They Ran Their Own Lottery Outlet and Paid Every Winner — Why Did Two Brothers Still Get Six Years in China?

The short answer

• In China, lotteries may only be the welfare and sports lotteries issued under State Council authorisation; all other units and individuals are barred from issuing or selling lotteries (Regulations on Lottery Administration Art. 3). Unauthorised issue or sale that constitutes a crime is prosecuted as illegal business operation under Article 225(4) of the Criminal Law — as Article 6 of the Supreme People’s Court and Supreme People’s Procuratorate interpretation expressly states.
• Winners were paid and bettors weren’t cheated, so it isn’t fraud: private-lottery money isn’t obtained by deception but by “diversion” — betting money that should have gone to the state is kept by the house, harming the state’s lottery monopoly.
• A lottery agency licence doesn’t entitle you to run your own book. An agent’s role is to sell on commission and remit lottery funds; collecting money yourself, not placing real bets and paying prizes yourself changes the nature entirely.
• The characterisation shifts with the business model. If draws are no longer official but you set your own odds and act as the house, or use the “lottery” name to run a betting platform with agents and commission on stakes, it may be running a casino (Criminal Law Art. 303(2)) — a different offence and sentencing range.
• Ticket buyers generally commit no crime, but their winnings aren’t legally protected; those most easily caught up are people who collect bets, handle payments or rent out payment QR codes for commission, often treated as accomplices in running a casino.

The background

In 2016, the Yu brothers in Anji, Zhejiang, held a genuine lottery agency licence but also ran a “private lottery outlet”: bettors bought lottery tickets from them via a website or mobile app, and instead of placing the bets with the state sports lottery centre, they kept the money and acted as the house; when someone won, they paid out. According to public reports, they sold about RMB 90 million of tickets in ten months, making about RMB 20 million, and both were sentenced to six years for illegal business operation.

(The facts come from public reports and a video script; the court name and case number have not been checked against the judgment and are not cited here.)

Why not fraud?

Many people’s first reaction is: a fake lottery outlet — isn’t that fraud? The key is what the bettors were deceived about.

Fraud (Criminal Law Art. 266) is structured as: fabricating facts or concealing the truth so that the other party, under a mistaken belief, hands over property.

In private-lottery cases, bettors pay for a chance to win; draws use official results; winners really are paid. Bettors aren’t left empty-handed because they were deceived. What is bypassed is the state lottery monopoly — money that should have gone to lottery public-welfare funds and issuing costs is kept by the house. The object harmed is lottery market order, so it is illegal business operation.

Conversely, if the house never intends to pay and blocks winners and runs, it approaches fraud and may be charged differently; so “paying winners” is actually a favourable fact for the defense.

The law

1. The starting point of the monopoly: Regulations on Lottery Administration (State Council Order No. 554, in force 1 July 2009)

Article 3: The State Council authorises the issue of welfare lotteries and sports lotteries. Without State Council authorisation, issuing other lotteries is prohibited. Issuing or selling foreign lotteries within the PRC is prohibited.

Article 15 (excerpt): lottery issuing and selling institutions may entrust units or individuals as agents; agents may not sub-delegate sales.

Article 41 (excerpt): an agent who sub-delegates sales, or lends, rents or sells dedicated betting equipment, is fined RMB 2,000–10,000 with confiscation of illegal gains — only the lightest tier of administrative penalty.

2. The offence: Article 225 of the Criminal Law (illegal business operation)

Whoever, in violation of state regulations, engages in any of the following illegal business operations that disrupt market order, where the circumstances are serious, shall be sentenced to up to five years’ imprisonment or criminal detention and/or a fine of one to five times the illegal gains; where especially serious, five years or more … (4) other illegal business operations seriously disrupting market order. (excerpt)

3. The interpretation linking lotteries to this article

Article 6 of the Supreme People’s Court and Supreme People’s Procuratorate Interpretation on Gambling Cases (法释〔2005〕3号): issuing or selling lotteries without state approval that constitutes a crime is punished as illegal business operation under Article 225(4).

4. The threshold for opening a case

Article 71(12) of the Supreme People’s Procuratorate and Ministry of Public Security Provisions on Standards for Filing and Prosecuting Criminal Cases (II) (2022 revision): other illegal business operations with individual illegal turnover of RMB 50,000 or more, or illegal gains of RMB 10,000 or more, shall be filed for prosecution; for units, RMB 500,000 and 100,000. So an individual earning more than RMB 10,000 may face a case — not a high bar.

