Homefund: A Legal and Regulatory Risk Assessment
Executive Summary
This report provides a comprehensive legal and regulatory risk assessment of Homefund, a platform that facilitates the transfer of residential real estate through a sweepstakes-style model. Based on a thorough analysis of Homefund's public-facing website, its official rules, and the current regulatory landscape, this report concludes that Homefund operates with a moderate to high risk of regulatory enforcement action that could lead to its shutdown.
While Homefund has attempted to structure its operations as a legal sweepstakes by incorporating a "no purchase necessary" (NPN) entry method, its business model contains several critical vulnerabilities. The most significant of these is its for-profit nature combined with a reserve price requirement, which creates a strong argument that the platform is operating as an illegal lottery in many jurisdictions.
Recent enforcement actions by state attorneys general against similar online platforms indicate a low tolerance for such models, particularly when high-value real estate is involved.
1. Homefund's Business Model
Residential properties, typically "starter homes" valued between $250,000 and $325,000. Winners receive the property free and clear with no mortgage.
Users can obtain one free entry per property. They can also make voluntary financial "contributions" to receive additional entries.
A winner is chosen through a "provably fair" random draw conducted on the Solana blockchain for transparency and verification.
Each campaign has a "reserve price" equal to the home's value. If this price is not met through contributions, the campaign is canceled and all contributions are refunded.
Homefund explicitly states "no purchase necessary" and that contributions are "voluntary gifts, not purchases or investments." It claims that all entries, free or paid, have equal weight in the draw. This structure is a clear attempt to position the platform as a legal sweepstakes rather than an illegal lottery.
2. Primary Risk: Illegal Lottery Classification
Recent Enforcement Actions
A homeowner's attempt to raffle a $1.3 million home for $10 a ticket was shut down by the Arizona Department of Gaming, which classified it as an illegal gambling operation and a felony offense. The key factors were that it charged for entry and was a for-profit venture.
Attorneys general in these states have launched aggressive crackdowns on online sweepstakes casinos, issuing dozens of cease-and-desist letters. These actions demonstrate a clear regulatory trend of scrutinizing and shutting down online platforms perceived as disguised gambling operations.
Homefund's model is superficially similar to that of Omaze, a sweepstakes platform that successfully defended itself against claims of being an illegal lottery in Knuttel v. Omaze, Inc. (2022). However, there is a critical difference:
Omaze's campaigns are tied to donations to registered nonprofit organizations. This charitable component provides a layer of legal and public policy justification that Homefund, as a for-profit enterprise facilitating private real estate sales, lacks.
Regulators are far more likely to view Homefund's model as a purely commercial, for-profit venture that uses a sweepstakes mechanic to circumvent real estate and gambling laws.
How Others Beat the Regulators
While Homefund faces significant regulatory challenges, several platforms have successfully navigated similar legal terrain. Understanding their strategies reveals what works—and what Homefund lacks.
DraftKings successfully reframed daily fantasy sports as games of skill rather than chance. They argued that player selection requires research, statistical analysis, and strategic expertise—not mere luck.
Lobbied for state-by-state legislation explicitly carving out DFS from gambling laws. Obtained exemptions in 40+ states by emphasizing the skill element and maintaining "no purchase necessary" alternative entry methods.
In 2015, the New York Attorney General declared DFS illegal gambling. DraftKings settled for $12M and agreed to reforms, but continued operating. They worked proactively with state legislatures to pass DFS-specific laws.
Homefund has no skill element—it is pure chance. The blockchain draw is random, and no amount of research or strategy affects outcomes.
Kalshi became the first CFTC-regulated prediction market exchange in 2020. By obtaining federal approval as a Designated Contract Market (DCM), they positioned event contracts as financial derivatives—not gambling.
CFTC regulates Kalshi under the Commodity Exchange Act. Event contracts are treated as financial instruments. Kalshi argues federal regulation preempts state gambling laws, allowing operation in all 50 states.
States like Nevada and Massachusetts are suing, claiming Kalshi operates illegal gambling. The Trump administration and CFTC are defending federal preemption. Litigation ongoing as of February 2026.
Homefund has no federal regulatory approval. It operates without CFTC, SEC, or any federal oversight. This leaves it vulnerable to state-by-state enforcement.
