article

Registration & Bonding

Posted: 7/2003

Registration & Bonding
Game Promotions: Playing By the Rules
Part 3 of 3

David O. Klein and Deena B. Burgess

Editors
Note: This is the third of a three-part series addressing the legal issues
surrounding game-based promotions. The first and second parts appeared in the
May and June issues of PHONE+. They can be viewed online at www.phoneplusmag.com.

Are you ready to begin your game promotion this
week? You know what prize(s) you are going to offer. You know that you must
offer an alternative means of entry to participants. You even have a written set
of rules ready to go. So, you are all ready, right? Not so fast. Have you
registered and bonded your game promotion? If your game promotion is not
registered and bonded or, if you, in fact, have no idea what registration and
bonding entails, you are going to have to wait to start that game promotion.

As discussed in the second part of this series, a
list of all contest winners must be maintained by the sponsor, made available to
entrants at no charge (and the State of Rhode Island upon request), and filed
with the states of Florida and New York within 60 or 90 days of the end of the
contest period, respectively. In the United States, three jurisdictions have
registration and bonding requirements under their applicable governing
legislation.

Florida. Where
residents of Florida are permitted by contest rules to enter a promotion,
Florida requires that the game be registered and bonded where the aggregate
value of all prizes to be awarded exceeds $5,000. Failure to comply with this
registration requirement is a second-degree misdemeanor and carries a civil
punishment of $1,000 per violation.

At least seven days prior to the launch of a
contest promotion, the contest sponsor must register with the Florida Department
of Agriculture and Consumer Services (DACS) by submitting a $100 nonrefundable
fee, a list of all promotional prizes and prize categories offered and a copy of
the applicable contest rules and regulations. Once the rules are filed with DACS,
these rules cannot be changed or modified in any way for the duration of the
game promotion.

Game sponsors also must either establish a trust
account or secure a surety bond in the aggregate amount of the monetary value of
the prizes offered and submit proof of such account or bond at least seven days
prior to the launch of the promotion. These funds are to be used exclusively to
pay for prizes and only upon certification by DACS of the amounts of the prizes
and the names of each winner. There is one exception to this provision, however.
If a game sponsor has legally run promotions in Florida for at least five years,
without incident, the sponsor may apply for a waiver from the bond or trust
account requirement.

New York. New
Yorks registration and bonding requirements are very similar to those of
Florida. The most significant difference between the New York regulations and
those of Florida is New York law requires all contest documentation (rules, fee
and proof of bond or trust account) be submitted to the secretary of state at
least 30 days prior to the launch of the game promotion, rather than the seven
days required in Florida.

The prize value threshold in New York for
registration and bonding also is an aggregate of $5,000. Contests that fall into
this category also must have filed with the New York secretary of state a $100
nonrefundable fee, a statement setting forth the minimum number of prizes to be
offered, the minimum value of such prizes and a copy of the applicable contest
rules and regulations. Failure to comply with the registration laws in New York
State is a Class B misdemeanor.

The trust account or surety bond provisions are
the same as those of Florida, with the exception that the five-year
good-standing exemption does not apply.

Rhode Island. The
Rhode Island registration requirements are quite dissimilar from those of
Florida and New York. The Rhode Island prize value threshold for registration is
an aggregate of only $500. Although the Rhode Island statute does not specify
how far in advance registration must be completed, it does state that contest
rules must be filed prior to the launch of the game promotion.

The most notable difference in the case of Rhode
Island is that there is no bonding or trust account requirement. However, in
order to register, contest sponsors must submit to the Secretary of State a $150
filing fee, a statement setting forth the minimum number of prizes to be
offered, the minimum value of such prizes and a copy of the applicable contest
rules and regulations. Failure to file such a statement is a misdemeanor under
Rhode Island law.

What if you do not want to register your game
promotion in New York, Florida or Rhode Island? Can you still run your game
promotion? The simple answer is yes. If you choose not to register and/or bond
your game promotion in any state in which it is required, you may not allow
residents from those states to enter your game promotion. In order to protect
yourself and your company, you should specify in your contest rules that not
only is the game void where prohibited by law, but also that the game is
void in the states of Florida, New York and Rhode Island (unless you have
registered and/or bonded there, as applicable).

Note that this is only a brief overview of some
of the more significant issues that you will face when you launch a game
promotion. We recommend that you consult with experienced promotional law
counsel prior to embarking on such an undertaking.

David O. Klein, Esq., is a partner and Deena
Burgess, Esq., is an associate in the firm of Klein, Zelman, Rothermel &
Dichter LLP, New York, N.Y.
Kleins
practice is in promotional and telecommunications law, and Burgesss practice
is in Internet and telecommunications law. They can be reached at +1 212 935
6020 or by e-mail at dklein@legal.org.

 

Links
Klein, Zelman, Rothermel &
Dichter LLP www.kzrd.com

 


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