Legal Question in Investment Law in Massachusetts

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?



Asked on 4/26/07, 11:18 am

1 Answer from Attorneys

Regina Mullen Legal Data Services, PLC

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.

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Answered on 4/26/07, 12:40 pm

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