How is a scheme that distributes prizes by chance among individuals who have paid for a chance to win commonly referred to?

A scheme that distributes prizes by chance among individuals who have paid for a chance to win is commonly referred to as a lottery. In legal terms, a lottery involves three key elements: consideration (the purchase of a ticket or entry), the awarding of prizes, and the randomness of the selection process where winners are chosen by chance.

Lotteries are heavily regulated in many jurisdictions due to their potential for gambling implications and the revenue they can generate for governments. Understanding this concept is crucial, as lotteries are distinct from other prize distribution schemes. For example, competitions typically involve an element of skill or effort to win, while raffles usually do not require a significant purchase to enter and often serve a charitable purpose. Giveaways are generally not based on chance and may not involve any payment at all. Therefore, a lottery specifically captures the essence of a chance-based prize contest that requires participants to pay for their opportunity to win.