Theoretical legal question (not asking advice)

This discussion came up at lunch today because it occurred (except for the winning) to one of the lunchers.

Suppose person A’s credit card is stolen and is used by person B to purchase lottery tickets (I know in some localities in the US you can’t do this, but you can in Toronto and I assume other US locations). The card is reported stolen, the thief is caught and confesses. Then one of the lottery tickets is a big winner.

Who gets the money?

Victim argued he should get the money – his card.
I argued if bank was liable to merchant on the purchase, then bank was entitled.
Others said it was a fraudulent sale of a lottery ticket and, like with mistakes, the merchant was liable on those so they owned the tickets and got the $$$.
I suppose it’s possible it’s not paid out at all.

Anyone know?

Depends on the terms of the specific lottery. I would be shocked if anyone got paid, other than the cardholder getting a refund.

As a tort matter, I can’t think of a theory of damages that would entitle the cardholder to the ill-gotten gains of the thief. As a criminal matter, the state could ask for disgorgement of the thief’s ill-gotten gains, presumably, and that generally wouldn’t go to the theft victim. It would depend on state law. They’d probably try to get the money for their coffers, governments being governments! And as a contract matter the question would turn, as RNATB points out, on the terms of the lottery. Though I actually doubt they cover a situation in which a person uses stolen money to buy a ticket.

Couldn’t the cardholder reach an agreement with the thief? (i.e. I won’t claim that my card was stolen, and/or used without my consent, if you give me the winning ticket. Hell, in such a situation, it might even be worthwhile to pay the thief some decent amount - say $10,000.00 - in exchange for the ticket).

Now, I realize that the state prosecutes crimes, rather than individuals, but if the cardholder suddenly “remembered” that he agreed to the thief’s use of the card, or was otherwise uncooperative with the investigation, it might get the charges dropped.

Good point.

I guess there might have been crimes committed for which consent was not a defense (if, say, the thief fraudulently represented to the store clerk that it was his card) or breaches of contracts with other parties (like the credit card company). But presumably no one would go after it unless they had a shot at the jackpot. I suppose if the state thought it might ultimately get the money as disgorgement for some crime, they might pursue it without the cardholder’s testimony.

My guess is that the state would declare that the sale had been based on an illegal act (stolen credit card and identity fraud) and therefore the sale was invalid. Which, conveniently, would get the state out of having to pay off the lottery prize.

What if the crook takes $20 cash from the victim, and buys the lottery ticket with cash? Not necessarily with the exact cash he stole. Upon arrest, the crook is found with $40 cash and the $20 is returned to the victim. Nobody knows where he got the other cash; could have been his own legit money. Now what?

One could argue he bought the ticket (or could have) with his own money, even if this cannot be proven. It’s not like the victim is going to know the serial number of his $20 bill. One could also argue though that even a crook wouldn’t be dumb enough to buy something as stupid as a lottery ticket with his own money… he bought the ticket only because he had earlier stolen some money from somebody.

I’m not sure illegally-obtained consideration that is not itself contraband makes a contract voidable. But there’s probably case law on that.

I suspect that this is why states like Texas make lottery sales cash only and lottery tickets are a “bearer instrument”. The clerk who stole the lottery ticket from Willis Willis in Grand Prairie in 2009 was convicted (in absentia, I think) of fraud and theft and his assets remaining in the US were turned over to Mr. Willis, but the Lottery Commission only pays out once.

Florida just switched to cash-only lottery sales, too. I was wondering why.

If someone steals $40 from me and uses the money to buy a lamp, there’s no way I’m gonna catch the guy and say “That lamp belongs to me now, and we’re even.” He committed a crime and he should be punished. If the judge rules that he should spend 30 days in jail plus make restitution to the victim, then I fully expect to get my $40 back, not the lamp. This would still be true even if the lamp turned out to be worth a million dollars.

excellent point there.

I have to admit that I’d be mad if I found out that somebody won the lottery right after robbing me, but I’d console myself with the knowledge that 99.99% of the time what would really happen is that the thief would buy a losing ticket, so then the thief would have the misfortune of both getting caught and being foolish enough to have wasted the money on a bad investment.