Why states are wary of essay contests

Write an essay and win the American dream - or more, the ads suggest. For $100 and 100 words, you could win a beachfront home, a landmark hotel, or perhaps a golf course.

Todd Call of Ogden, Utah, thought sponsoring such an essay contest would be a novel way to find a new owner for his soup restaurant. Warren Owens of Salt Lake City thought entering one of these contests might give him a ticket to a new life he couldn't otherwise afford.

But as more people turn to this unconventional method of unloading real estate, the reality often falls short of expectations. States around the country have begun taking a hard look at the enticing contests, concerned that their resemblance to gambling is a little too close for comfort. "I always warn people that these things are almost certain to fail," says Dave Horn of the Washington State Attorney General's Office.

But that's not the conventional wisdom. The 1990s have seen a tide of expectant entrants, perhaps fed by a romanticized portrait in the movie "Spitfire Grill," starring Ellen Burstyn as the owner of a small-town restaurant in Maine who sponsors a wildly successful contest to pass it on.

Mr. Call, owner of Soup Heaven in Ogden, caught the wave of excitement when his brother-in-law mentioned a golf course being raffled off for $100 a ticket. Call put up a Web site and advertised his own contest in local newspapers. Entrants were asked to address the question, "I deserve Soup Heaven because...." He thought he had a winner for sure with this response: "The soup angels are calling me. Angel vegetable-beef, I hear you.... Angel minestrone, I'm coming. Angel gazpacho is blowing his horn.... I am ready for Soup Heaven and willing."

"I honestly expected it to work," Call says. But after six weeks, that entry was one of only two, and he canceled the contest. He needed about 1,200 entries to make it worthwhile. He figured there was little hope in waiting longer, although most contests run for six months to a year.

THE contests have become so popular that a Web site based in North Carolina (www.wilmington.net/walshnet/essaycontests/) tracks state laws, offers sample forms for rules, and suggests that organizers hire a lawyer. The key is to structure a contest so that it is a game of skill, not chance.

As in many states, Washington has a gambling law that makes lotteries illegal. "There's a constant concern that essay contests are a sham," says Mr. Horn, adding that the potential for fraud and mismanagement is high. Out of concern for consumers, the Washington Attorney General's Office has issued a fact sheet and a checklist of questions that would-be contestants should ask.

But even as some states try to rein in the practice, most view the essay-contest trend as benign dalliance. "There hasn't been that much money lost on them," Horn acknowledges. "Most who fail give the money back." Or they're forced to shut down.

A few years ago, a Marysville, Wash., woman offered a contest to give away two homes. She sent out materials saying all fees would be held in a trust. But when the contest fell through, she had no money to give back. She spent it all on advertising. Ultimately, there was no legal action. The woman managed to pay back some people and persuaded others to forgive the debt.

So far, no state laws directly address the essay-contest phenomenon. But Mr. Owens, for one, wishes they did. As he finished 250 words on why he'd like to operate a motel on the Oregon coast, he began to figure the math. "The income-tax burden from winning would be devastating," Owens wrote the owner, a Houston insurance man. "It sounds as if the people who would reach for this dream are not the ones who can afford it."