On Illegal Gaming, Commercial Lotteries and Mechir Lamishtaken

September 8, 2018
The article was published in Afik News 265 12.09.2018

Such a scenario no one could have imagined. The Minister of Finance flagship project – “Buyer’s Price” (“Mechir Lamishtaken”) for the reduction of housing prices for young couples, is in fact illegal due to the fact that it did not receive a permit to conduct a lottery as required under Israeli law. How many years imprisonment will be sentenced to the Minister of Finance, the organizers of the lottery or any of the young couples who won such a lottery and what will happen to the entire project? – For all these questions the answer is clear – the authorities will find the way to legitimize the Buyer’s Price project. However, it is important for businesses to learn about the implications of a commercial lottery.
A commercial lottery is a common tool in the trading life under which a business promotes sales by drawing a product or service between its customers or its distributors. Many businesses use this tool but do not understand that without complying with the law they are committing a criminal offense.
The Israeli Penal Law prohibits gambling and games of chance and sets that a person who conducts, performs or engages in prohibited gaming, lotteries, and gambling is committing a criminal offense and is liable to long prison terms. Under the, it is illegal to have 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 which enables commercial lotteries subject to the terms and conditions stipulated in such permit.
Among other terms of the permit, it is required to appoint a supervisor pre-approved by the Ministry of Finance. The supervisor is to supervise the lottery operation and furnish the Ministry of Finance with a detailed report pursuant to the provisions of the permit. Also, the permit sets a long list of requirement such as the dates on which the lottery may be performed and how many times a year it may be carried out, the information that should be included in the lottery rules and the manner by which the rules 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.
In this issue of the Buyer’s Price lotteries not only were the lotteries illegally conducted and the lottery managers broke the law but also all the young couples who participated in the lottery and won the right to purchase an apartment at a controlled price have become outlaws. In addition, the entire set of commercial agreements that the “criminals” have committed is illegal and unenforceable.
While it is likely that the State will find a way to legalize the faux-pas, one need be aware of the implications of commercial lotte and it is important that any business intending to run a commercial lottery will first consult with an attorney knowledgeable in this field and who has the experience as a supervisor of commercial lotteries. The same lawyer can act to receive the required permit from the Ministry of Finance, will be involved in drafting the lottery rules, will be present at the lottery and will verify that the lottery meets all legal conditions.