Polymarket initially operated without registration and was shut down by the CFTC in 2022 with a $1.4M penalty. After operating offshore for three years, they obtained CFTC approval and relaunched in the US in December 2025.
The CFTC found Polymarket violated the Commodity Exchange Act by operating an unregistered exchange for event-based binary options. They were ordered to wind down all non-compliant markets and pay penalties.
Polymarket blocked US users, operated offshore, then invested in full regulatory compliance. They obtained DCM status, implemented KYC/AML, and now operate as a federally regulated exchange.
Operating first and seeking forgiveness later is expensive and risky. Polymarket paid $1.4M and spent three years offshore. Proactive compliance is cheaper than reactive enforcement.
Omaze ties all campaigns to donations to registered 501(c)(3) charities. This charitable component provides legal and public policy justification that distinguishes it from for-profit raffles.
In Knuttel v. Omaze, Inc. (2022), a federal court in California dismissed illegal lottery claims. The court found that Omaze's free entry method (AMOE) was readily available and provided equal opportunity to win.
Omaze worked proactively with the California Attorney General to improve disclosures. They prominently display "NO PURCHASE NECESSARY" messaging and allow free entries to receive maximum entry counts.
This is the critical difference. Homefund is a for-profit enterprise facilitating private real estate sales. It has no charitable component, no nonprofit connection, and no public policy justification beyond commercial gain.
McDonald's Monopoly operates as a promotional sweepstakes for business purposes with a robust "no purchase necessary" alternative method of entry and third-party administration.
Official rules clearly state: "No purchase is necessary to play or win a prize. A purchase will not improve chances of winning." Free mail-in entry option available. Game pieces can be obtained without purchase.
Security director Jerome Jacobson stole winning pieces and distributed them to accomplices for kickbacks. $24M in prizes fraudulently claimed. 50+ people convicted. Important: The fraud was internal, not structural. The game itself remained a legal sweepstakes.
Legitimate AMOE always available. Third-party administration (strengthened after scandal). Clear disclosures. No consideration required. Operated as promotional marketing, not primary revenue source.
Kalshi and Polymarket obtained CFTC designation, arguing federal preemption of state laws
DraftKings emphasized player skill and strategy, not random luck
Omaze tied campaigns to registered nonprofits, providing public policy justification
McDonald's and Omaze provided prominent free entry methods with equal opportunity
Successful platforms worked with regulators before enforcement, not after
No federal approval, no charity, for-profit only, reserve price dependency, no skill element
Texas-Focused Go-to-Market Strategy
A tactical launch plan designed to maximize operational runway while minimizing legal spend.
A Texas-first launch strategy provides Homefund with the longest possible operational runway (12-18 months) before regulatory enforcement, while minimizing legal compliance costs to $75K-$145K in Year 1 (vs $500K-$1M for multi-state launch).
Core Principle: Operate in perfect technical compliance with Texas law while maintaining lowest possible profile until business model is validated.
Why Texas?
Gambling is Class C misdemeanor. Defenses exist for private gambling where no operator profits and risks/chances equal for all.
Contest and Gift Giveaway Act governs sweepstakes. No registration required for most sweepstakes.
Prohibits private lotteries. Only state-run Texas Lottery is legal. Primary legal risk for Homefund.
Texas prohibits automatic entry based on purchase if prizes ≥ $50K. Since properties exceed this, AMOE is mandatory. Lower threshold than most states but already required under federal law.
12-18 Month Launch Strategy
Operate in perfect technical compliance for 12-18 months, validate unit economics, achieve 20K-50K users, award 10-15 properties, then execute strategic pivot to sustainable model (charitable partnership or skill-based competition) before enforcement action.
Top 10 States Similar to Texas
Comprehensive ranking of the best alternative states for Homefund expansion based on regulatory favorability, market size, and enforcement activity.
States are ranked using five weighted criteria to identify the most favorable regulatory environments for low-cost, low-risk expansion:
Top 10 Rankings
Georgia represents the closest regulatory match to Texas among all US states. No registration requirement, no gaming commission oversight, and zero enforcement actions against compliant sweepstakes 2020-2026. Atlanta's emergence as a major tech hub creates a population comfortable with innovative digital platforms. The state's 11M population provides sufficient scale for business validation without multi-state complexity.
