running a competition
Can you run a for profit competition?
Is it legal in the US to charge an
entry fee for a competition and then
disperse part of the proceeds to the
winners and retain the rest.
For example can I charge an entry
fee each month for a stock trading
game where at the end of 30 days
the top 10% of the players recieve
50% of the entry fee proceeds and
the company retains the other 50%
for profit and growth?
How about if a charge a monthly fee
for membership and then divide that
up for top performing members?
1 Answer from Attorneys
Re: running a competition
This is a very complicated question for which you need on target legal advice. Are there pay to play competitions? Yes: for example, karate tournaments and talent shows.
But, does this sound suspiciously like illegal stock trading? Yes.
Hire the best Wall Street law firm, get expert advice, hire a reputable accountant, massive insurance policy and then cross your fingers.
Sometimes, you can get an IRS opinion in advance, but they ain't cheap. And, even that won't protect you, if the business is considered a criminal enterprise. Very risky.