The Missouri Court of Appeals ruled in 2015 that a lottery winner’s pledge of his lottery winnings to his bank under the Uniform Commercial Code is effective notwithstanding State Lottery Law that lottery winnings are unassignable without a court order. Gary Michael Clark v. Missouri Lottery Commission and Community Bank of El Dorado Springs, WD78060.

Mr. Clark won the “Lifetime Riches” prize in 2006 from the Missouri Lottery.  He won a payout of $50,000 per year for the rest of his life but with a minimum payout of thirty years.  He obtained a loan from his Bank and assigned his right to receive payments from the Missouri Lottery to the Bank as security.  The lottery prize payouts were thereafter paid into an account at the Bank and Mr. Clark had no authority to withdraw the funds.

After a few years, Mr. Clark then filed this action asserting that the assignment was void under the State Lottery Law (last amended in 1993) which specifically prohibits the assignment of lottery prizes.   Mo. Rev. Stat. §313.285.1.  He claimed that all payments had to be made to him and not to the Bank.

However, the Uniform Commercial Code amended in 2001 specifically provides that “winnings in a lottery or other games of chance operated or sponsored by a state …” are included in the definition of “accounts” and “accounts” are assignable under the UCC.  400.9 – 102(a)(2).  Further, 400.9-406(f) which was part of the 2001 amendment provides that any law, statute or regulation prohibiting assignment or the creation of a security interest in an account is ineffective.  Mr. Clark argued that the State Lottery Law was a more specific law and, therefore, should control over the general statute in Article 9.

The Court rejected this claim and held that the later enacted amendments to the UCC rendered the prohibition of assignments of lottery winnings ineffective.  Mr. Clark could not withdraw his assignment until the loans it secured were paid in full.