Is the lottery gaming or a financial service? US regulator FINRA takes a swipe at con artists

There is no doubt that a clear line has been drawn between both regulatory authorities and traders between what constitutes gambling and what constitutes financial services. In many jurisdictions worldwide, gambling is not  legal at all, and in those which allow it, plate glass, respectable financial services firms do their utmost to distance themselves from […]

US regulator FINRA takes a swipe at con artists

There is no doubt that a clear line has been drawn between both regulatory authorities and traders between what constitutes gambling and what constitutes financial services.

In many jurisdictions worldwide, gambling is not  legal at all, and in those which allow it, plate glass, respectable financial services firms do their utmost to distance themselves from the high-street, smoke-filled, duffle  coat-wearing image of the betting shops.

The lottery is the ‘acceptable face’ of gambling, despite it being, in my opinion, a tax on those with no restraint, and therefore it is not blighted by the same lowbrow image as traditional gambling practices.

Raising this point this week is FINRA, the US financial services regulatory authority, which has issued a warning to retail investors to avoid nefarious lottery related schemes.

What is not surprising is that there is a warning relating to lottery related schemes, however FINRA’s involvement in this matter is of interest, as lottery and gaming is usually of absolutely no interest to any segment of the financial sector.

FINRA states in its alert, which is amusingly titled “Sorry, This One’s Not a Winner: Don’t get fooled by a lottery scam” that its aim is to ensure that it does its best to dissuade retail investors to avoid dealing with companies that promise significant cash prizes or gains from participating in lotteries.

Gerri Walsh, FINRA’s Senior Vice President for Investor Education, made a public statement on the matter, stating that

“With fraudulent schemes, there is always a catch. In the case of lottery scams, fraudsters tell you to send money upfront to secure your new riches. Our recommendation couldn’t be clearer: Don’t do it. Remember, if you have to pay first, it’s likely not a prize.

According to FINRA, the regulatory authority took this action as a result of investors calling the FINRA Securities Helpline for Seniors (HELPS) to report that they were being pursued by individuals offering luxury goods, cash prices, investment opportunities and other lifestyle acoutrements in return for a fee, a donation or a purchase.

FINRA stated that recipients of cold calls were being offered prizes of $1.5 million and a new Mercedes-Benz, during pressure-selling calls which involved a battle of wits between the seller and the call recipient in order that the recipient of the call will submit and pay.

What is interesting here is that the financial services regulator got involved, rather than the consumer protection authorities, or a lawyer which provides a service which can establish a class action lawsuit against vendors of such services.

This is quite poignant at a time during which there is a substantial dialog among US regulators and officials to discourage OTC retail trading – as has already become the case some time ago with binary options trading, which is now only available and only legal via dedicated NFA regulated exchanges.

Whilst binary options bears closer similarities to gambling, as it is by nature a fixed bet on an event, FX trading in the US could be subject to restrictions on deposit bonuses or the necessity to operate via an exchange.

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