Arizona combines favorable no-registration status with a large, growing market and libertarian-leaning political culture. Phoenix has emerged as a rapidly growing tech hub attracting California transplants. Minor concern: 2025 legislative discussion of sweepstakes regulation (no bills enacted), indicating potential future scrutiny.
Ohio offers the 7th-largest state population (11.8M) with no registration requirement. The state's 67.4% homeownership rate is the highest among top-ranked alternatives. Ohio's affordable real estate market (median $180K) allows for lower reserve prices compared to coastal or Sunbelt markets.
Lobbying Strategy to Change Laws
Comprehensive state and federal lobbying strategies to pass legislation explicitly legalizing sweepstakes-based real estate platforms, including tactics, timelines, and cost projections.
Pass state legislation explicitly legalizing sweepstakes-based real estate platforms with clear regulatory frameworks. State legislatures control sweepstakes and lottery law, making this the most effective approach.
Prevent federal legislation that would ban or restrict sweepstakes platforms; establish federal safe harbor provisions. Primarily defensive with 3-5x higher cost than state lobbying.
State-Level Lobbying Strategy
Why Texas First: Already operating in Texas (existing stakeholder presence), no registration requirement (favorable baseline), Republican-controlled legislature (business-friendly), 30M population provides proof of concept, and success in Texas creates template for other states.
Target States (Priority Order): Georgia, Arizona, Ohio, Indiana, Missouri, South Carolina, Alabama, Oklahoma, Kentucky, North Carolina. Run 3-5 state campaigns simultaneously to achieve critical mass.
Federal Lobbying Strategy
Why Federal Lobbying is Challenging: Federal government has limited jurisdiction over sweepstakes (defers to states), no clear federal champion, higher cost ($1M+/year) with lower success probability, and primarily defensive rather than enabling.
Between 2015-2020, DraftKings and FanDuel faced regulatory crackdown claiming daily fantasy sports were illegal gambling. Their response: aggressive state-by-state lobbying campaign to pass legislation explicitly legalizing daily fantasy sports.
4. Secondary Risks and Vulnerabilities
Sweepstakes and lottery laws vary significantly from state to state. As Homefund expands, it will have to navigate a complex patchwork of regulations. A model that is arguably legal in one state may be a felony in another. The "void where prohibited by law" disclaimer in its rules does not absolve the company of its responsibility to comply with the laws of each jurisdiction in which it operates.
The winner of a Homefund property is responsible for paying income tax on the full market value of the home. This can amount to a substantial, immediate financial burden ($50K-$100K+) that the winner may be unprepared for, potentially leading to consumer complaints and regulatory scrutiny.
Homefund disclaims any warranties regarding the condition of the properties. If a winner receives a home with significant undisclosed defects, it could lead to legal action and consumer protection investigations.
While the risk is currently low, there is a potential for Homefund's model to be scrutinized under securities laws if contributions were framed as an investment with an expectation of profit derived from the efforts of others (the Howey test). While the current model likely does not meet this threshold, any future changes that introduce investment-like features could trigger SEC oversight.
Can Homefund Claim "Game of Skill"?
Homefund has implemented a gamified app with quests, badges, and XP progression. Could this support a "game of skill" argument similar to DraftKings?
Legal Conclusion
Homefund cannot credibly claim to operate a "game of skill" under any recognized legal test. The gamification system is an engagement tool that does not affect prize distribution, which remains determined by pure random chance.
While Homefund's app includes 79 quests, 107 badges, XP progression, and daily challenges, these mechanics fail all three major legal tests for skill-based games because they have zero impact on who wins the property.
Outcome must be determined more by skill than by chance
Winner selected by random blockchain draw. Quest completion has zero impact on odds.
Skill must be a material element in determining outcome
User actions only track engagement. Prize distribution completely independent of skill.
If any element of chance affects outcome, it's gambling
100% random draw. No way for skilled users to improve odds.
Players analyze statistics, injury reports, matchups
Lineup construction, salary cap management, position selection
Experienced players consistently outperform novices
Better decisions = higher fantasy scores = better winning odds
Quest completion (browsing, favoriting, sharing)
XP and badges are decorative, not determinative
All entries have equal odds regardless of gamification performance
Random draw treats all entries equally—no causal link to skill
"Homefund added badges and quests to make an illegal lottery look like a game. But the winner is still chosen by random draw. The gamification is window dressing. This is a lottery with a loyalty program, not a skill-based competition. We look at how the prize is awarded, not how users are engaged."
