Request By:
Hon. William A. Miller, Jr.
Washer, Kaplan, Rothschild, Aberson & Miller
Suite 725 Marion E. Taylor Building
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; Linda Carnes Wimberly, Assistant Attorney General
This is in response to your recent request for an opinion from this office concerning the constitutionality of KRS 528.010(10)(a) and the general applicability of KRS 528.010 to a lottery your client, American Civil Education Societies, Inc., intends to sponsor.
The mechanics of the venture described by you are as follows:
1. The American Civil Education Societies, Inc., a non-profit corporation was formed earlier this month exclusively for charitable and educational purposes.
2. The corporation intends to sponsor various fund-raising activities including the lottery in question.
3. The corporation has an option on a house located in Shelby County which you intend to raffle.
4. The organization would attempt to collect donations of $100.00 or more and each contributing donor would be eligible for a drawing, the winner of which would receive the house.
5. The proceeds from the donations in excess of the option price would be used exclusively for charitable purposes.
Enclosed are copies of OAG 81-290 and OAG-80-408, which we believe are dispositive of the raffle you propose.
In your proposed scheme, all the elements necessary for a lottery are present. Those elements are a prize, an award thereof by chance, and consideration.
A.B. Long Music Company v. Commonwealth, Ky., 429 S.W.2d 391, 394 (1968).
The only difference between your proposed raffle and the one described in OAG 81-290 is that you call those persons who contribute $100.00 or more, "donors" who receive a "certificate of eligibility" for a chance to win the house.
You ask specifically whether the $100.00 contribution to the charity and the subsequent issuance of a certificate of eligibility constitutes paying something of value within the meaning of KRS 528.010(5)(a) 1. We think it does and are supported in this view by the dicta gleaned in
Commonwealth v. Malco-Memphis Theatres, 293 Ky. 531, 169 S.W.2d 596 (1943), the leading case on lottery law in Kentucky. Our Court of Appeals spoke in terms of "payment" of valuable consideration; of people who had "paid" to participate; and those people having been induced to purchase.
In Malco-Memphis, supra, the court held that persons paid a "valuable consideration" for the chance to receive a prize in a drawing of ticket stubs held in a theatre, where such consideration consisted of no more than purchasing the regular tickets of admission to the theatre for the usual price. It was not necessary that there be any additional charge for the added opportunity to participate in the drawing for prizes. The opinion reads in part as follows:
"The rule is that where the participants in a drawing by lot for a prize have paid admission fees the transaction is a lottery though the same admission fee is charged as on occasions when no drawing is held. The fact that there can be no loss to the participant does not prevent the scheme from being a lottery when there may be contingent gains. So long as prizes are distributed by chance among people who have paid consideration to enter the contest, it is of no importance that its conduct by the owner of a legitimate business is a means of stimulating sales. If the chance of winning a prize is part of the inducement to purchase goods or tickets of admission, the scheme is a lottery. " (Emphasis added).
Where $100.00 or more contributions to the organization is the only means by which one could obtain a "certificate of eligibility" , then it appears that Malco-Memphis is directly on point and the contribution would be considered consideration.
In regard to your question about the constitutionality of KRS 528.010(10), our office issued an opinion last year (OAG 80-408) stating the reasons why we believe that statute is unconstitutional.
Also, you ask whether the provisions of the gambling statutes which refer to "persons" can be interpreted to include corporations and its officers or directors. In response, we refer you to the general provisions of the Kentucky Penal Code found in KRS Chapter 500. Specifically, KRS 500.080(12) which says that "person" means human being, and where appropriate, a public or private corporation, an unincorporated association, a partnership, a government or a governmental authority. Your corporation and its directors would be included under the provisions of KRS Chapter 528.
Therefore, for the above-mentioned reasons, we believe that your proposed raffle would be considered a lottery and could subject your organization to criminal penalties. See KRS 528.020; KRS 528.030.