V.

We have studied now the rules of law applicable to lottery bonds in their respective countries. Bonds, however, are not alone public funds; they are besides, in a way, international commercial paper. Frequently, for example, a foreign company will open in quite another country than its own a public subscription with the intention of negotiating thereby an issue of bonds. Often, as well, bonds issued in one country circulate and are bought and sold in another country than the one in which they were authorized. In France, as in most of the countries of Europe, share lists or subscriptions relative to bonds issued by foreign loans are entirely free. It is the same with the negotiation of foreign bonds. These transactions are always more or less protected in the respective states, where the admission to the official quotation list is more or less strictly regulated. But if the principal countries of Europe are thus freely open on the whole to bonds of foreign origin, we may not say, however, that it is the same for the special bonds. which we are considering, lottery bonds, - for the issue and transfer of these are of a nature to interfere with certain rules of public order. It is then pertinent to examine here the following questions: Ist. On what conditions may lottery bonds be issued by a borrower outside of his own country? 2d. On what conditions may lottery bonds circulate in a country other than the one in which they were regularly issued, and become the subject of valid negotiation?

(1) Issue of lottery bonds. We have called attention above1 to the license permitted a borrower, in view of the different statutes forbidding lotteries, with regard to the issue of lottery bonds in the principal countries of Europe. There is a general tendency to recognize in the arrangements which forbid lotteries a character not only of public regulation, but also of international regulation. In consequence of this, foreign lotteries, and therefore the issue of foreign lottery bonds, are considered to be forbidden by the same laws. Moreover, most States have formulated special prohibitions in regard to foreign lotteries,2 and these are universally applied to the issue of foreign lottery bonds.

1 Supra, II.

Penal Code, and
Denmark, law of

2 France, law of 21st of May, 1836, Art. 4. Germany, Art. 286 of Prussian law of 20th of July, 1885. England, 6 & 7 Will. IV. c. 66. 6th of March, 1869. United States, sect. 2851, 3894, 3929, 4041, of the Revised StatutesItaly, Decree of 5th of November, 1863. Sweden, law of 6th of August, 1881.

Such are the general principles which govern the matter in the absence of special provisions. But some States have regulated in express statute with great restrictions the issue of lottery bonds on their territory. In Germany the law of the 8th of June, 1871, forbids all issue of foreign lottery bonds throughout the Empire. The Austrian and Hungarian laws of 1889, before mentioned, which were visibly inspired by the German law, contain analogous prohibitions. In Belgium the law of the 30th of December, 1867, subordinates the legality of these issues to a previous sanction of the government.

(2) Circulation. - Foreign lottery bonds, of which the issue has been duly sanctioned in a country, circulate there, and are negotiated as bonds of the country, under the same conditions and under the same prohibitions. As to bonds from lottery loans of which the issue has not been specially authorized in a country. where an authorization of this sort is indispensable, or else a prohibition of the lotteries may be assumed, the territory of the country is closed to them, and the existence of such instruments could not be revealed with impunity. The sale of these instruments is an offence against the law, and falls within the province of the penal code. The principle is almost universally admitted, and the contrary opinion has only been sustained by isolated decisions. In the United States, for example, a decision was given by the court of New York that the lotteries of Austria did not come under the articles which forbid lottery, and an analogous decision is found in California; but the contrary has been decided by the Supreme Court of the United States.2

It is by virtue of this principle, and on the basis of the law of 1836, that decision has been rendered in France that it is forbidden to bring to the attention of the public by announcements, prospectuses, or any other means of publicity, the existence of unauthorized foreign lottery bonds. The publication of the winning numbers even is sufficient to expose the one who attempts it to the penalties of the law of 1836.3 Belgian law on this last point is broader than the French, and shows that insertions in the papers indicating simply the result of passed drawings, without informing the public about the conditions for sharing in these

1 Kohn v. Koehler, 96 N. Y. Rep. 362.

2 Edward H. Horner v. The United States, 147 U. S. Rep. 449.
8 Cour de Cassation de France, 14th January, 1876.

drawings, and without giving information of the importance nor of the number of drawings yet to take place, do not fall under the prohibition of the law of 1851 which forbids lotteries.1 Similar rules are observed, without indulgence of any kind, in the countries where, as in England, no exception to the prohibition of lotteries is made in favor of the lottery bond. It is by reason of this circumstance that in 1871 France waived the scheme considered for a moment of realizing a loan of two thousand millions in lottery bonds. England would not have been able to take part in a transaction of this kind, and this reflection was enough to dismiss the project.

