Benevolent & Protective Order of Elks 2656 v. State Department of Liquor Licenses & Control
239 Ariz. 121
| Ariz. Ct. App. | 2016Background
- The Benevolent Order of the Elks (Elks), a nonprofit with an Arizona liquor license, contracted with Patriots Land Group to install and operate electronic sweepstakes kiosks in the Lodge for member fundraising.
- Kiosks accepted $1 per play, credited plays to magnetic player cards, and generated prize pools funded by player payments; payouts were cash up to $1,199 and the Elks kept a portion of proceeds.
- Patriots provided equipment, software, rules, training, maintenance, monitoring (via internet connection), processed free-play mail requests, and received 55% of net proceeds.
- From April 2011–June 2012 members paid $234,408; ~55% paid out as prizes, Patriots received ~$58,065.56, Elks kept ~$47,508.19.
- The Arizona Department of Liquor Licenses and Control investigated, concluded the operation was unlawful gambling in violation of A.R.S. § 4-244(26), ordered cessation, and imposed a $200 fine; administrative and superior court appeals upheld the Department; Elks appealed to the Court of Appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the sweepstakes constituted unlawful gambling (consideration element) | Plays were effectively free or charitable donations; availability of free plays negates "consideration" | Majority of plays were paid; members paid for chance to win and received no goods/services | Held: Gambling — paying for plays (≈90%) satisfied consideration; free plays did not negate gambling |
| Whether the sweepstakes qualified as a lawful nonprofit raffle under A.R.S. § 13-3302(B) (third-party participation) | Elks met statutory raffle requirements and purpose (charitable fundraising) | Patriots’ operational role and revenue share amounted to indirect participation in management/operation, disqualifying raffle status | Held: Not a lawful raffle — Patriots’ operational control and percentage-based compensation constituted indirect participation in management |
| Whether the Department had to prove Elks knew the sweepstakes were unlawful under A.R.S. § 4-244(26) ("knowingly") | "Knowingly" requires knowledge of unlawfulness; must prove Elks knew activity was illegal | Statutory and definitional provisions: "knowingly" requires awareness of act but not its unlawfulness; ignorance of law is not a defense | Held: No knowledge-of-unlawfulness required — proof Elks knowingly permitted sweepstakes on premises sufficed |
Key Cases Cited
- Cleveland v. Thorne, 987 N.E.2d 731 (Ohio App. 2013) (business selling a product primarily to provide sweepstakes entries held to be illegal gambling)
- Commonwealth v. Wintel, Inc., 829 A.2d 753 (Pa. Comm. Ct. 2003) (video sweepstakes with paid plays constituted illegal gambling despite free plays and charitable claims)
- Barber v. Jefferson Cty. Racing Ass'n Inc., 960 So. 2d 599 (Ala. 2006) (free plays do not negate that paid plays make machines functionally slot machines)
- Ruiz v. Hull, 191 Ariz. 441 (1998) (attorney general opinions may be persuasive authority in statutory interpretation)
- Comm. for Justice & Fairness v. Ariz. Sec'y of State's Office, 235 Ariz. 347 (App. 2014) (standard of review for agency action on appeal)