www.for10cents.com is not from a legal point of view.
To Bid or not to Bid
Author: Lucas FuksaIssue:
For10cents.com runs an Internet auction forum, in which registered users can purchase auction bids in order to partake in bidding on discounted wholesale priced items. An auction is a public sale in which property or items of merchandise are sold to the highest bidder. Once the registered user bids on an item (each bid worth as low as ten cents) then that bids worth is expended, whether or not the user wins the auction in the end. The conduction of the websites business services are being accused of being gambling strategies, which would be illegal in the state of Delaware (where the website is based and run from) and would also be illegal on a federal level since the website runs nationally. Delaware state law prohibits all forms of gambling unless sanctioned and conducted by the state legislatures. Federal gambling laws prohibit any type of carrying out gambling through state lines, and the website is run on a national level. Therefore, the issue is whether the operations and services provided at For10cents.com are considered to be “gambling”.
Rule:
In the Delaware State constitution “all forms of gambling are prohibited in the state” except some exceptional cases that would not encompass the jurisdiction of For10cents.com if found guilty of gambling practices in their business.
The U.S. Code defines gambling in terms of a small stake called a “bet or wager”(Title 31, Subt. IV, Ch 53, SCh IV, 5362). A “bet or wager means the staking or risking by any person of something of value upon the outcome of a contest of others [. . .], a game subject to chance, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome” that includes “the purchase of a chance or opportunity to win a lottery or other prize(which opportunity to win is predominantly subject to chance)”(1.A.B).
The U.S. Code defines “gambling” in Prohibition of illegal gambling businesses as “include[ing] but not limited to pool-selling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita, or number games, or selling chances therein”(Title 18, Part 1, Ch 95, 1955)”
Although not very closely related, the definition of a wage and lottery are given in the Supreme Court Case Horner v. United States decided January 30, 1893. In “Headnote 4. Where the element of certainty goes hand in hand with the element of lot or chance in an enterprise offering prizes, the former element does not destroy the existence or effect of the latter.” In other words, where there is an element of chance imbedded within an enterprise, which also includes certainty, the element of certainty does not cancel out ANY element of chance if present in a gambling pursuit. With multiple definitions attested to the case of Horner v. United States, the definition of lottery was established as “a scheme for raising money by selling chances to share in a distribution of prizes; more specifically, a scheme for the distraction of prizes by chance among persons purchasing tickets, the correspondingly numbered slips or lots, representing prizes.” Furthermore, “in the law term, lottery [**413] embraces all schemes for the distribution of prizes by chance [. . .] and includes various forms of gambling.” “Lottery is defined as ‘A distribution of prizes by lot or chance’.” It is “a distribution of prizes and blanks by chance; a game of hazard, in which small sums are ventured for the chance of obtaining a larger value, either in money or in other articles”
In the court of appeals case United States v. Bergland, the term of “gambling” is once again defined. The defendants are charged with interstate travel “with the intent to promote a business enterprise involving gambling offenses [, which] is broader than a charge that the defendants themselves engaged in gambling.” The district judge deemed “that the terms ‘gambling’, ‘bets’, ‘wagers’ in the statutes now before us are [**5] terms which are unambiguous; that they are activities involving the element of chance; that the scheme charged against the defendants herein was ‘a sure thing’ and hence no element of chance was involved.” Moreover, “the District Judge was also of the opinion that there was no need to refer to legislative history, and cited among others, the case of Caminetti v. United States where pages 194, 196 the Supreme Court said ‘Where the language is plain and admits of no more than one meaning the duty of interpretation does not arise.’ Statutory words are uniformly presumed, unless the contrary appears, to be used in their ordinary and usual sense, and with the meaning commonly attributed to them.” “The statutes with which [the court] is concerned [**6] are so plain and unambiguous that there is no need to resort to legislative history.” Simply put, gambling can simply be placed in “activities involving the element of chance,” and in a case digressing from chance to relative certainty, there is no need to resort to legislative history to prove its viability and applicability as a deciding factor, as in United States v. Bergland.
Analysis:
According to the For10cents.com website function, utility, and structure, which includes but is not limited to the means and end of the business, it does not carry out gambling practices. Three elements that need to be present and addressed in gambling are consideration, prize, and chance. In the above mention definition of gambling the consideration will be taken to mean the payment for a chance to win something of value (which could be money or something else worth money). That is, the “players” must pay something of value to be eligible to participate. The prize is obviously what is acquired by the winner, as in the money, or something of value. Finally, the chance is the outcome that is not determined by skill. In the For10cents.com website the consideration does not directly parallel with its definition found within gambling. The website is opened to anyone that is 18 years of age or older. So registering is free, and in fact free bids are given upon initiating one’s account. Once the registered user wants to engage in the service, or participate in the auction, then they pay for that specific service. They pay in order to partake in the bidding on certain products, and to have those products available (for a certain price) to them via the Internet. The registered users are well aware of what a bid costs, and are not obliged to buy any bids if they simply do not want to engage in the service. The website is free of charge, no purchase necessary to become or remain a registered user. When the user wants to buy (engage in the service provided), they bid up to a pre-decided specific amount. So, what they pay in purchasing bids is the fee they pay to use a service and have that service available to them via the For10cents.com website.
