This week Donald J. Trump announced that “Back by popular demand” he’s offering his new (Series 4) Trump Digital Trading Cards (NFTs). Being the glutton for punishment that I am, I went to the website to review the offer and its terms to give you my thoughts on some potential legal issues with this promotion.
The Trump promotion allows you to buy these NFTs at $99 each, and with each increasing increment you may receive, among other things, the following;
- a “FREE” pair of Trump Gold Low Top Sneakers (with first 1,000 pairs numbered)
- A Physical Trading Card with a piece of Trump’s suit (with only 2,024 available and “Some Are Randomly Autographed.”)
- “One GUARANTEED One-of-One Digital Trading Card (NFT). The Only One in the World!”
- “VIP Ultra Tickets” for dinner and for cocktails with Trump in Jupiter, Florida (with dinner “Limited to 25 Buyers” and cocktails “Very Exclusive-Limited to 50 People”)
This offer is stated here. The Terms and Conditions are here. To be clear, the Terms state: “The Offerings on the Website are not political and have nothing to do with any political campaign”, so we don’t have to get into any political donation issues. It’s a pure commercial promotion.
Is This An Illegal Lottery?
While definitely structured to try to look like a premium offer – you pay this, we’ll give you that – it may very well be a chance promotion – you buy this, and you have a chance to get that – because of the limited availability of some of the additional gifts/rewards/prizes/merchandise (whatever you want to call them) that can be obtained after purchasing a certain number of NFTs.
A lottery is a specific form of gambling and typically requires three elements: Prize, Chance, and Consideration. Stated another way, if a payment is required when the “award or distribution of the prize or prizes is by chance,” you got yourself a lottery. See United States v. Davis, 690 F.3d 330, 333 (5th Cir. 2012).
Let’s see what we have here.
Consideration: Yep. The Offer clearly states: “Minimum purchase required.”
Prize: Yep. Typically defined as “anything of value.” Here you can get NFTs, sneakers, VIP tickets, pieces of suit, autographed stuff, etc.
Chance: It sure looks like it. Once a person buys a certain number of NFTs at $99 a pop, they may only have the chance to receive one of the limited additional gifts – meaning a person could pay $24,750 for 250 NTFs but not get the dinner and cocktail tickets if he was the 26th person to make this purchase. OR they may buy 15 NFTs for $1,485 and not get one of the “randomly autographed” physical trading cards. And what about the fact that the Terms state: “Seven Hundred and sixty-four (764) One-of-One Digital Trading Cards will also be randomly distributed across all buyers of AMERICA FIRST Edition Drop NFTs.” (underscore by me). All of this sounds like “chance”.
While supplies last” promotions are legal, but the important distinction here is that it’s not the original NFTs that have a limited supply; instead, it’s the additional special gifts (dinner, cocktails, autographed cards, pieces of Trump’s suits, etc.) that are limited and being given out, essentially at random depending on how quickly you make a purchase of NFTs. Because you have to make a purchase (of an NFT) for the chance to get one of these limited additional products, you run into lottery problems. I note that neither the Offer nor the Terms state that they will stop selling the NFTs once these “rare” additional awards run out (although they do mention that you may get more sneakers when some prizes run out).
Therefore, without a free/non-paying method to have a chance to win these additional awards, the promotion could be an illegal lottery.
Other Issues:
- There may be a post-consideration issue concerning having to pay for schlepping to Florida for the dinner and cocktails. Typically, I’m fine with giving out “tickets only” but usually only when a person doesn’t have to incur too much additional expense to get there, even if you disclose this in the rules.
- The little type (in the 79th paragraph Terms and Conditions) stating that this dinner may be canceled and that Trump may not even attend may not be sufficient disclosure when the big type (in color and bold) in the Offer unconditionally states: “Dinner with President Trump. 1 VIP Ticket For YOU To Attend President Trump's Gala Dinner At his Private Club in Jupiter, Florida on Sunday, September 22. Once-In-A-Lifetime Experience That Could Be YOURS!”
- If this were a true premium offer, the seller would be obligated under Federal Law to deliver the premium within 30 days or notify the buyer that delivery will not be possible within 30 days and give the buyer the option to cancel, perhaps unless adequate disclosure were possible and made. See, 16 C.F.R. § 435.1.
- If the product being sold (the NFT) is actually worth less than what it’s being sold at because of deception or misrepresentations by the seller, this may violate many state consumer protection statutes. See, Irvine v. Kate Spade & Co., No. 16-CV-7300 (JMF), 2017 WL 4326538, (S.D.N.Y. Sept. 28, 2017) (holding that plaintiff stated a cause of action for deceptive advertising under NY and FL law by contending that seller’s conduct misled them to believe that the merchandise was of higher quality and value than it was in fact). I leave this valuation issue up to you.
