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Gambling And Liquor Licenses

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At a recent meeting of the State Liquor Authority (SLA), General Counsel Shannon Kearney Sarfoh warned licensees against hosting bingo games on licensed premises. She cited two state laws that prohibit such activities. As gambling is a frequent violation among licensees and an activity that has merited recent attention from the SLA, it is important to understand some of the relevant laws and elements of gambling.

General Municipal Law § 487 provides, in part, “No game or games of bingo shall be conducted in any room or outdoor area where alcoholic beverages are sold, served or consumed during the progress of the game or games.”  Relatedly, Alcoholic Beverage Control Law § 106(6) provides, “No person licensed to sell alcoholic beverages shall suffer or permit any gambling on the licensed premises , or suffer or permit such premises to become disorderly. The use of the licensed premises, or any part thereof, for the sale of lottery tickets, playing of bingo or games of chance, or as a simulcast facility or simulcast theater pursuant to the racing, pari-mutuel wagering and breeding law, when duly authorized and lawfully conducted thereon, shall not constitute gambling within the meaning of this subdivision.”

Pursuant to Penal Law § 225, “A person engages in gambling when he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.” This statute continues: “Something of value means any money or property, any token, object or article exchangeable for money or property, or any form of credit or promise directly or indirectly contemplating transfer of money or property or of any interest therein, or involving extension of a service, entertainment or a privilege of playing at a game or scheme without charge.” Consequently, even a chance to win a free game would be considered something of value under the statute.

There are three elements to gambling. First, the player must risk something of value upon the outcome of the contest. Second, the outcome of the contest must be based upon a substantial element of chance. Finally, the winner must receive something of value. If any one of the three elements is missing, the contest or game is not considered gambling.

As noted, one of the elements of gambling is a requirement that the player provide something of value. A requirement that the player purchase a product or pay to enter an event would satisfy that element.

Many companies attempt to avoid this element by including in the contest rules the statement, “No purchase necessary.” This would only work, however, if the language is posted clearly, an alternative method to enter is provided and easily available, and it is true and clearly communicated that the chances to win are not greater for the people who purchase versus those who enter using the alternative method. If a mail-in entry is provided as an alternative to participation, the entry blanks must be easy to obtain, and sufficient time must be allotted for the mail-in entrants, so that their ballots are entered before the winner is selected.

The element of chance can be eliminated by making the contest one based upon skill. Essay and photo contests will usually escape a charge of gambling, provided that the element of chance is substantially eliminated. Clearly, if the company running the contest were to select at random 25 essays from 1,000 entries and then award the prize to the best of those 25, chance would remain a substantial element and the charge of gambling would still lie.

Finally, some companies attempt to eliminate the “prize” in order to avoid a charge of gambling. If all that can be won is bragging rights, the winner does not receive something of value, and the contest does not constitute gambling. This is true even if a sign is posted congratulating the winner. However, it is important to remember that a thing of value can take many forms. A game that is based substantially on chance, which requires a payment to play and awards the winner a free game or extended playtime is gambling.

This article is not intended to give specific legal advice.  Before taking any action, the reader should consult with an attorney familiar with the relevant facts and circumstances.

Written by

Keven Danow

Founding and Senior Partner
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