The Rhode Island Supreme Court held that a lottery has three elements, consideration, chance and prize. A pyramid club may be a lottery depending on the interpretation of the chance element. The Court adopted the "dominate factor doctrine" under which a scheme is a lottery if chance dominates the distribution of prizes, even if the distribution is affected some degree by skill. The skill of the promoters was required to bring in additional members of the pyramid, but chance still dominated the possibility of a payoff for earlier participants. Because chance dominated the distribution of prizes, the pyramid program was a lottery and illegal.
Case and case summary are also available online at: http://www.mlmlegal.com/legal-cases/RhodeIsland_v_CommunicationsInvestmentClubofWoonsocket.php
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