5. When it becomes running a casino

Article 1 of the Supreme People’s Court, Supreme People’s Procuratorate and Ministry of Public Security Opinions on Online Gambling Cases (公通字〔2010〕40号) (excerpt): organising gambling via the internet or mobile terminals is “running a casino” under Article 303(2) where, among other things: (1) a gambling website is built and accepts bets; (3) one acts as agent for a gambling website and accepts bets; (4) one shares in a gambling website’s profits. Article 2: knowingly providing funds or settlement help to a gambling website makes one an accomplice in running a casino.

Two People’s Court Case Database cases show sentencing: in Yancheng, Jiangsu, Gu (No. 2024-06-1-286-004) acted as agent for a site called “Fuying Lottery”, recruiting downlines to bet RMB 2.63 million, and got one year three months plus a RMB 20,000 fine; in Shenyang, Liaoning, Yu (No. 2023-06-1-286-007) collected Mark Six bets via WeChat as the house and used apps such as “Welfare Lottery”, with stakes over RMB 430,000, and got five years six months plus a RMB 100,000 fine. The common thread: platforms with “lottery” in the name were in substance gambling sites.

How ordinary people can tell a “lottery app” or private outlet

• Channel: since April 2015 China has made clear that no unit may sell lottery tickets online without Ministry of Finance approval; in August 2018 the Ministry of Finance and eleven other departments reiterated the ban on unauthorised online lottery sales. Most “lottery apps” on phones are themselves non-compliant.
• Odds and draws: odds clearly higher than official games, or draw results adjustable from the back end, mean it is in substance a gambling site.
• Where the money goes: payments into personal accounts or private payment codes rather than an outlet’s account, and no official ticket.
• “Agents” and “downline commissions”: a hallmark of running a casino. Official lottery sales have no downline system with commission on stakes.

Are buyers and helpers at risk?

• Simple small purchases: entertainment involving small stakes without profit motive is not treated as gambling (法释〔2005〕3号 Art. 9).
• Gambling as a business, or organising others to bet for commission on stakes: may be gambling or running a casino.
• Most at risk are the “workers”: collecting bets, handling payments, or renting or lending payment codes for a cut of turnover are often treated as accomplices in running a casino. A few hundred yuan in fees can buy a criminal record.
• Private-lottery winnings aren’t legally protected. When the house is investigated and accounts frozen, winning bettors usually can only join the restitution process as ordinary creditors and rarely recover much.

Already charged or summoned for talks? What to do

• First distinguish “selling real tickets but diverting funds” from “setting your own odds and acting as the house” — the watershed between illegal business operation and running a casino, which directly decides the sentencing range.
• Secure three kinds of evidence: the flow of funds (whether bets were remitted and into whose accounts), payouts (whether winners were genuinely paid), and whether there were downlines and commissions.
• Check the nature of the amounts: illegal business operation looks at illegal turnover and gains (RMB 50,000 or 10,000 for an individual is enough to file); running a casino looks at stakes, house takings and number of gamblers. Different measures lead to very different conclusions.
• Agents summoned for talks should distinguish an administrative violation under Article 41 of the Regulations from a crime, explain where the funds went proactively, and not let an administrative issue become a criminal one.

Limitations

The Regulations on Lottery Administration, Articles 225 and 303 of the Criminal Law, 法释〔2005〕3号, 公通字〔2010〕40号, the Filing Standards (II) and the two database cases cited are public current texts that can be checked. Details of the Anji case come from public reports and a video script, not the judgment; the offence and sentence are subject to the court’s documents. The line between illegal business operation and running a casino is genuinely disputed in practice, and different courts may reach different conclusions; each case turns on the actual business model.

If you or your family have been charged or summoned over lottery sales or online betting platforms, or have winnings from a private lottery you can’t collect, contact Wang Xin: phone +86 186-0113-9509, WeChat wang223040.

This is an English edition of Wang Xin’s original Chinese article, 自己开的彩票站，中奖照样兑付，为什么兄弟俩还是被判了6年？. It explains the law of the People’s Republic of China in general terms and is not legal advice for any particular case; outcomes depend on the specific facts and on how local authorities apply the rules.