Special Counsel for Internet Matters, Investor Protection & Securities Bureau, State of New York, Attorney General's Office. As a prosecutor for the Attorney General's Office, he has had extensive experience investigating and prosecuting Internet securities fraud, including illegal securities touting and a sweep of pyramid scheme sales over the Internet. Mr. Schwarz was also one of the primary authors of the New York State Attorney General's report on the online brokerage industry, entitled "Wall Street to Web Street," issued November 22, 1999, and serves on NASAA's Internet Enforcement Project Group. Finally, Mr. Schwarz successfully prosecuted and secured the first decision in the country holding that Internet gambling violates state and federal law, in State of New York v. World Interactive Gaming Corp., No. 98-404428, 1999 WL 591995 (N.Y. Sup. Ct. July 22, 1999). Any opinions and/or observations expressed herein as furnished by the author are his alone, and are not to be construed in any fashion, either directly or indirectly, as the formal or informal opinions of the New York State Attorney General's Office or the New York State Attorney General, who will not be bound thereby. The author would gratefully like to acknowledge the contributions of his Research Assistants Eleanor A. Heard and Joshua Bauchner. The author would also like to acknowledge the help of William H. Mohr and Susan L. Ross. Both MTTLR and the author have copies of relevant web pages on file, as noted below. Many of these websites still exist, but the information about the share distribution programs has been removed. In such cases, the URL is not listed, but the name of the website is.

[1] Travelzoo.com <http://www.travelzoo.com>.

[2] FreeIPO.com (visited Aug. 30, 2000) <http://www.freeipo.com>.

[3] FreeIPO.com, Why Free IPO? (visited Aug. 30, 2000) <http://www.freeipo.com/why.html>.

[4] See FreeIPO.com, Frequently Asked Questions (visited Aug. 30, 2000) <http://www.freeipo.com/how.html>.

[5] See WebWorksMarketing.com, Inc., on file with MTTLR.

[6] Id.

[7] See WowAuction.com, Inc., on file with MTTLR.

[8] Id.

[9] Id.

[10] Id.

[11]See YouNetwork Corp., SEC Registration Statement SB-2 (filed Feb. 5, 1999<http://www.sec.gov/Archives/edgar/data/1078306/0000950136-99-000152.txt.

[12]> Id.

[13] Id.

[14] See ExitNorth.com, Inc. (visited Aug. 30, 2000) <http://www.exitnorth.com; contest pages on file with MTTLR.

[15] Id.

[16] Id.

[17] See PopularLink.com (visited Aug. 30, 2000) <http://www1.freeipo.com/popularlink/ step1.html; (now offering only $25 bonus after successful IPO); older offer on file with MTTLR.

[18] Id.

[19] Id.

[20] See Tradehall.com, on file with MTTLR.

[21] Id. (emphasis added).

[22] Id.

[23] LifestyleTravel.net, on file with MTTLR.

[24] Id.

[25] Id.

[26] See MyGo.com, on file with MTTLR.

[27] Id.

[28] Id.

[29] See MyOwnEmpire, Inc., on file with MTTLR.

[30] Id.

[31] Id. MyOwnEmpire believes its method of share distributions to be so unusual that it has apparently filed for a patent on its consumer-owner business model.

[32] Id.

[33] CIO Magazine Poll Shows CTOs Grapple with Double Standard on Internet Privacy Regulations, PR Newswire, Mar. 31, 1999.

[34] Judge Shelves Plan for Sale of Online Customer Database, N.Y. Times, Aug. 18, 2000, at C2.

[35] Jeff Sovern, Opting In, Opting Out, Or No Options At All: The Fight For Control of Personal Information, 74 Wash. L. Rev. 1033, 1051 (1999).

[36] Id. at 1047.

[37] Id. at 1045.

[38] See Kim Komando, Personal Information a Hot Item These Days, Fresno Bee, Oct. 4, 1999, at C2.

[39] See Sovern, supra note 35, at 1046.

[40] See Erica S. Koster, Zero Privacy: Personal Data on the Internet, 16 No. 5 Computer Law. 7, 10 (1999).

[41] Kenneth Neil Cukier, Is There a Privacy Time Bomb, Red Herring, Sept. 1999, at 38.

