Legal Question in Business Law in California

Re: State Compliance or Regulations for Online Monetary Competitions?

Perhaps you have noticed that certain national advertising campaigns for business contests, whether they are free or not, sometimes include disclaimers such as: �not applicable in New Jersey, Delaware and Idaho.� This is because, as you correctly have inquired, there may be a patchwork of rules and regulations pertaining to a contest such as the one you propose. In addition, your site would have to be certain to be careful with regards to securities laws as well, for example, avoiding any promotion of or encouragement to actually buy a specific stock(s).

I would be willing to discuss some of the issues concerning your business plan to see how I may be of assistance.

I offer prospective clients an initial consultation of 30 minutes for free.

I look forward to speaking with you.

Yours truly,

Bryan

Bryan C. Becker, Esq.

Principal

Law Office of Bryan C. Becker

The Koll Center

501 W. Broadway, Suite 800

San Diego, CA 92101

Toll Free: 877*201*8728

Direct: 619*400*4929

Fax: 619*400*4810

Re: State Compliance or Regulations for Online Monetary Competitions?

The first issue is, if you don't charge, are you a bone fide nonprofit or are you selling something, like advertising? If so, what are you advertising? The principal regulatory concern here is likely to be that your contest and your site will be touting individual stocks, perhaps indirectly by pointing out to potential investors the profits made by investing in a particular pink-sheet stock or by using the advisory services of a particular broker which may not be nationally licensed.

There may be other concerns as well, and a lawyer cannot possibly anticipate them all without having full access to your business plan and doing considerable research.

It's also possible that your concept would pass legal muster, but securities regulation is such a cautious and rigid field that anyone proposing something novel should have the business concept reviewed in great depth (and, unfortunately, great cost) before launching the site.

Legal review of your business model might start with determining whether it is a lottery (and thus probably illegal or requiring licensing in most states) or not, using definitions of "lottery" that are common to most jurisdictions. Next would be an analysis of whether the business concept involves any regulated securities activity, and as I've already mentioned, indirect touting of particular issues or particular dealers could be the primary concern here. Surely if you're going to be running a big site and giving away $10,000 periodically, someone is providing you some cash. Who, and why?

A starting point to learn about securities regulation might be to visit the Web site of the North American Securities Administrators Association at www.nasaa.org.

Re: State Compliance or Regulations for Online Monetary Competitions?

You have a huge compliance and regulatory burden to meet, or face civil and criminal penalties under multiple states and federal laws. You're not going to get proper advice without hiring gambling law and securities attorneys to coordinate and set this up, certainly not free and anonymous over the net. Start by contacting the local Lawyers Referral Service and asking for gambling law and securities specialists. I would expect you to spend tens of thousands of dollars in attorny fees minimum.