Prize-Linked Savings Laws Spread Across States

With Americans' saving habits in the news as the federal government considers caps on retirement contributions, financial institutions should be aware that many states are passing laws making it easier to incentivize saving.

To date, 26 states have enacted legislation that liberalizes their approaches to games of chance in support of good consumer saving practices. Prize-linked savings (PLS) accounts allow consumers that invest in savings accounts or certificates of deposit to be entered into drawings that can augment their original deposits, with the prizes funded by the interest generated. By passing laws that permit PLS accounts, states are allowing financial institutions to run lotteries in ways not traditionally permitted in order to persuade more Americans to save for a rainy day.