[42] Koster, supra note 40, at 8-9.

[43] Id at 9.

[44] See Sovern, supra note 35, at 1037.

[45] See infra, text accompanying notes 84-94.

[46] See GeoCities, Docket No. C-3849 (Feb. 12, 1999) (Final Decision and Order available at <http://www.ftc.gov/os/1999/9902/9823015d&o.htm).

[47] See Paul Gilster, Real Networks' Real Big Mistake, News & Observer (Raleigh, NC) Nov. 22, 1999, at D4 (noting that as a result of the company's activities, at least two class-action lawsuits had already been filed: one in Pennsylvania and one in California).

[48] See, e.g., On the Web You Have No Secrets, PC World, July 1, 1999, at 22 (The Online Privacy Alliance, a group composed of more than 80 businesses, was launched in July 1998 to promote self-regulation as a solution to privacy concerns); Cukier, supra note 41, at 39 ("As a result of pressure from consumers and privacy advocates, the World Wide Web Consortium, a standards forum, has issued a draft specification called Platform for Privacy Preferences, or P3P.").

[49] See Self-Regulation and Privacy Online, Before the Subcomm. on Telecomm., Trade, and Consumer Protection of the House Comm. on Commerce, 106th Cong. (1999) (Statement of Robert Pitofsky, Chairman, FTC).

[50] Id.

[51] Id. at 9-12.

[52] See Gilster, supra note 47. Specifically, Truste avoided revoking Real Networks' seal by alleging that Real Networks had not violated Truste's policies because the "data wasn't being collected on a Web site." Id.

[53] FTC Seeks Authority To Regulate Online Privacy, Tech Law Journal, May 23, 2000 <http://www.techlawjournal.com/privacy/20000523.htm; (emphasis added) (two of the five FTC Commissioners dissented).

[54] Id.

[55] Some believe that self-regulation is inevitable because the ever-increasing value of this personal information will create an incentive for many companies to "husband the data like a trade secret rather than disseminate it to the highest bidder." See Cukier, supra note 41.

[56] See Koster, supra note 40, at 11. All three bills were still in committee as of August 2000.

[57] Id.; see also Internet Commerce Said to be in Danger, Times-Picayune, June 20, 1999, at A13.

[58] See Komando, supra note 38 ("Individual consumer information is a hot commodity these days . . . ."); Cukier, supra note 41 ("The value of personal information is uncontested. Many Net companies are discovering that the most potentially lucrative asset in their business model isn't the products they sell but the data they collect about their visitors . . . Personal information is becoming so lucrative that it is creating a seller's market . . . ."); see also John Davidson, Your PC is Having a Clandestine Affair, Austl. Fin. Rev., Nov. 4, 1999, at 39 ("In this information-based shopping revolution, information privacy becomes your most precious, precarious asset, your bargaining chip.").

[59] U.S. West, Inc. v. FCC, 182 F.3d 1224 (10th Cir. 1999), cert. denied sub nom., Competition Policy Inst. v. U.S. West, Inc., 120 S. Ct. 2215 (2000).

[60] Id. at 1228-29.

[61] Id. at 1228.

[62] 47 U.S.C. § 222(F)(1) (Supp. II 1996).

[63] Denise Caruso, Consumers' Desire For Information Privacy Ignored, N.Y. Times, Aug. 30, 1999, at C5.

[64] See U.S. West, 182 F.3d at 1230.

[65] Id.

[66] Id.

[67] See Caruso, supra note 63.

[68] Privacy: Federal Trade Comm'n v. Toysmart.com-FTC Files First Enforcement Action Under New Child Privacy Law, Computer and Online Industry Litig. Rep., Aug. 1, 2000, at 9-10.

[69] Id.

[70] Keith Perine, Who Are the Privacy Police?, The Standard, Aug. 7, 2000 <http://www.thestandard.com/article/display/0,1151,17324,00.html; (emphasis added).

[71] Judge Shelves Plan for Sale of Online Customer Database, supra note 34 ("Other bankrupt dot-com companies have [also] sold their customer data, though Craftshop.com, an arts and crafts retailer, also withdrew its list from sale last month [July 2000].").

