Penny auctions, an online phenomenon imported from Europe, operate by the hundreds in the United States without meaningful oversight from consumer protection agencies. In a penny auction, consumers compete for items one penny at a time. To date, no significant inquiry, either academic or practical, into the legitimacy of the penny auction has occurred. Although marketed as auctions, online penny auctions may actually qualify as lotteries. Unlike the multifarious and confusing definitions of gambling, the long-accepted definition of a lottery consists of three elements: prize, consideration, and chance. If a penny auction satisfies this definition then, under well-established case law in Washington, it is prohibited under the mandatory and self-executing lottery clause, as well as a probable violation of the Washington Consumer Protection Act. This Comment will explore whether an online penny auction constitutes a lottery under article II, §24 of the Washington constitution. Ultimately, this Comment concludes that penny auctions are lotteries and should be regulated as such to protect consumers while improving Washington’s own bottom line.
David R. Konkel, Costing a Pretty Penny: Online Penny Auctions Revive the Pestilence of Unregulated Lotteries, 36 SEATTLE U. L. REV. 1967 (2013).