While the skill argument fails, Homefund has five alternative strategies to reduce regulatory risk:
Seek CFTC designation as regulated exchange, argue federal preemption
Partner with 501(c)(3) nonprofits, frame contributions as donations
Obtain lottery/raffle licenses in each jurisdiction
Guarantee draws regardless of reserve, eliminate paid entry dependency
Complete redesign: real estate knowledge contests, prediction accuracy
Recommended: Charitable Partnership
The Omaze model offers proven legal precedent, minimal business disruption, cost-effectiveness, and can be implemented in 6–12 months. Partnering with housing nonprofits provides public policy justification while maintaining current user experience.
Redesigning for Skill-Based Outcomes
How can Homefund transform its gamification into a genuine skill-based competition like DraftKings?
To create a credible skill-based competition, Homefund must fundamentally restructure how winners are determined. The current random blockchain draw must be replaced with performance-based winner selection where user expertise materially affects outcomes.
Users compete by predicting property values, market trends, and real estate outcomes. Winners determined by prediction accuracy, not random chance.
Property valuation challenges, market trend forecasting, comparative analysis scored against real market data from Zillow/Redfin/MLS
Research, analysis, strategy, expertise - experienced real estate professionals have measurable advantage
Leaderboard system based on prediction accuracy. Top performers over defined period win property prizes.
Timeline: 12-18 months | Cost: $2M-$4M | Ongoing: $500K-$1M/year
Users compete by designing renovation plans, marketing strategies, and property optimization proposals. Winners selected by expert judges based on quality and feasibility.
Renovation design challenges, marketing strategy competitions, investment analysis submissions
Design expertise, market knowledge, financial analysis, creativity
Expert judging panel (real estate agents, investors, contractors, designers) with scoring rubrics
Timeline: 9-12 months | Cost: $1M-$2M | Ongoing: $300K-$600K/year
Users compete in timed quizzes, challenges, and simulations testing real estate knowledge. Winners determined by accuracy and speed, similar to trivia competitions.
Timed quizzes, market simulation challenges, case study analysis
Knowledge, speed, strategy, adaptability
Tournament brackets, leaderboard rankings, objective automated scoring
Timeline: 6-9 months | Cost: $800K-$1.5M | Ongoing: $200K-$400K/year
Combine all three models in phases: Start with knowledge tournaments (quick to market, low cost), add prediction challenges (core skill differentiation), then integrate strategy competitions (premium tier).
Legal Strength: Multiple skill vectors demonstrate skill predominance. Statistical validation tracks correlation between expertise and winning outcomes. Expert testimony from real estate professionals supports skill classification.
Top 10% must win 40-60% of prizes (vs. 10% if random). Track repeat winners and skill improvement over time.
Automated scoring, transparent rubrics, public leaderboards. Avoid subjective judging without criteria.
Free entry method provides equal opportunity. Paid entries offer additional attempts, not better odds per attempt.
Tiered difficulty levels, educational resources, gradual skill progression. Maintain accessibility while requiring genuine skill.
Does Legal Sweepstakes Protect From Regulators?
Analyzing whether AMOE compliance actually shields Homefund from enforcement actions.
Critical Finding
Operating as a legal sweepstakes does NOT fully protect Homefund from regulators. Regulators look at how the business actually operates (substance), not just how it's labeled (form). Even with "no purchase necessary" (AMOE), Homefund has critical vulnerabilities that expose it to enforcement actions.
The business model requires paid contributions to meet the reserve price before awarding properties. This creates the argument that the sweepstakes is a facade for a paid lottery, free entries are a "token compliance measure," and the entire enterprise depends on consideration (payment).
Regulatory View: "If the property is never awarded unless enough people pay, then payment is effectively required despite the AMOE loophole."
Unlike Omaze (partners with charities) or McDonald's Monopoly (promotional tool), Homefund is a for-profit real estate transaction platform. Regulators are more aggressive toward for-profit sweepstakes that generate revenue from entries, don't benefit charitable causes, and involve high-value prizes.
State Attorneys General have been actively shutting down platforms claiming to be "legal sweepstakes":
Pattern: Regulators increasingly skeptical of sweepstakes structures used to circumvent lottery laws.
You claim AMOE eliminates consideration, but regulators may argue the reserve price requirement makes payment effectively mandatory. If regulators conclude consideration exists → Illegal lottery, regardless of AMOE.