[72] Brian Krebs, Lawmakers Intro Privacy Bill in Wake of Toysmart Scandal, Newsbytes, July 12, 2000 <http://www.newsbytes.com/pubNews/00/152015.html; (noting that Representatives William Delahunt and Spencer Bachus also introduced a bill in the House which "would give the Federal Trade Commission (FTC) the express right to investigate and bring actions against websites that violate their own privacy policies.").

[73] Doug Brown, White House Studies Bankruptcy Privacy, Interactive Week, Aug. 7, 2000 <http://www.zdnet.com/intweek/stories/news/0,4164,2612068,00.html; (emphasis added).

[74] Regulator to Draft Database Sale Guidelines, Financial Times, July 18, 2000, at 8.

[75] Stefanie Olson, eBay, Yahoo Nix Auctions of Personal Data, CNET, Aug. 7, 2000 <http://news.cnet.com/news/0-1007-200-2457350.html.

[76] BonusBoulevard, Inc., SEC Registration Statement SB-2/A (filed Sept. 3, 1999) <http://www.sec.gov/Archives/edgar/data/1089471/0000950117-99-001884-index.html at 13.

[77] YouNetwork Corp., SEC Registration Statement SB-2/A (filed July 13, 1999) <http://www.sec.gov/Archives/edgar/data/1078306/0000950136-99-000955-index.html at 18.

[78] BonusBoulevard, supra note 76, at 21.

[79] See YouNetwork, supra note 11, at 32.

[80] Id. at 13.

[81] See MyOwnEmpire, supra note 29, "About My Own Empire-Share Value" webpage, at 3; see also Cukier, supra note 41 ("According to a 1998 study of online retailing by the Boston Consulting Group and Shop.org, an association of online merchants, 65 percent of revenues derived from e-commerce sites is re-invested in marketing and advertising-a bid to grab eyeballs.").

[82] As described in Bonus Blvd.'s SB-2/A filing: [a]ffiliate relationships . . . involve a form of marketing based on revenue sharing between a retailer and other web site owners known as affiliates. When an affiliate relationship is established, the affiliate's web site is linked electronically to the web site of a retailer. When prospective customers visit the affiliate's web site, they may chose to be linked to, and then may make a purchase at, the retailer's web site. The retailer then pays a commission, which ordinarily equals a percentage of the amount of the purchases made. See supra note 76, at 24-25.

[83] Id. at 30; see also YouNetwork, supra note 77, at 19.

[84] See Lifestyle, supra note 23; Popular Link, supra note 17.

[85] See YouNetwork, supra note 77, at 24; see also Sovern, supra note 35, at 1045.

[86] YouNetwork, supra note 77, at 24.

[87] Popular Link, supra note 17.

[88] See, e.g., Sovern, supra note 35, at 1034-35.

[89] See ExitNorth, supra note 14.

[90] See, e.g., New Millennium Certain to Bring Continued Change in the Communications Arena; Expect to See Increased Competition and a Sustained Focus on Customer Issues in All Industry Segments, Business Editors, Dec. 21, 1999, at 14.

[91] See MyOwnEmpire, supra note 29. YouNetwork likewise collects detailed information about the people registering for free shares, including name, address, E-mail address, home and work phone numbers, company name and age group. See YouNetwork, supra note 11.

[92] MyOwnEmpire, supra note 29.

[93] See Komando, supra note 38, at C2 ("Since the greatest value in your personal data lies in how it can be used to get you to buy more stuff, the details of your shopping habits are the most valuable."); Sovern, supra note 35, at 1038-40; see also U.S. West, 182 F.3d at 1224.

[94] YouNetwork, supra note 77, at 25.

[95] Securities Act of 1933, § 5(c) (1997).

[96] Securities Act of 1933, § 2(a)(3) (1997).

[97] 326 F. Supp. 943 (S.D.N.Y. 1971).

[98] Id. at 945.

[99] Id. at 946-51.

[100] Id. at 945.

[101] Id.

[102] Id. at 946.

[103] Id. at 946, 950.

[104] Id. at 952 (emphasis added).

[105] Id. at 952-53.

