Office pools: Are they legal?

It's March Madness, and you are down to the last few seconds of a game. Your office manager takes your last-minute bet as Arizona makes a run for the basket. But, is more than the pool at risk?

Are you safe?

Not in Wisconsin. It does not matter how much was in the pot—state law prohibits placing bets. There the offense is a Class B misdemeanor.

Office pools are legal in most states, though there are a number of exceptions, including Hawaii, Florida and Illinois. There are three questions that you should ask before you set up a pool to determine whether the pool is legal.

First, does your state allow informal sports betting? It is safest to confine your betting pool to persons and a location situated within a state that permits the pool. Taking bets across state lines can tangle the taking and disbursement of proceeds. In addition, take care that your activities fit within the scope of local county or city ordinances regarding betting pools. Local authorities generally do not take the time to investigate businesses that do not have a license to organize gambling activities. But businesses with a liquor license are more open to the public. Bars, restaurants and stores also present more opportunities for gambling than other establishments. Police are more likely to hear about pools at places with a liquor license and so may check on them for illegal activity on a regular basis.

Second, is your game safe? Bets on NCAA basketball matches, as on other amateur sports, are out of the question unless you are in Nevada. Congress, however, is currently considering foreclosing Nevada's exclusion through the pending Student Athlete Protection Act, a follow-up to the 1992 Professional and Amateur Sports Protection Act (PAPSA). Although football squares for professional teams may be a good choice, it is never harmless to bet on a co-worker's personal or work-related activities. Such pools may violate employment laws. They are likely to open up the company to civil suits for employment discrimination and sexual harassment.

Third, does your pool follow common sense rules? If police are tipped off to the pool, they will first examine the amount of money and people involved. If the numbers start to get out of hand, so does their investigation. That goes double if the pools are held often and your business brings people out of the office into the pool. A pool that involves minors is always suspect. So is a pool where the house receives a cut. Setting up a pool through the Internet can pose problems. A temporary website can be classified as an online betting site if it appears that your business is regularly engaged in setting up pools. If you want to pay out people through an Internet payment site, you will need to ask the site whether it allows this practice for residents of your state. PayPal, for example, does not allow New York residents to use the site for online gambling, and will go so far as to alert New York law enforcement officials if the site is used improperly.

The last question that you will want to ask is whether an office pool is against company rules. Just because the pool is legal does not mean you will not get fired for running it.

Office pools are tricky to monitor not only because they are private activities, but because states have different definitions of gambling.

Hawaii allows "social gambling" in which a person receives his own winnings and persons compete on equal terms, but not activities in which people earn money for promoting gambling.

States treat certain games such as bingos and lotteries differently, and may not consider them to be gambling if they are run by charities.

The best way to make sure that your office pool is legal is to read state and local statutes regarding gambling before the fact. Then set up a pool that is fair, accountable, and does not involve ambiguous paperwork. If you plan to award substantial amounts of money through the pool, and especially if there is paperwork that can be traced to your company, inform participants that gambling winnings should be reported on IRS forms. Finally, be aware that employees and businesses may be held liable for wrongful activity even if you write out documents that appear to absolve persons and entities from responsibility.

The best advice for office pools is to keep betting "in": informal, infrequent and insignificant. That way you won't invite unwanted guests—a category that includes the police and people that you know can't pay up.