For-profit + reserve price + real estate = regulatory red flags
Likely in at least one state if you scale nationally
Possible in strict states (AL, UT) or if you ignore C&D
Less likely unless massive scale or consumer complaints
Partner with 501(c)(3) housing nonprofits, frame contributions as donations
Guarantee property draws regardless of reserve, absorb shortfall risk yourself
Replace random draw with performance-based winner selection, eliminate lottery classification
Operating as a legal sweepstakes is necessary but not sufficient. It's like wearing a seatbelt in a car with faulty brakes—it helps, but doesn't eliminate the core danger.
The sweepstakes structure with AMOE is a starting point for compliance, not a shield against enforcement. Given the recent regulatory crackdown and Homefund's for-profit + reserve price model, we assess a 60-70% probability of enforcement action within 2-3 years if you scale nationally—even with perfect sweepstakes compliance.
Interactive Risk Calculator
Adjust business model variables to see real-time impact on regulatory enforcement probability and timeline.
Percentage of property value that must be reached before awarding. 0% = no reserve price (lowest risk).
Percentage of entries via free alternative method. Higher ratio = stronger sweepstakes defense.
Percentage of revenue going to 501(c)(3) nonprofits. 50%+ significantly reduces risk.
Number of states where platform operates. More states = higher regulatory exposure.
First AG Inquiry
Cease & Desist
Litigation Risk
Critical Risk - Immediate Action Required
Consider: (1) Add 50%+ charitable component, (2) Eliminate reserve price, or (3) Limit to 1-3 states only.
This calculator models enforcement probability based on four key variables that regulators consider when evaluating sweepstakes platforms:
- • Reserve Price Threshold: Higher thresholds create stronger "payment required" arguments
- • AMOE Entry Ratio: Higher free-entry percentages strengthen sweepstakes defense
- • Charitable Component: Nonprofit partnerships reduce profit-motive scrutiny
- • State Operations: More jurisdictions = higher regulatory exposure
Note: This calculator provides estimates based on historical enforcement patterns and legal precedent. Actual regulatory outcomes depend on many additional factors including state-specific laws, enforcement priorities, and platform-specific circumstances.
9. Conclusion and Recommendation
Homefund is operating a high-risk business model in a volatile regulatory environment. Its attempt to use a sweepstakes structure to facilitate for-profit real estate transactions is clever, but it rests on a tenuous legal foundation that is likely to be challenged by regulators.
The company's central vulnerability is the argument that its "no purchase necessary" mechanism is a superficial compliance layer on what is, in substance, a for-profit lottery. The reserve price requirement makes the entire enterprise dependent on paid contributions, a fact that regulators are unlikely to ignore.
The recent wave of enforcement actions against similar online platforms, coupled with the felony-level seriousness with which some states treat illegal gambling, suggests that Homefund is exposed to significant legal peril.
It is the conclusion of this assessment that Homefund faces a moderate to high probability (60-70%) of regulatory enforcement action within 2-3 years if it scales, which could include cease-and-desist orders, fines, and, in the most severe scenarios, criminal prosecution.
Therefore, it is recommended that any party associated with Homefund proceed with extreme caution. The platform's long-term viability is questionable without a fundamental restructuring of its business model to align more closely with established legal precedents for sweepstakes and raffles, such as incorporating a genuine charitable component.
References
- [1] Homefund. (2025). Official Campaign Rules. gethomefund.com/official-rules
- [2] Butler, J. (2016). Problems with Offering Real Estate as a Contest or Sweepstakes Prize.
- [3] Raven5 Ltd. (2024). Can You Raffle off Real Estate? Understanding the Legalities.
- [4] Pretzel, J. (2025). Raffle Off Your Home? It Might Be a Felony. Realtor.com.
- [5] James, L. (2025). Attorney General James Stops Illegal Online Sweepstakes Casinos. NY AG.
- [6] Tennessee AG. (2025). Tennessee AG Cracks Down on Illegal Online Sweepstakes Casinos.
- [7] iGaming Today. (2026). Illinois regulator fires off cease-and-desist wave.
- [8] Ifrah Law. (2022). Federal Court Dismisses Illegal Lottery Claims Against Omaze.
- [9] U.S. SEC. (2024). Regulation Crowdfunding.