail investor v. gambler paper, I have acquired some handy knowledge about gambling.  Unfortunately, a little knowledge is dangerous, and so I'm wondering if the winbutton may be an "illegal gambling business" under federal law.

Under 18 U.S.C. ยง 1955, a person can be fined or imprisoned for being involved in an "illegal gambling business."  This term is defined as "a gambling business which-- (i) is a violation of the law of a State or political subdivision in which it is conducted; (ii) involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and (iii) has been

or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day.

The term" gambling" is defined as including, but not being limited to "pool-selling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita or numbers games, or selling chances therein."

OK, I hear you saying that it can't be a gambling business because the player is not putting money at risk.  The player is not placing a bet or wager, so it can't be gambling.  I'm inclined to agree with that argument, especially if you believe that the purpose of gambling laws is to protect the would-be gambler from losing money in a risky game.  Then maybe this website is more like a sweepstakes or a McDonald's promotional game where you get a game piece, no purchase necessary, and you have a chance to win.  What's in it for McDonald's?  Most people don't just send away for a free game piece, they actually walk in to a McDonald's and also make a purchase.  Here, the winbutton player may click on an advertiser, but the player does not have to in order to play.

However, what if we think that focusing our eyeballs on something has value.  That in a land of attention scarcity, the ability to barter our willingness to focus our eyeballs on something is worth money.  So, by my clicking on the winbutton and being shown advertisers, I have paid an entry fee into a lottery.  (This argument is not too off-base, given a different definition in section 1085 that a "gambling establishment" an establishment "operated for the purpose of gaming or gambling, including. . .playing any game of chance, for money or other thing of value.")

I think the defendant could say that a sweepstakes player or McDonald's promotional game player also gives valuable attention in the same way that the winbutton player does.  To enter one of those clearinghouse sweepstakes games, a person doesn't have to order any magazines, but you have to sift through a lot of material on those magazines.  To enter a McDonald's promotional game without making a purchase, a person will have to come in contact with the McDonald's brand.  So, is the winbutton any different?

As I point out in my paper, federal regulators have been much more strident about conduct that happens on the Internet, merely because it happens on the Internet, so I would not be surprised if the winbutton would be treated differently than the Publishers' Clearinghouse Sweepstakes on that basis alone.  (Also, if anyone knows whether this sweepstakes is "void where prohibited" and specifically where, I would like to know that, too.)

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