Why Earth Future’s lottery bid failed
By Linda
In the first case to seriously consider the application of Canada's lottery and gaming laws to the Internet, a Canadian provincial court recently ruled that the Earth Future Lottery’s operations contravened the Canadian Criminal Code, since it was not conducted and managed in the province, and was to be operated using computers.

The ruling was given despite the lottery being granted a license by the Prince Edward Island’s (PEI) government, and it represents a setback for the Internet gaming industry in general, as the decision is another example of simplistic definitions of Internet technology and practice.

The Earth Fund is a 'Canadian charitable organization dedicated to raising money for important environmental and humanitarian causes.' In 2000, it decided to launch a fundraising lottery, planning to sell tickets worldwide via the Internet.

The Earth Fund intended to run the lottery exclusively in PEI -- the computer server running the Web site, administration, credit-card approvals, and the drawings were all to be located in PEI. Also, the lottery contract was to have included a clause that deemed the purchase and sale of tickets to occur within PEI.

After PEI granted the Earth Fund a license to operate, provincial lottery administrators from across Canada challenged the decision. In response, the PEI government agreed to let the court determine the legality of the Earth Fund's lottery operation.

The decision against the lottery was based on two questions: First, was the lottery strictly a provincial operation such that PEI was entitled to grant it a license to operate? And second, was the lottery operated on or through a computer?

Regarding the first question, the court ruled that the lottery was 'based in' PEI, but was not 'conducted and managed in the province' according to the law. The court held that the worldwide scope of the lottery sales meant that the lottery was not conducted strictly within provincial borders. The lottery's contractual jurisdiction language failed to sway the court.

On the question of computers, although the court acknowledged that the actual draw would physically occur in PEI, it found that computers were to be used for a range of lottery activities including promotion, registration of ticket numbers, and delivery of prizes. The court concluded that 'without the use of computers the Earth Future Lottery would not be viable.'

As the Canadian Criminal Code treats gaming and lotteries the same

As Michael Geist, director of e-commerce law at the law firm Goodmans LLP said in Canada’s Globe and Mail recently, the decision leaves the legal issues around internet gaming in a grey area: “Describing the plan as based in PEI does not really address challenging issues such as where and when contracts occur on-line, as well as what indicia are used to determine which jurisdiction is home to a particular transaction.” Says Geist.

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