Companies and businesses wishing to launch a new product or promote sales are often utilizing commercial lotteries as part of their promotional efforts. A business conducting a commercial lottery without legal support prior to the lottery or receipt of a permit in advance from the Israeli Ministry of Finance may find itself (and even its managers) under indictment for a criminal offense which maximum sentence is up to three years' imprisonment, beyond the exposure to civil claims. So how can one avoid committing the offense?
The Israeli Penal Code explicitly sets that a person who conducts, performs or engages in prohibited gaming, lotteries, and gambling is committing a criminal offense and is is liable to long prison terms. The law makes no distinction between a lottery, a forbidden game or gambling and prohibits any arrangement whereby it is possible to win funds or other benefits, all based more on fate than on understanding or ability. An exception to this is the possibility of holding lotteries for commercial advertising and sales promotion, subject to a set of terms and conditions enumerated in the general lottery permit issued by the Israeli Ministry of Finance and extended from time to time and which enables commercial lotteries subject to the terms and conditions stipulated in such permit. Such conditions are complex and it is important to consult with an attorney with experience in that field as early as structuring a business plan for the lottery and not wait for the last minute.
Among other terms stipulated in the permit, the permit requires the appointment of a person pre-approved by the Ministry of Finance and serving as supervisor of the lottery. The supervisor will not only supervise the lottery operation and the necessary publications, but also furnish the Ministry of Finance with a detailed report pursuant to the provisions of the permit and will deal with any client issues. Also, the permit sets a long list of requirement such as the dates on which the lottery can be performed and how many times a year it may be carried out, the information that should be included in the lottery bylaws and the manner by which the bylaws need to be published, requirements relating to the prices of the promoted products after the lottery, the prohibition on participation in the lottery of family and friends of the lottery organizer or the supervisor, the manner by which lottery results are to be published, the manner by which prizes should be distributed and more. The supervisor is to be present when the lottery takes place and it is important that the supervisor is involved in the drafting of the lottery bylaws to be published to the public in the manners prescribed in the permit and ensure that the lottery meets all legal conditions in order to prevent liability.
Therefore, if one intends to run a lottery to promote sales, one should consult with an attorney knowledgeable in this field and who has the experience as a supervisor of lotteries so that such attorney will be able to guide you on how to meet the legal requirements and will be authorized by Ministry of Finance as a supervisor. As stated, failure to obtain a permit from the Ministry of Finance prior to the lottery and improper planning of the lottery and the preliminary actions required may not only cause financial risks but may also constitute a criminal offense.