AG: Some kinds of lottery ticket pooling are illegal in TN

In a formal opinion, the state attorney general has declared that Tennessee law prohibits participation in a lottery pool “managed by a third party” — throwing cold water on a Blount County man’s idea for a part-time business, though apparently not on informal pools among friends.

State Rep. Bob Ramsey, R-Maryville, said he requested the opinion from Attorney General Bob Cooper after a “senior citizen” constituent asked if his idea of a part-time retirement business would be legal.

Basically, the idea was to collect money for buying a large block of lottery tickets with the agreement that any winnings would be split among purchasers — with the money collector getting a fee for his services or a share of any winnings, Ramsey said.

When Cooper issued the opinion and posted it on the attorney general’s website, the question was posed as: “Is it lawful to conduct a lottery-ticket pool in which Tennessee lottery ticket holders pool their tickets and share in any prizes awarded on winning tickets?”

The short summary answer, in turn, was: “No. Such a lottery-ticket pool is ‘gambling’ within the meaning of (the state’s anti-gambling statute), does not fall within any of the exceptions to ‘gambling’ provided in (the statute establishing a state lottery) and therefore is unlawful.”

That led some to think that lottery pools generally were being deemed illegal — including at least one television station in its reporting. Not so, said a spokeswoman for the attorney general’s office, pointing out a footnote to the opinion that says: “This opinion does not address the circumstance in which people pool their money toward the purchase of one or more lottery tickets consistent with the rules and regulations of TELC,” the abbreviation referring to the Tennessee Education Lottery Corp.

The “analysis” text of the opinion also includes some more specifics. It states that buying a Tennessee lottery ticket is specifically exempt from the legal definition of gambling within the relevant state statute.

“But participating in a lottery-ticket pool — an organized plan, managed by a third party who is not affiliated with the Tennessee Education Lottery Corporation, under which Tennessee lottery ticket holders enter their tickets in a pool and agree to give up their right to any prize awarded on one of their tickets in exchange for the right to share in any prize awarded on any winning ticket in the pool (including their own) — is gambling within the meaning of this statute,” the opinion says.

“Because participants in such a pool give up the chance to win a full prize on one of their own tickets, they are ‘risking (something) of value for a profit whose return is to any degree contingent on chance’,” says the opinion, quoting a phrase in state law.

The opinion cites a case wherein the Michigan Supreme Court backed that state’s attorney general in declaring illegal the lottery pooling operations of a corporation. That company, known as PowerPick, charged a fee for pooling money toward purchase of large blocks of lottery tickets. In a complicated arrangement, the company would then assign each buyer a “share” in one of several blocks of tickets as assigned by a random computer drawing. The latter transaction, the Michigan court said, amounted to a “second bet” and thus ran afoul of anti-gambling statutes.

Ramsey said the attorney general opinion provided “a definitive no” to his constituent’s inquiry, but has left questions that may lead him to ask for an opinion to “clarify” just what is, and is not, legal in lottery ticket pooling.

Note: Text of the opinion is HERE.