[106] Id. at 953. In conducting its analysis, the court also noted that in the case of each spin-off, the defendants had available all of the pertinent information had they actually wanted to file a registration statement.

[107] Id. at 952.

[108] Id. at 952-53.

[109] Id. at 953.

[110] Id. at 953-54.

[111] Id. at 954.

[112] Id.

[113] Id. at 954-55. Although the court found that the defendants had violated Section 5 of the 1933 Act, the court, in its discretion, refused to order equitable relief in the form of an injunction because: (a) Harwyn had acted on the advice of counsel; (b) the Commission had passed up previous opportunities to dispel the inferences which had given rise to the perceived loophole; and (c) the defendants assured the court that they would not engage in further distributions of the type in dispute. Id. at 955-58.

[114] 490 F.2d 250 (4th Cir. 1973).

[115] Id. at 253.

[116] Id.

[117] Id. at 253-54.

[118] Id.

[119] Id.

[120] Id.; see also Harwyn, 326 F. Supp. 943, 953 (S.D.N.Y. 1971).

[121] Release No. 34-32669, [1993 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 85,223, at 84,417 (July 23, 1993).

[122] Id. at 84,418. Subsequent to incorporating each of these subsidiaries, Capital General would file a registration statement on Form 10, pursuant to § 12(g) of the Securities Exchange Act of 1934. Capital General, Yeaman, and a number of Capital General's subsidiaries were also the subject of a cease and desist action by the New Jersey Bureau of Securities, based upon their violation of New Jersey securities laws, having issued shares of unregistered, nonexempt common stock in the Capital General subsidiaries to approximately 24 New Jersey residents. In the Matter of Capital General Corp., Order Denying Exemptions and to Cease and Desist, N.J. Dept. of Law and Public Safety, Div. of Consum. Aff., Bureau of Securities, OAL Docket No. BOS 01534-94, July 14, 1994.

[123] Capital General, supra note 121, at 84,420.

[124] Id.

[125] Id.

[126] Id. In addition to registration violations, the SEC noted that Capital General had also made various misrepresentations and had engaged in fraudulent conduct. A detailed discussion of these fraud issues, however, is beyond the scope of this article.

[127] Id.

[128] Id. (quoting Exchange Act Release No. 4982 [1968-1969 Transfer Binder] CCH Fed. Sec. L. Rep. ¶ 77,725 (July 2, 1969)).

[129] Id. at 84,424.

[130] Id.

[131] Id.

[132] See Letter from Michael Sanders, Partner, Vanderkam & Sanders, to U.S. Securities and Exchange Commission (Jan. 15, 1999) (1999 WL 38281 (S.E.C.)) (hereinafter "Vanderkam & Sanders Letter").

[133] Id.

[134] Id.

[135] See Letter from George Poncy, President, American Brewing Company, to U.S. Securities and Exchange Commission (Jan. 25, 1999) (1999 WL 38280 (S.E.C.)) (hereinafter "American Brewing Company Letter").

[136] See Letter from Jay Lancy, President, Simplystocks.com, to U.S. Securities and Exchange Commission (Jan. 19, 1999) (1999 WL 51836 (S.E.C.)) (hereinafter "Simplystocks Letter").

[137] See American Brewing Company Letter, supra note 135.

[138] Id.

[139] Id. According to the American Brewing Company Letter, the most likely way it would pass the cost on to recipients of these free shares of stock would be to raise prices, and its restraint in not raising prices could easily be verified since any price increase would by law have to be posted.

[140] See Simplystocks Letter, supra note 136.

[141] Id.

[142] Id.

[143] See Letter from Michael Hyatte, Special Counsel, U.S. Securities and Exchange Commission, to American Brewing Company (Jan. 27, 1999) (1999 WL 38280 (S.E.C.)); see also Letter from Michael Hyatte, Special Counsel, U.S. Securities and Exchange Commission, to Simplystocks.com (Feb. 4, 1999) (1999 WL 51836 (S.E.C.)).

[144] See Letters from Andrew Jones and James Rutten to U.S. Securities and Exchange Commission (Apr. 21, 1999) (1999 WL 377873 (S.E.C.)) (hereinafter "Jones & Rutten Letters").