Foreign lottery bonds, of which the issue has not been authorized in a country where an act of legislation is required, could not be admitted by a simple administrative measure to the official quotations of the exchanges of this country, since they could not become the object of a valid sale. This is only true for France and Belgium since 1881. Before that time the treaty of commerce concluded between France and Belgium on the 1st of May, 1861, in Article 36, stipulated for the admission to the official quotations of each of the contracting countries of certain lottery bonds issued in the other. It is interesting to note that, by reason of this proviso of the Franco-Belgian treaty, not only Belgian lottery bonds were authorized to appear in the official quotations of Paris, but also similar bonds found in exchange quotations in all the countries with which France had concluded a treaty of commerce which contained the clause "la nation la plus favorisée." The arrangement of Article 36 of the treaty of 1861 not having been reproduced in the Franco-Belgian convention of the 31st of October, 1881, French and Belgian lottery bonds have been reciprocally forced to disappear from the official quotations of the other country, and the régime of protection established in 1861 has come to an end.

VI.

We have limited ourselves in the course of this study to the investigation of the principles of law raised by lottery bonds, but the present work would be far from complete if we were not to remark upon the grave economic problem raised by the existence of such obligations.

1 Cour de Cassation de Belgique, 18th July, 1887.

The most elementary principles of political economy formally condemn lotteries. Are lottery bonds, then, to be condemned on the same footing with lotteries? Such is the question. The system of lottery bonds has its obstinate partisans. It counts also unyielding adversaries, and it is among the latter that we take our place.

The partisans of lottery bonds, at the head of whom in France are the celebrated economist, Michel Chevalier, and M. Paul LeroyBeaulieu,1 have several times pleaded the cause of lottery bonds. They claim that there is a great difference between lotteries and lottery loans. I. In the lottery there are a few winning tickets only, while most of the holders of tickets lose their investment entirely. In lottery loans, however, those who do not gain a prize may always rely on the return of their investment. 2. The lottery ticket brings no interest. The lottery bond is a deed of investment, to which a reasonable interest is attached. 3. The fascination of the lottery chances which are attached to the bonds permits the borrower to obtain a diminution in the demands of the investors for the rate of annual interest. The lottery bond, they continue, far from being detrimental, is sovereignly useful to society, for it renders saving attractive. Far from destroying the practice, which lotteries do, the lottery loan stimulates it. Many small fortunes have for an origin the charm exercised by a prize. When a man has once conceived a liking for transferable securities in this form, he quickly becomes used to all. He has taken a first step in the way of saving, and soon makes other investments. The lottery bond is no more reprehensible, no more immoral, than a hundred other ways of becoming rich which are considered lawful and legitimate. The lottery bond is for our city population what the bit of ground is for the peasant, saving rendered attractive not only to the reason, but also to the imagination.2

Economists do not always advocate lottery bonds without reservation in their approval of the system. They blame it specially for paying a low interest, sensibly inferior to that of other steady securities; for charming small capitals too easily, which could find equally sure investment with higher interest elsewhere for the same capital, and for favoring speculation. Hence they

1 Leroy-Beaulieu, Traité de la Science des Finances, 5th ed., Paris, 1891, Book II PP. 341 et seq.

2 Ibid.

are not in favor of absolute freedom in issuing lottery bonds, and recommend certain restrictions on this freedom from a legislative standpoint. M. Leroy-Beaulieu proposes to regulate the issue of lottery bonds in the following manner : 1. The lowest interest should never fall below 2%. 2. The yearly instalment for the use of prizes should not exceed the tenth of the sum needed as yearly allowance for the use of the loan. 3. The length of the period of gradual payment should not exceed seventy-five years. 4. A single prize should not exceed 150,000 francs. 5. The number of yearly drawings should be four at the most.

The reasoning of the adversaries of lottery loans is very simple. All that is immoral is anti-economic. Now, the essential immorality of the lottery is found in the lottery loan. The phase of the lottery which is so strongly condemned is the possibility of gain without work, which dazzles the eyes of the poor and needy. For the same reason lottery bonds should be condemned.

The lottery, moreover, is so profoundly immoral, that it vitiates all that it touches. The ideal system of lottery bonds, a serious investment with reasonable interest, is already far exceeded. The example has been set by public authority; the lottery in a way is to be reborn into France when the lottery ticket is disguised under the flimsy name of lottery check (bon-à-lots). This is an intermediate bastard between the lottery bond and the lottery ticket. It is in principle a lottery bond, which bears no interest, of a price varying from 25 centimes to 100 francs, and it is to be paid up at the close of a certain period of time. There have been several issues of these for several years past. The combination of bon-àlots is condemned by the best minds. The money invested by the purchaser of a bon-à-lots may be considered as lost to him for the time, since it bears no interest.

Lottery bonds, even though they bear an appreciable interest, may still be always condemned from another point of view. They give rise to speculations economically reprehensible, such as we have studied above, and which no restrictive law can effectively repress; whatever exertions are made, as long as lottery bonds exist, whatever the price may be, speculation will always arise which by clever arrangement will manage to place within the reach of modest means the possibility of taking part in the lottery at a small figure.

1 Supra, III.