Does Cash Have to Change Hands for It To Be Gambling?
UPDATED: December 12, 2018
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The prevailing belief is: If cash is not changing hands, it is not gambling. Is that notion true? Unfortunately, it is not.
Gambling is traditionally defined as the “Payment of a price for a chance to gain a prize” (Boies v. Bartell). That means there are three elements that make up “gambling”: (1) payment of price, (2) for a chance to win, (3) a prize. The question, "Does cash have to change hands for it to be gambling" goes to the first of three elements--what exactly is "payment of price"? (These three components are further explored in the article, “The Three Core Elements That Make Up Gambling”).
Relationship to contract law
To answer that question, the law looks to contract law, since the bet or wager is basically a contract. It is an agreement between two people (or between a person and a business) that "I will give you something and in return, if something in particular happens, you will give me something else.” For instance:
(1) It could be betting $50 on the Steelers to win at 2-1 odds--in which case, if they do win, the bettor gets his bet back plus $100.
(2) It could be a $10 bet in blackjack, where if the bettor gets a higher total than the dealer without going over 21, he gets his original bet back plus $10.
(3) It could be a bet in a poker game, where if the bettor has a better hand than anyone else (or rather, than anyone else who does not "fold" or forfeit the hand), he or she wins the pot.
Whatever the circumstances, it is an agreement about who gets money, based on the outcome of a certain event. That is a contract.
Form of payment
Though parting with cash is typically the most common method of payment, contract law does not require all "payment" to be in the form of cash. Rather, contract law has developed the concept that the "payment" that someone makes to create or bind a contract (called "consideration") can be anything of value. That's why, for example,
- you can settle an automobile accident claim with the other person's insurer by giving up the right to sue in exchange for a payment, or
- receive severance from an employer, also in exchange for giving up the right to sue.
In both cases, in giving up the right to sue, you are giving up a thing of value (the right to potentially receive money, if you were to sue and win) even though you are not yourself paying cash.
What is it worth?
"Value" is a broad term--that photo of you and your favorite stuffed toy from when you were three or four, or a postcard your first serious boy/girlfriend sent you from spring break, may have tremendous value to you; but it likely has no value to anyone else. Is something valuable just because you care about it? In a word, no--the law does not deal in emotional or sentimental value, or value that is so idiosyncratic that there is only one or a very few person(s) who acknowledges it. That is why, for example, if your beloved pet is accidentally killed by a drunk driver, you can only sue for the pet's monetary value--basically, what it cost you to buy the pet (which means that if you rescued an animal for free, you might not get any compensation.) There is no compensation for losing something you viewed as part of the family.
Something does not have to be cash or a cash equivalent (e.g., money order, check) to have value. A car is not cash, but has a recognizable, measurable value; intellectual property, like patents, trademarks, and copyright, has value; stocks and bonds have values; a promise to do something you'd otherwise have to pay for (think about a charity auction, where a local business or restaurant auctions off its services) or a promise to give up the chance to have money (such as where you settle a case by agreeing to not sue) has value.
The crux is simply this: does the thing you gave up--or promise you made--have some readily determinable value? Could you reasonably expect that you'd find someone willing to pay for it? If the answer is "yes"--that is, if the thing or promise is "monetizable," or convertible to money by offering it "for sale"--then it is "payment" or "consideration." And if you offer it in exchange for a chance to win some prize, then you have gambled.
Anything for which there is a market (that is, people ready and willing to pay for the thing) has value. That's why, for example, gold or other treasure in the game "World of Warcraft" had a value and could be used as the basis for gambling--because so many people played the game and were willing to pay for an advantage that you could have put your virtual gold up for sale and convert it to actual cash. Or why buying more telephone or internet minutes than you need can be "consideration" for gambling at an internet cafe--the extra, unneeded and unused minutes represent a premium to the provider for which they are giving you nothing in return-- which is why sweepstakes at internet cafes which you can play in exchange for buying surplus minutes can be considered gambling even though, on the face of it, no one is paying cash as such for the chance to play.
Think about it this way: if someone might pay you money for it—whatever the “it” is, “it” has a monetary value. If you pay the “it” in exchange for the chance to win, you are gambling.