Most people would think that there’s nothing wrong with raffling off an advance copy of Mass Effect 3 for charity — in fact, many would encourage it. As Michael Davis and Miguel Droz discovered, however, holding a raffle without doing your research can land you in hot water with the law.
This past weekend, Electronic Arts launched several copies of the sci-fi role-playing game into space using weather balloons. Once they landed, fans could track the GPS device attached to the balloon to find get their hands on a copy of the game — which isn’t available until March 6.
Davis and Droz, two video makers, discovered a copy of the game that had landed in the Arizona desert. They decided to raffle the copy off that Sunday, with $5 giving fans a chance to win the game entirely at random using a lottery system. 30% of the proceeds were set to go to Child’s Play Charity, a gaming community charity that improve the lives of sick kids in hospital, with the rest going towards a video game company the duo were hoping to found.
The two weren’t aware, however, that raffling off the game left them subject to potential criminal penalties — including a large fine and even jail time. State law in Nevada, where the two are based, states that lotteries are only legal if all the proceeds go to charity.
If that wasn’t scary enough, because Davis and Droz were accepting entries from interstate, the raffle also became a federal issue.
"You can pretty much never rely on a charitable gaming exemption unless 100% of the money goes to a charity (though you can often use part of the funds to cover event costs, ie dealers at a charity casino night)," attorney Mark Methenitis told Kotaku in an email. "…In short, they're running an illegal lottery which subjects them to potential criminal penalties. I would imagine that Child's Play, if they knew what was going on, would not want to be involved. I won't even get into the issues with the IRS that could come up here."
“We were actually unaware of the legal ramifications before we started this. At first we actually thought it would be a great idea for a great cause,” wrote Droz in an email to Kotaku, before announcing they would be changing to lottery to give 100% of the proceeds to Childs Play.
Not long after, however, Droz sent another email, cancelling the entire event. “So as of now we are officially cancelling this entire thing, and refunding everyone's money through PayPal. Sorry about that, we should have done our homework first, but in the rush to get this done, hopefully do something cool for charity and get ourselves a kickstart to start our company, we just didn't do our due diligence. Again, we super apologize for wasting anyone's time.”
Childs Play later commented that while they weren’t about to stop any donations, they don’t promote any fundraisers that don’t fully benefit the charity. While they were contacted by Droz and Davis, they weren’t given adequate time to decline the offer to participate.
You can donate to Childs Play Charity at their website.
[Kotaku]
