Lottery Pool Contracts: 10 Questions to Ask in Advance

Lottery pools are an effective way to boost your odds of winning a jackpot without spending any additional money. They can also raise morale in the workplace, bring neighbors closer together, and give members of an organization something to talk about. But unfortunately, misunderstandings and assumptions can cause lottery pools to turn sour. To avoid this, you need a lottery pool contract.

A lottery pool contract simply outlines how the pool is run so everyone is on the same page and knows what to expect.

The contract for your pool doesn't have to be extremely formal. The idea is to make sure that everyone knows, understands, and agrees to a set of rules to avoid lottery pool problems ranging from hurt feelings to lawsuits.

Before you start writing up your rules, you want to gather the information you are going to need. Here are some of the questions that you might want to answer in your contract.

Who Will Be Your Lottery Pool Manager?

Lottery Tickets — Having a Lottery Pool Contract Can Help Avoid Legal Problems and Hurt Feelings. Bryan Allen / Getty Images

It's always a good idea to have one person who is in charge of the lottery pool. This person doesn't have to do all of the work, but they are the point of contact if anyone has questions or concerns.

A lottery pool manager should take care of administrative tasks like:

Making sure every participant signs and has a copy of the lottery pool contract.
Keeping track of the signed copies
Making decisions like where to store the tickets after they have been purchased.
Delegating tasks like who should buy the tickets each week.
Making and tracking copies of the lottery tickets purchased for the pool.

When Will Your Lottery Pool Buy Tickets?

Some lottery pools buy tickets on a regular schedule — once per week, once per month, etc. Some buy tickets every time a jackpot hits a certain value, while others are valid only for a single drawing, then form anew every time an interesting lottery drawing (like a big jackpot prize) comes up.

Your lottery pool agreement should specify which drawing or drawings are covered. It should include both the lottery games your pool will play and the specific drawings you will participate in.

Who Will Participate in the Lottery Pool?

Before you start to write your contract, you need to know who the pool members are. If your group hits a jackpot, some people will regret not participating — and regret make those people litigious.

Coworkers have sued winners because they claimed that they were unfairly excluded from participating in a pool that resulted in a jackpot. To avoid this, be sure to outline who will be invited to play and how and when people can join the lottery pool.

Your lottery pool agreement should also cover whether members can participate in some drawings while passing on others.

Can Members Buy More than One "Share" In the Drawing?

Some lottery pools allow members to put in more money to receive more shares in the prize if they win. For example, if a single ticket costs $2, a member can choose to throw $10 into the pot to receive 5 shares of the jackpot they win. The pool would then buy five extra tickets, raising everyone's odds of winning.

Other lottery pools keep it simple by creating an even split; every member puts in the same amount of money, and every person receives the same amount in the case of a win.

Your lottery pool contract should outline how the jackpot will be split.

How Will the Lottery Numbers Be Chosen?

When you buy lottery tickets, you have two options: let the computer choose your numbers randomly or pick your own numbers. Which method will your lottery pool choose?

The simplest option is to agree to let the numbers be chosen randomly, but if you do agree to let members choose their own numbers, you need to specify who will choose the numbers and how they'll choose them.

If you go that route, you might also want to have your lottery pool contract waive responsibility if the person buying the tickets accidentally chooses the wrong numbers. Imagine the bad feelings if the wrong numbers were purchased and the right ones won!

What Happens With Small Prizes Your Lottery Pool Wins?

Everyone joins a lottery pool in the hopes of winning a jackpot, but you are much more likely to win a smaller prize. Your lottery pool contract should clearly state what happens to prizes with low dollar values.

Some options include:

Divvying up the prize among the participants, no matter how small.
Putting the money toward buying tickets for another drawing.
Giving small prizes to charity.
Putting those prizes in an office coffee fund or saving them up for a group luncheon or other goal.

If you do choose to put the smaller prizes toward the next lottery drawing, it makes sense to say that only people who chip in to participate in the next drawing get the benefit.

For example: Say that this week, your pool of 20 people wins $5. That $5 is put toward the next week's drawing. In the next week's drawing, only 15 people participate, each putting in a two dollars to buy a single ticket. With this suggestion, only the 15 participating people have the chance to win in the new drawing. Although 20 tickets are actually purchased, the 15 will split any jackpot 15 ways.

Your lottery pool agreement should state not only what to do with small prizes, but what the cut-off is for a small prize. Is it $5? $20? $100? $1,000?

Can Lottery Pool Members Buy Tickets Privately?

Imagine that you're in a lottery pool and you find out that the pool manager has hit a jackpot, but isn't sharing the funds. Why? Because the manager says that they bought the winning lottery ticket privately, not with the lottery pool's funds.

This scenario has happened in the past, resulting in bitterness. To avoid it, make sure your lottery pool contract states whether participants, especially the person in charge of buying tickets for the group, can purchase lottery tickets outside of the pool as well.

If your contract does allow members to buy lottery tickets privately, be sure to make copies of the group's tickets and distribute them before the drawing takes place, to be very clear which tickets belong to the pool.

Tip:

It's a good idea to make copies of the lottery tickets for each member of the pool no matter which decision you make here!

Will Your Group Take a Lump Sum or Annuity?

If your lottery pool does win a big jackpot, you'll have to decide whether to take a lump sum immediately or take an annuity and spread the winnings out over a number of years.

It's a good idea to make the decision ahead of time and spell it out in your lottery pool contract to avoid conflict over the answer if you actually win.

Will Your Lottery Pool Remain Anonymous If You Win?

Some states allow their lottery winners to remain anonymous in case of a win. This helps the winners to avoid some of the negative fallout of winning the lottery, such as losing jealous friends, having reporters knocking at your door for an interview, or being deluged with requests for handouts.

With a group prize, keeping your identity anonymous becomes difficult if some members aren't on board. To help avoid problems down the road, have everyone agree at the outset whether they'll stay anonymous or announce their win, assuming you're in a state which allows you to make the decision.

Finishing Up Your Lottery Pool Contract

This is not intended to be a comprehensive list of all of the issues that need to be covered in a lottery pool contract, but rather a way to start a conversation about your goals with your group. For legal advice, you should always consult a professional lawyer who is familiar with this kind of contract.

Once you have a legal document drafted, it's important to have everyone read it, make sure everyone understands it (don't let anyone just skim through it!), and then have each member sign it.

You can add weight to the contract by having an uninvolved third party witness the signatures (even more if the third party is a notary!) Your lottery pool manager should keep all of the copies.

There might be local and state laws that influence your lottery pool agreement. Your state, your company, or your region may prohibit lottery pools. Be sure to speak with your company's legal or HR department if you aren't sure if you are allowed to start a pool.