On May 13, the World Triathlon Company—which organizes Ironman events—agreed to forfeit $2.76 million in funds that it charged athletes to win the chance to compete in the Ironman World Championship in Kona, Hawaii. The case, which the U.S. Attorney’s Office in Florida brought against the Florida-based company, covered the thousands of athletes who participated in the lottery since October 2012.

The U.S. Attorney’s Office declined to comment on what prompted the case. The assistant United States Attorney who investigated the case, James A. Muench, is an eight-time Florida Ironman finisher. In a statement, the World Triathlon Company said, "While we do not agree with U.S. Department of Justice’s interpretation of the relevant statutes or that there has been anything untoward or inappropriate in our operation of the IRONMAN Kona Lottery, IRONMAN chose to settle so that we can focus on our priorities—our athletes and our events."

The Ironman World Championship currently draws a field of approximately 2,000 racers, most of whom qualify. Ironman reserves 100 non-qualifier spots, which are filled with a lottery. Since 1989, Ironman has charged athletes a fee to enter that lottery. Whether or not athletes were selected to race, they were still charged the lottery fee.

Last year, 12,292 lottery entrants paid a $50 fee; this year, 14,254 did. By holding these lotteries, the World Triathlon Company ran an illegal gambling business, according to the court.

This ruling could have implications in the running industry. The New York City Marathon, Chicago Marathon, Marine Corps Marathon, Beach to Beacon 10K (in Maine), and Mount Washington Road Race (in New Hampshire) are five well-known events that hold entry lotteries. The Chicago and Marine Corps Marathon lotteries are free to enter, while the New York City Marathon charges a non-refundable $11 fee per entry. Both Beach to Beacon and Mount Washington charge a non-refundable $5 lottery fee per person.

According to the Unites States code highlighted in the Ironman complaint, an illegal gambling business involves five or more people, either remains in continuous operation for at least 30 days or has gross revenue of $2,000 in a single day, and violates the law of a state.

Are Race Lotteries Gambling Businesses?

All five races have lottery field sizes larger than five people, so they meet that criterion.

The Chicago and New York City Marathon lottery windows both exceed 30 days. The lottery timeframe for the Beach to Beacon and Mount Washington Road Race are both shorter than 30 days. However, those two races could exceed $2,000 gross revenue in a day, depending on how many entries they receive.

Because the Marine Corps Marathon neither charges for its lottery entries nor operates its lottery for 30 days or more, it cannot be seen as an illegal gambling business.

Do They Violate State Laws?

Private lotteries are illegal in every state. To be considered a private lottery, three elements must be present: consideration (that is, a cost to enter), chance, and prize. Based on those requirements, the Chicago Marathon lottery does not qualify as a potentially illegal lottery, said Marc Edelman, a law professor at Baruch College, Zicklin School of Business, in New York, who specializes in gaming law: “No amount of money is paid to enter the random drawing.”

Edelman noted that very limited transaction fees in certain circumstances have been deemed acceptable, but that just because the New York City Marathon calls its charge a "processing fee" does not make it immune to the law. “Requiring an individual to pay $11 to enter a random lottery where the selected winners earn the right of entry into a marathon may reasonably be construed as an illegal lottery because the elements of chance and reward are clearly present and one could make the reasonable argument that the upfront non-refundable payment of $11 in exchange for entry could be construed as consideration,” Edelman said.

The New York City Marathon is managed by the not-for-profit New York Road Runners. The New York State constitution does make lottery exceptions for non-profits that benefit organizations of veterans, volunteer firefighters, and “similar groups.” The language is unclear as to whether the NYRR would be included in “similar groups.”

The Beach to Beacon and Mount Washington Road Race each charge a lottery fee of $5 per person. “As the amount of money is reduced, one could make a stronger argument that the payment is merely a processing fee and not an entry fee,” Edelman said. “However, charging even a nominal amount of money could lead to a technical challenge of these activities.”

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