The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 6655 August 17, 1990 LOTTERIES: Bureau of State Lottery--authority to institute sports wagering game WORDS AND PHRASES: "Lottery" A gambling activity in which players may win prizes by correctly predicting the outcome of sporting events does not constitute a "lottery" under the McCauley-Traxler-Law-Bowman-McNeely Lottery Act and, accordingly, the Michigan Bureau of State Lottery does not have the statutory authority to institute such a game or activity. Honorable Richard A. Bandstra State Representative The Capitol Lansing, Michigan 48913 You have requested my opinion on the question of whether the Michigan Bureau of State Lottery has the authority to institute a new game in which players may win prizes by correctly predicting the outcome of sporting events. Administrative agencies have only such powers as are conferred by the statutes enacted by the Legislature. Roxborough v Michigan Unemployment Compensation Commission, 309 Mich 505, 510-511; 15 NW2d 724 (1944). The authority of the Bureau of State Lottery is set forth in the McCauley-Traxler-Law-Bowman-McNeely Lottery Act, 1972 PA 239, as amended, MCL 432.1 et seq; MSA 18.969(1) et seq. Section 9 of that Act, MCL 432.9, MSA 18.969(9), directs that "[t]he commissioner shall initiate, establish, and operate a state lottery at the earliest feasible and practicable time." The answer to your question, then, turns upon the meaning of the term "lottery" as used in this provision. The only definition of the term "lottery" contained in the Act is that set forth in section 3(c), MCL 432.3(c); MSA 18.969(3)(c), which provides: " 'Lottery' or 'state lottery' means the lottery created and operated pursuant to this act." As is readily apparent, this definition does not provide any clear guidance as to the precise nature of the games which the Bureau is authorized to establish. The term "lottery" is also used, but nowhere defined, within the Michigan Penal Code, 1931 PA 328, Sec. 372; MCL 750.372; MSA 28.604, which prohibits the promotion and operation of, and participation in lotteries, and provides for sanctions. The absence of a statutory definition of the term "lottery" was acknowledged in the case of Sproat-Temple Theatre Corp v. Colonial Theatrical Enterprises, Inc, 276 Mich 127, 129; 267 NW2d 602 (1936), where the Court observed that: "Our statutes do not attempt to define what a lottery is, but our court has said that the essentials of a lottery are consideration, prize and chance." Thus, although there is no statutory definition of the term "lottery" in Michigan, the courts have construed the term as requiring the three elements of (1) consideration, (2) prize, and (3) chance. The Michigan Supreme Court has consistently held that, because sports wagering activities involve at least some degree of skill on the part of the person placing the wager, such activities do not satisfy the "chance" element and, accordingly, do not constitute a "lottery" under Michigan law. For example, in the early case of People v. Reilly, 50 Mich 384; 15 NW 520 (1888), the Michigan Supreme Court overturned the conviction of an individual who had been charged with operating a lottery. The activity involved in the case involved a betting pool which accepted wagers on sporting events. After describing the wagering activities involved in the case, the Court observed: "That this is a species of gambling is clear enough, but whether it amounts to keeping a lottery is a very different question...." 50 Mich at 386. After an extensive examination of the distinction between lotteries and other forms of gambling, the Court concluded that sports wagering activities are not a "lottery" under Michigan law. In People v. Elliot, 74 Mich 264; 41 NW 916 (1889), in contrast, the Court affirmed the conviction of a defendant for operating a lottery. The evidence in that case showed that the defendant had received money in exchange for a selection of one, two, three, or four numbers from one to seventy-eight. Purchasers of these numbers were to receive a specified amount of money for each number or set of numbers selected which corresponded with numbers subsequently drawn in a lottery conducted in the state of Kentucky. In upholding the defendant's conviction, the Court offered the following definition of the term "lottery": "A lottery is a scheme by which a result is reached by some action or means taken, and in which result man's choice or will has no part, nor can human reason, foresight, sagacity, or design enable him to know or determine such result until the same has been accomplished." 74 Mich at 267-268. Significantly, the Elliot Court explicitly distinguished its earlier decision regarding sports wagering in People v. Reilly, supra: "It is thought by counsel for defendant that this case is ruled by People v. Reilly, 50 Mich. 384 (15 N.W.Rep 520). That case, however, is different. There the contingency was one upon which the parties interested could exercise their reason and judgment under an agreement upon which the money was paid, and was in its nature executory. In this case the money was paid when the chance was obtained, and there was no opportunity for exercising the reason or judgment or any other faculty of the mind, and hence the lottery." 74 Mich at 268-269. (Emphasis added.) More recently, in Rohan v. Detroit Racing Assoc, 314 Mich 326, 343-346; 22 NW2d 433 (1946), the Court was called upon to decide whether parimutuel wagering upon horse racing events, as authorized by 1933 PA 199, constituted a "lottery" in violation of Const 1908, art 5, Sec. 33. After reviewing extensive cases and authorities from Michigan and other jurisdictions, including both Elliot and Reilly, supra, the Court summarized its views as follows: "Under the above authorities it is clear that parimutuel betting on a horse race is not a lottery. In a lottery the winner is determined by lot or chance, and a participant has no opportunity to exercise his reason, judgment, sagacity or discretion. In a horse race the winner is not determined by chance alone, as the condition, speed, and endurance of the horse and the skill and management of the rider are factors affecting the result of the race. The better has the opportunity to exercise his judgment and discretion in determining the horse on which to bet.... The fact that a better cannot determine the exact amount he may win at the time he places his bet, because the odds may change during the course of betting on a race, does not make the betting a mere game of chance, since the better can exercise his reason, judgment, and discretion in selecting the horse he thinks will win. Horse racing, like foot racing, boat racing, football, and baseball, is a game of skill and judgment and not a game of chance...." 314 Mich at 346. (Emphasis added.) The conclusion that sports wagering activities do not fall within the definition of a "lottery" is also consistent with federal law. In 18 USC 1301 through 1340, Congress has prohibited interstate mailings and broadcasts of lottery advertisements. In an effort to accommodate those states which have established state lotteries, however, Congress created a limited exemption from these prohibitions in 18 USC 1307(a) for a "lottery conducted by a State acting under the authority of State law." Subsection (d) of that section defines the term "lottery," for purposes of that exemption, as follows: "For the purposes of this section 'lottery' means the pooling of proceeds from the sale of tickets or chances and allotting those proceeds or parts thereof by chance to one or more chance takers or ticket purchasers. 'Lottery' does not include the placing or accepting of bets or wagers on sporting events or contests." (Emphasis added.) It is my opinion, therefore, that a gambling activity in which players may win prizes by correctly predicting the outcome of sporting events does not constitute a "lottery" under the McCauley-Traxler-Law-Bowman-McNeely Lottery Act and, accordingly, the Michigan Bureau of State Lottery does not have the statutory authority to institute such a game or activity. Frank J. Kelley Attorney General