Question Submitted by Bice, 092619 OKAG, 2019 OK AG 8

Docket Nº:2019 OK AG 8
Party Name:Question Submitted by: The Honorable Stephanie Bice, Oklahoma State Senate, District 22
Attorney:MIKE HUNTER ATTORNEY GENERAL OF OKLAHOMA CALEB J. SMITH ASSISTANT ATTORNEY GENERAL
Case Date:September 26, 2019
Court:Oklahoma Attorney General Opinions
 
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2019 OK AG 8

Question Submitted by: The Honorable Stephanie Bice, Oklahoma State Senate, District 22

No. 2019 OK AG 8

Oklahoma Attorney General Opinions

September 26, 2019

MIKE HUNTER ATTORNEY GENERAL OF OKLAHOMA

CALEB J. SMITH ASSISTANT ATTORNEY GENERAL

¶0 This office has received your request for an official Attorney General Opinion in which you ask, in effect, the following question:

Does a prize-linked savings account constitute a "lottery" under 21 O.S.Supp.2019, § 1051, and, if so, are prize-linked savings accounts prohibited by Oklahoma law?

I.

BACKGROUND

¶1 A prize-linked savings ("PLS") account is "[a] savings account that gives an account-holder the opportunity to win a cash reward... to encourage people to save money." Prize-linked account, BLACK'S LAW DICTIONARY (11th ed. 2019). Unlike traditional savings accounts, PLS accounts offer returns in the form of chances to earn prizes instead of, or in addition to, accrued interest, dividend income, or capital appreciation. See Melissa Schettini Kearney et al., Making Savers Winners: An Overview of Prize-Linked Savings Products 1 (Nat'l Bureau of Econ. Res., Working Paper No. 16433, 2010). 1 Typically, the larger the balance in a PLS account, the greater the account holder's chances to win a prize. See Peter Trufano et al., Consumer Demand for Prize-Linked Savings: A Preliminary Analysis, 3 (Harvard Business School, Working Paper No. 08-061, 2008). 2 In general, the financial institution offering the PLS account establishes a minimum deposit amount required and sets the amounts required to receive incrementally greater chances to win. See Kearney, Making Savers Winners, at 1-2.

¶2 Prize-linked savings accounts are not novel products; their basic function was described in 2002 as follows, as they were becoming increasingly common: Typically, the bank automatically enrolls in a lottery those depositors who maintain a deposit of some specified size for some specified period in the designated accounts. Commonly, the depositor receives one "lottery ticket" or chance, each month for every X dollars he has on deposit for that month. The buyer pays for her lottery tickets by foregoing interest relative to an account that does not have the lottery feature. The lottery does not affect the principal of the deposit, but the interest rate that the holder receives each period is a random variable. The interest rate the holder actually receives could be very low--perhaps zero or only nominal, depending on the scheme's structure--or it could be very high if the owner is lucky enough to win the grand prize.

Mauro F. Guillén & Adrian E. Tschoegl, Banking on Gambling: Banks and Lottery-Linked Deposit Accounts, 21 J. FIN. SERVICES RES. 219, 219...

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