[145] Id.

[146] Id.

[147] Id.

[148] Letter from Andrew Jones and James Rutten to U.S. Securities and Exchange Commission (May 24, 1999) (1999 WL 377873 (S.E.C.)).

[149] See Letter from Michael Hyatte, Special Counsel, U.S. Securities and Exchange Commission, to Andrew Jones and James Rutten (June 8, 1999) (1999 WL 377873 (S.E.C.)) (denying issuance of no-action letter).

[150] See, e.g., Mark Veverka, Despite Yellow Flags, New Internet Portal Plans to Give Away Stock: MyOwnEmpire.com Thinks Its Offer Won't Irk SEC Regulators, S.F. Chron., Apr. 7, 1999, at D1.

[151] See In re Loofbourrow, Exchange Act and Securities Act Admin. Proc. Release No. 33,7700, File No. 3-9934, 1999 WL 514038 (July 21, 1999); In re Sotirakis, Exchange Act and Securities Act Admin. Proc. Release No. 33,7701, File No. 3-9935, 1999 WL 514040 (July 21, 1999); In re WebWorksMarketing.com, Inc., Exchange Act and Securities Act Admin. Proc. Release No. 33, 7703, File No. 3-9937, 1999 WL 514083 (July 21, 1999); In re Wowauction.com, Inc., Exchange Act and Securities Act Admin. Proc. Release No. 33,7702, File No. 3-9936, 1999 WL 514042 (July 21, 1999).

[152] See Loofbourrow, 1999 WL 514038, at *2; WebWorks, 1999 WL 514083, at *1; WowAuction, 1999 WL 514042, at *1.

[153] See Loofbourrow, 1999 WL 514038, at *2; WebWorks, 1999 WL 514083, at *1; WowAuction, 1999 WL 514042, at *1.

[154] WowAuction, 1999 WL 514042.

[155] See WebWorks, 1999 WL 514083.

[156] See Sotirakis, 1999 WL 514040.

[157] Id.

[158] Id.

[159] See Loofbourrow, 1999 WL 514038; see also Sotirakis, 1999 WL 514040.

[160] See WebWorks, 1999 WL 514083, at *2.

[161] Id.; see also Capital General, Release No. 34-32669, [1993 Transfer Binder] Fed. Sec. L.Rep. (CCH) ¶ 85,223, at 84,417 (July 23, 1993); SEC v. Harwyn Indus. Corp., 326 F. Supp. 943 (S.D.N.Y. 1971).

[162] WebWorks, 1999 WL 514083, at *3.

[163] Id.

[164] See Loofbourrow, 1999 WL 514038, at *2; Sotirakis, 1999 WL 514040, at *3; WebWorks, 1999 WL 514083, at *3.

[165] See WowAuction, 1999 WL 514042, at *2.

[166] See Loofbourrow, 1999 WL 514038, at *3.

[167] See WebWorks, 1999 WL 514083, at *3 (citing American Library Ass'n v. Pataki, 969 F. Supp. 160, 173 (S.D.N.Y. 1997)). Having established that each of the free share distribution programs constituted a "sale" under securities law, the respondents in both the WebWorks and Loofbourrow cases were also cited for having violated Section 17(a) of the 1933 Act and Section 10(b) of the Securities and Exchange Act of 1934 based upon the fraudulent conduct in which they engaged in furtherance of said "sale." WebWorks, 1999 WL 514083, at *4; Loofbourrow, 1999 WL 514038, at *4.

[168] See WebWorks, 1999 WL 514083; see also Regulation D, 17 C.F.R. §§ 230.501-508 (1999).

[169] See WebWorks, 1999 WL 514083. The SEC also noted that effective April 7, 1999, Rule 504 was amended to limit the circumstances under which general solicitations for offerings not exceeding an aggregate annual amount of $1 million may be made, specifically: (1) if the offering is "registered under state law requiring public filing and delivery of a disclosure document to investors before sale, or (2) [if it is] exempted under state law permitting general solicitation and advertising so long as sales are only made to accredited investors." Id. *2-3.