Moreover, in For10cents.com there does not exist a prize that directly parallels the “prize” in gambling. Registered users only bid on the items that they choose. The random assessment of a prize is not present on the website. The registered user can choose to bid on a wholesale product, or abstain from bidding. The auctions (like a regular sale) are voluntary and even subject to returns if the auctioneer that wins decides he/she no longer wants the auction item. Thus the definition of a prize in gambling does not match with the definition of a purchased item in an auction. In an auction, the registered user with bids disposable to him can bid on the item they choose, up to a certain amount that they choose. The bidder chooses to try and purchase a product from the website. They choose whatever item appeals to them, and the ability to obtain under-market prices for these items. To have access to the auction they pay a service fee in the form of individual bids. So, there is no prize in a direct sense, but a pool of products that they individually choose to either bid or not bid on. Additionally, the per bid price For10cents.com charges is the fee that is required to provided the users with the service of extending the inventory of below market priced items to them.
Finally, the factor of chance in gambling does not match with the bidding, outbidding, or underbidding prevalent on the For10cents.com website. When a consumer decides to partake in a specific auction the outcome is determined by a certain level of skill. There are electronic options on the website that allow the buyer to pre-decide the amount that he is willing to auction, or the amount of times he will bid on an item. So, even before the auction begins the customer assesses the extent of risk and reward and utilizes a strategic intuitive business skill. The bidding does not go unthought-of or unplanned. In other words, the outcome of the auction does not prove to be equally or even similarly structured to that of gambling. In the auction a certain level of skill and predetermination go into the business plan of a consumer. The customer pre-decides what he is willing to spend, how often or up to how much he/she will bid each time. Thus the element of “chance”, as it is found and necessary for gambling, simply does not exist in the element of an auction. Chance does not determine who will outbid another bidder, but strategic business planning and preparation.
Additionally, the element of chance in a gambling or lottery scheme does not exist in its nature aforementioned in Horner v. United States of America. The element of chance is taken to represent the way in which the people took part in the lottery, where the “purchaser did not know until after the sale what prizes they were entitled to, and the prizes varied in character and value.” In For10cents.com the business venture does not present this element of chance. The bidders only take part in an auction if the merchandise is something they perceive of being worth the amount they expend on it. At every given step, the person who pursues a bid has control over what item they choose to bid on. Thus, the item they choose to bid on is an informed choice by the bidder not an element of chance. Further, the customer controls and chooses the minimum and maximum amount to bid on the item (depending on the perceived worth of the item). The customer also has control over how many bids they choose to engage with in the auction. Also, in Horner v. United States of America, the element of chance represents the ignorance by the gambler that, for example, unknowingly purchases a box that costs a fixed amount, “each box being represented to contain a prize of money or jewelry [something of value], the purchaser selecting his box in ignorance of its contents, was a [*464] device in the nature of lottery.” In short, the ignorance of acquiring a product that is higher in value then one’s anticipated expenditure, is not found in the auction of a product at fixed value. The bidder has control over WHAT items they choose to bid or withhold bidding on. The bidder knows exactly what the product is, what that specific product is worth, and how predicts an approximate how much they are willing to spend on obtaining it. In every given step the element of chance as presented in Horner v. United States is simply not found in the For10cents business procedure and structure.
Furthermore, in the court of appeals case United States v. Bergland where the term of “gambling” is once again defined, the element of chance is the defining factor of a bet or wager. The element of chance that, according to its previous definition, does not exist in the For10cents.com website. In the Terms & Conditions the auction section explains, delineates, and clarifies every step of the process on the website. The bid rules are clearly stated and explained so as to eliminate any ambiguity in words or functions. The AUTOBID RULES clearly eliminates all and any hindrances to understanding exactly how the bid works. The item description and values are all listed in plain site on the website so as to enable the bidder to see what auctions they wish to engage in, and which ones to decline. The strategic and foreseeing nature of an auction assessing costs and benefits trumps any element of chance intrinsic to gambling within a bet or wager. The dynamics of an auction, a public sale in which property or items of merchandise are sold to the highest bidder, may appear to have traits similar to gambling, but lacking the absolute element of chance does not hold through to be considered a bet or wager. Also, as cases in gambling have not been similar in nature to this one in the past, where the language is unambiguous and does not require interpretation, past legislative history has been found to not be needed. In other words, where the contours of a word are strictly and straightforwardly represented, those words hold strength enough to present to a judge without the extension of cases to strengthen its definition.
Conclusion:
Evidently, For10cents Internet business structure does not fully encompass the elements of “gambling” as legally defined in the US Code. Although, the appliance of purchasing bids and then assessing them to auction on a website does seem to parallel in a sense the essence of a “bet or wager,” upon closer consideration it proves to not be a gambling pursuit. The three factors based in the definition of gambling (as dictated by the U.S. Code) of consideration: staking or risking something of value, prize: receiving something of value, and chance: not basing the outcome on a certain skill, are not found in the structure and pursuant action of For10cents.com website. Furthermore, in Horner v. United States and United States v. Bergland the element of chance proves that “the element of chance” is the deciding factor in considering an activity a gambling pursuit or scheme. Through the website’s function it becomes apparent that the element of chance prevalent in gambling, such as lotteries, bets, and wagers, as defined by previous cases is not one found in the procedure and structure of an auction as conducted by For10cetns.com and similar websites. Thus, looking at the legal definition of gambling and past cases definition and application of it, and the ways in which For10cents.com digresses in its practices and objective from gambling, it becomes clear that For10cents.com is not a gambling site. It neither promotes nor pursues illegal gambling, and does not fit in the definition of an illegal gambling business, as defined by the U.S. Code.
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