Gambling is generally illegal in California. The question is if you lend someone money to try their hand at blackjack or bet on their favorite sports team, will a judge enforce the debt?
Al is feeling lucky about the New York Nicks. He wants to bet $2,500 on the game tonight. He asks his friend Bob to lend him the money, which he says he “can’t lose.” Bob knows that gambling is illegal and he certainly doesn’t want to participate. But Al is his good friend, so he decides to lend Al the money. Bob asks Al to sign a written agreement in which Al agrees to pay back the loan at the end of the week. The contract makes no mention of gambling. Can Bob sue Al if Al doesn’t pay back the loan?
Pursuant to California Civil Code Section 1607, the consideration on any contract must be “lawful.” Civil Code Section 1667 defines what is “not lawful” as including that which is illegal, “contrary to the policy of express law, though not expressly prohibited,” or “otherwise contrary to good morals.”
Interpreting these statutes expansively, it could be argued that lending money to enable gambling is against good morals and contrary to the judicial policy in California against the enforcement of gambling debts. On the other hand, Bob was not actually a player in the sports betting. He did not participate, had no stake in the wins, and did not place the bets on Al’s behalf. To reinforce his chance of being able to recover if Al does not pay him back, Bob should include a term of interest in the contract. That way, interest is the consideration for the contract, not lending money for the purpose of gambling.