[170] See SEC v. Datronics Engineers, Inc., 490 F.2d 250 (4th Cir. 1973); SEC v. Harwyn Indus. Corp., 326 F. Supp. 943 (S.D.N.Y. 1971); Capital General, Release No. 34-32669, [1993 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 85,223, at 84,417 (July 23, 1993).

[171] WebWorks, 1999 WL 514083, at *3.

[172] FreeIPO.com, supra note 2 (emphasis added).

[173] See Datronics, 490 F.2d at 250; Harwyn, 326 F. Supp. at 943; Capital General, Release No. 34-32669, [1993 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 85,223, at 84,417.

[174] Id.

[175] Edward Wyatt, S.E.C. Settles Four Cases Offering 'Free Stock,' N.Y. Times, July 23, 1999, at D2.

[176] See supra Part II.

[177] Jones & Rutten Letters, supra note 144.

[178] Markey Asks SEC to Answer Questions Regarding 'Free Stock Offerings on Internet,' 31 Sec. Reg. & L. Rep (BNA) 423 (Apr. 2, 1999).

[179] Revision of Rule 504 of Regulation D, Securities Act Release No. 7644, [1999 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 86,114 at 81,769 (Feb. 25, 1999).

[180] Id. at 81,770.

[181] Id. at 81,771.

[182] Id.

[183] Id.

[184] Id.

[185] Id. at 81,774 (emphasis added). The other option for securing a 504 exemption under amended Rule 504 would require issuance of securities under a state law that permits general solicitations so long as sales are only made to "accredited investors," as defined in Regulation D. Id.

[186] Id.

[187] It is important to note that YouNetwork did in fact register to issue its free shares. See YouNetwork, supra note 11.

[188] See WebWorks, 1999 WL 514083, at *3.

[189] Id.

[190] Popular Link, supra note 17 (emphasis added).

[191] Lifestyle, supra note 23 (emphasis added).

[192] Id. at n.3. Also confusing is the notation in the footnote that Lifestyle is distributing these shares not merely for registering with the website, but for recruiting others to join the program. It is therefore unclear how a registrant actually receives these shares of stock, and what the registrant is receiving.

[193] Id.

[194] Tradehall, supra note 20 (emphasis added).

[195] See MyGo, supra note 26.

[196] Id.

[197] 449 U.S. 424 (1981).

[198] Id. at 425-27.

[199] Id. at 428.

[200] Id. at 429.

[201] Id. at 430.

[202] Id. at 431.

[203] Id. (emphasis added).

[204] See supra Part II for a detailed discussion of the "value" of this personal information.

[205] See, e.g., WebWorks, supra note 5 ("Assuming you received the full 63 shares, the total net asset value of your shares (on paper), will be approximately $2,419.20 in theory"); WowAuction, supra note 7 ("In related [I]nternet auction news, City Auction was acquired by Ticketmaster in late February for . . . approx. $54 million. . . Moreover, eNet recently bought Auctiongate for $5.8 million . . . And at the market close on March 8, 1999, eBay's total stock worth was over $20 billion!!").

[206] See, e.g., Rubin, 449 U.S. at 429-30.

[207] See Yoder v. Orthomolecular Nutrition Inst., Inc., 751 F.2d 555, 559, n.4. (2nd Cir. 1985) ("We perceive no reason why a contingency attached to a contractual right to acquire stock should remove that right from securities law coverage simply because it increases the risk that plaintiff will not obtain the shares.").

[208] 737 F.2d 582 (7th Cir. 1984).

[209] Id. at 583.

[210] Id. at 584.

[211] Id.

[212] Id. at 585.

[213] Id.

[214] Securities Act of 1933, § 2(a)(3) (1997) (emphasis added).

[215] Abrams, 737 F.2d at 587 (emphasis added).

[216] Id.

[217] Id. at 587-88.

[218] Id.

[219] Id.

[220] Id. at 587.

[221] See Rubin, 449 U.S. at 431; see also Yoder, 751 F.2d at 559, n.4.

[222] Restatement (Second) of Contracts § 3.

[223] See supra Part II, for a detailed discussion of the "value" of this personal information.

[224] E. Allan Farnsworth, Contracts 1.6 (2d ed. 1990).

[225] See Lifestyle, supra note 23.

