I've been fortunate in my time since law school to work with many smart people. One of them is Dale Joerling, a partner at Thompson Coburn LLP (my first law firm employer). I met Dale while we were both working on an antitrust case in the Boston area. Over a bowl or two of clam chowder, Dale and I got to know each other, and since I left that firm, I've been trying to find a way to work with him on a project.
Finally, years later, the opportunity presented itself. You see, Dale writes a Sweepstakes Law Blog, and recently wrote an article that discussed the legality of grab bags including grab bags for the distribution of sports trading cards.
Given Dale's background and recent article (which everyone should check out), I thought he would be perfect for a Q&A on box breaks.
Q. Dale, since the box breaking industry started, quite a few of my readers have inquired into whether or not box breaks are "legal." I've attempted to write short blogs on these issues, but have inevitably surrendered given the complexity of the issues presented.
With that preface, can you help identify the areas of laws that are implicated by box breaks?
Dale Joerling: As you know Paul, because of ethical codes that apply to attorneys, I cannot give legal advice to persons whom I don't represent. However, I can speak generally about the areas of the law that may apply to box breaks, with the caveat that the statutes may not apply to all types of box breaking and each situation needs to be analyzed individually.
The primary laws that apply to box breaking are state anti-gambling statutes. Virtually every state has some form of these laws. They provide that if a game, sweepstakes, lottery, giveaway, or sale of a product or service has: 1) a prize, 2) an element of chance in determining the winner, and, 3) consideration, i.e. some type of payment or activity to participate, it is an illegal form of gambling.
The principal issue with respect to box breakers would be whether all three of those elements are present: prize, chance, and consideration. Let's break down the basic elements of a box break:
- Special, rare, or valuable cards or memorabilia included in some but not all boxes of less valuable cards could be seen as a prize.
- Randomly including these more valuable cards in a box could be viewed as creating an element of chance of winning a prize.
- Requiring people to buy a box of cards to participate may constitute consideration.
It appears that it may be possible that all three elements could be present in certain box break situations.
Some states have other statutes that could also be applicable. For example, California has a grab bag statute that pertains specifically to using grab bag types of promotions to sell trading cards.
Q. I've recently seen "razzes" open up as a type of box break, where multiple people pay for the opportunity to win only one item or one card. This looks to me like a raffle. Does that raise any possible concerns under state anti-gambling laws?
Dale Joerling: As with the box breaks, if this type of promotion has all three elements of gambling, it could also be considered to be an illegal form of gaming. All scenarios must be looked at on a case-to-case basis, however.
Q. Would a "no purchase necessary" option resolve some of the illegal gambling questions raised by certain box break promotions?
Dale Joerling: The most common way of making certain that a promotion does not contain all three elements is to eliminate the consideration required to participate. By designing the promotion in a way that no purchase is necessary, this can be accomplished. Most states recognize that allowing people to enter by mailing in an entry does not constitute consideration. By allowing free mail-in entries that have the exact same odds of winning as other entrants, the element of consideration is removed, which is why most sweepstakes will have the "No Purchase Necessary" language prominently displayed in their official rules and promotional materials. It may be possible to eliminate consideration in a box break situation if the manufacturer of the cards or a retailer or distributor is able to provide a free opportunity to win the more valuable cards as an alternate method of entry. Whether that is a practical solution for the break box industry is another question.
Q. If everyone wins "something" in a box break, does that adequately respond to the illegal gambling issues? I've analogized these type of box breaks with the concept of four people on a hunting trip. Before they hunt, the group decides how they plan to carve up the deer. One guy wants the heads to mount on his wall in his man cave, another wants the steaks, another wants the burger, and the fourth guy wants the pelts to wear (it takes all types). So, if the spoils are carved up according to a preexisting formula, are there still sweepstakes/contest/lottery concerns?
Dale Joerling: In most instances, the fact that "everyone could win something" is not enough to remove the element of chance. However, if everyone wins the same prize or, in some cases, the same prize value, it could be found that the element of chance has been eliminated because the participants know the value of what they will receive before they make their purchase.
Q. Is it possible that manufacturers of trading card products may have some responsibility? In particular, if a company makes a product specifically for the box break market, are they opening themselves to potential backlash from a dissatisfied participant?
Dale Joerling: Every situation is different, so I can't respond to that directly. But it is possible that there could be some responsibility on the part of card manufacturers and perhaps, more so, by those who make products specifically for the box break market.
Q. What could a breaker do to protect themselves and make sure they're following applicable state laws in regard to sweepstakes, lotteries, and contests?
Dale Joerling: Because no two situations are exactly the same, it is important that anyone with concerns about the application of these laws check with a lawyer who has experience in these types of promotions.
The information provided in Paul Lesko's "Law of Cards" column is not intended to be legal advice, but merely conveys general information related to legal issues commonly encountered in the sports industry. This information is not intended to create any legal relationship between Paul Lesko, the Simmons Browder Gianaris Angelides & Barnerd LLC or any attorney and the user. Neither the transmission nor receipt of these website materials will create an attorney-client relationship between the author and the readers.
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