Are there ANY limitations for hedge funds?

[Xanthia Alysha]

I know hedge funds are more or less unregulated by the SEC. However, are there limitations to the types of investment decisions they can make with people's money?

For example, could a hedge fund purchase a certain number of lottery tickets every day with the investors money? How about bet on professional sports?...etc.

Obviously ethical and legal issues would exist if the hedge fund were wasting away money on useless investments, but what if they could actually prove a positive expected value. Would it be legal for them to engage in such activities?