[226] Securities Act of 1933, § 2(a)(3) (1997).

[227] See Abrams, 737 F.2d at 582.

[228] See Rubin, 449 U.S. at 424; Abrams, supra note 227, at 582; Sotirakis, 1999 WL 514040, at *2.

[229] See Sotirakis, 1999 WL 514040, at *2.

[230] Id.

[231] MyGo, supra note 26 (emphasis added).

[232] See Abrams, 737 F.2d at 589; Sotirakis, 1999 WL 514040.

[233] See Sotirakis, 1999 WL 514040.

[234] 751 F.2d at 559.

[235] Sotirakis, 1999 WL 514040, at *2.

[236] See ExitNorth, supra note 14, at 6.

[237] Yoder, 751 F.2d at 559, n.4.

[238] See Abrams, 737 F.2d at 587. Although Abrams dealt with a contract that would be executed in the future, a contract that locked in both the buyer and the seller, the court's holding is still applicable to share distribution contests. Even though only a certain number of contest entrants will receive the shares, each and every person enters the contest pursuant to the terms laid out on the website, and thus each and every entrant enters into a contract with the website providing personal information upon the understanding that they will be entered into a drawing, the winners of which will receive the shares of stock.

[239] For a discussion of other laws that may apply to contests for free share distributions, see Part IV.

[240] See MyOwnEmpire, supra note 29.

[241] Id. MyOwnEmpire believes its method of share distributions to be so unique that it has apparently filed for a patent on its consumer-owner business model.

[242] See Wyatt, supra note 175.

[243] On its website, MyOwnEmpire claims to be exempt from the federal registration requirements based upon its alleged qualification for a Rule 504, Regulation D exemption under federal law, and a state exemption under California Corporation Code Section 25113(b)(I). See MyOwnEmpire, supra note 29. As the goal of this article is to assess the application of the federal registration requirements to various share distribution programs, this article will not address whether, having qualified as sale of stock under the 1933 Act, the company may nonetheless skirt the registration requirements by claiming an exemption.

[244] See, e.g., Travelzoo, supra note 1; Popular Link, supra note 17.

[245] See supra Part II, for a more detailed discussion of the "value" of this personal information.

[246] See In re Amway Corp., 93 F.T.C. 618, 667 (1979).

[247] Id.

[248] Id. at 670.

[249] Id. at 670-72.

[250] See, e.g., N.Y. Gen. Bus. Law § 359-fff (McKinney 1996); Nev. Rev. Stat. § 598.100(3) (1999).

[251] BonusBoulevard, supra note 76, at 42.

[252] Nev. Rev. Stat. § 598.100(3) (1999).

[253] See supra Part I.

[254] Id.

[255] See Loofbourrow, 1999 WL 514038; Sotirakis, 1999 WL 514040; WebWorks, 1999 WL 514083; WowAuction, 1999 WL 514042.

[256] See Loofbourrow, 1999 WL 514038; Sotirakis, 1999 WL 514040; WebWorks, 1999 WL 514083; WowAuction, 1999 WL 514042.

[257] Cf. supra text accompanying notes 68-74 (discussing Toysmart's proposed sale of personal information).

[258] See supra text accompanying notes 162-166.

[259] BonusBoulevard, supra note 76, at 31.

[260] See YouNetwork, supra note 11, at 25.

[261] See U.S. West, 182 F.3d at 1230.

[262] Cf. supra text accompanying notes 68-74 (discussing Toysmart's proposed sale of personal information).

[263] See supra Part II.

[264] Nev. Rev. Stat. § 598.100(3) (1999).

[265] See BonusBoulevard, supra note 76, at 4.

[266] 720 Ill. Comp. Stat. Ann. 5/17-7(a) (West 1993).

[267] 720 Ill. Comp. Stat. Ann. 5/17-7(a) (West 1993).

[268] See supra Part II, for a more detailed discussion of the "value" of this personal information.

[269] 619 N.E.2d 203, 212 (Ill. App. Ct. 1993) (quoting State ex. rel. Webster v. Membership Marketing, Inc., 766 S.W.2d 654, 658 (Mo. Ct. App. 1989)).

[270] Id.

[271] See ExitNorth, supra note 14, at 6.

[272] See, e.g., BonusBoulevard, supra note 76, at 26.

[273] Id. at 15.

[274] N.Y. Const. art. 1, § 9 (amended 1985).

[275] See People v. Kim, 585 N.Y.S.2d 310, 313 (N.Y. Crim. Ct. 1992).

[276] N.Y. Penal Law § 225.00(10) (McKinney 2000).

[277] N.Y. Penal Law § 225.00(10) (McKinney 2000).

[278] N.Y. Penal Law § 225.00(6) (McKinney 2000).

[279] See U.S. West, 182 F.3d at 1224.

[280] Cf. supra text accompanying notes 68-74 (discussing Toysmart's proposed sale of personal information).

[281] See BonusBoulevard, supra note 76, at 31.

[282] N.Y. Penal Law § 225.00(10) (McKinney 2000).

[283] See, e.g., Office of the New York Attorney General Eliot Spitzer, Investor Protection and Securities Bureau, Internet Bureau, "From Wall Street to Web Street-A Report on the Problems and Promise of the Online Brokerage Industry" (Nov. 22, 1999) (discussing a three-tiered architecture).

[284] N.Y. Penal Law § 225.00(10) (McKinney 2000).

[285] Bonus Boulevard, supra note 76, at 42 (emphasis added).

[286] N.Y. Penal Law § 225.00(10) (McKinney 2000).

[287] See, e.g., WebWorks, supra note 5 ("Assuming you received the full 63 shares, the total net asset value of your shares (on paper), will be approximately $2,419.20 in theory."); WowAuction, supra note 7 ("In related [I]nternet auction news, City Auction was acquired by Ticketmaster in late February . . . for . . . approx. $54 million . . . cNet recently bought Auctiongate for $5.8 million . . . . And at the market close on March 8, 1999, eBay's total stock worth was over $20 billion!!.").

[288] N.Y. Penal Law § 225.00(6) (McKinney 2000).

[289] See People v. World Interactive Gaming Corp., No. 404428/98, 1999 WL 591995, at *1 (N.Y. Sup. Ct. July 22, 1999).

[290] Id. at 4.

[291] See Cal. Const. art IV, § 19 (amended March 8, 2000).

[292] Cal. Bus. & Prof. Code § 19801(a) (Deering 2000). In order to clarify the purpose of the Gambling Control Act as it relates to lotteries, § 19806 states that "[n]othing in this chapter [the Gambling Control Act] shall be construed in any way to permit or authorize any conduct made unlawful by Chapter 9 (commencing with Section 319) of . . . Title 9 of Part 1 of the Penal Code, or any local ordinance." Cal. Bus. & Prof. Code § 19806 (Deering 2000).

[293] Cal. Penal Code § 319 (Deering 1999).

[294] Cal. Penal Code § 320 (Deering 1999).

[295] See California Gasoline Retailers v. Regal Petroleum Corp., 330 P.2d 778, 782 (1958).

[296] See BonusBoulevard, supra note 76, at 42-43.

[297] See supra Part II, for a more detailed discussion of the "value" of this personal information.

[298] Gregory Zuckerman, SEC Clears Web Firms' Stock Giveaway, Wall St. J., Nov. 16, 1999, at C1.

[299] Id. at C22.

[300] Id. (noting that DoctorSurf has publicly stated that it is considering accepting advertising by medical and drug companies on its website).

[301] Id. at C1, C22.

[302] Id. at C22.

[303] Eichenwald and Kolata, Hidden Interest-A Special Report; When Physicians Double as Entrepreneurs, N.Y. Times, Nov. 30, 1999, at A1, C16.

[304] Id. at A1 (noting that in the early 1990s, Dr. Maurice Buchbinder served as a principal investigator in studies for the Rotablader, a tiny drill used to remove plaque from arteries, while holding a stake in the company that sold the device, a stake worth millions of dollars. A few years later in 1993, however, the Food and Drug Administration found significant deficiencies in Dr. Buchbinder's research, "including failures to conduct proper follow-up or to appropriately report problems experienced by patients. The University subsequently banned him from performing other experiments on patients." ).

[305] Id.

[306] Id.