Intro
Promotional campaigns, e.g., sweepstakes and contests, are a great way to engage customers/users, find new customers/users, and collect useful marketing data. But sponsoring such promotional campaigns comes with legal regulations and restrictions that can be confusing. Please note that the following is only a brief overview of some of the legal issues surrounding promotional campaigns. You must obtain legal guidance from an experienced attorney before conducting a promotional campaign.
Sweepstakes vs. Contests vs. Lotteries
First, understand the differences between sweepstakes and contests (which are legal promotional campaigns), and private lotteries (which are illegal under state law).
• A Sweepstakes is a campaign in which entrants can win a prize based on chance. No purchase, payment, or other consideration is permitted, and the winner is picked at random. The element of consideration must not exist in a Sweepstakes. Caution: consideration is anything of value the contestant must give up to participate, monetary or non-monetary, and can exist if the contestant must expend substantial time or effort that benefits the sponsor. For example, some states have determined that providing contact information is consideration if the information is to be used for marketing purposes.
• A Contest is a campaign in which effort, skill, or merit, is required to enter to win a prize. For example, you may require people to upload a photo or video in order to enter. The winner is determined by voting or other judging criteria. The element of chance must not exist in a contest.
• A Lottery requires purchase, payment, or other consideration (the contestant has to buy something, such as a ticket), chance, and a prize. Note: Private lotteries are illegal under state law. Moreover, under federal law, it is illegal for U.S. citizens to even participate in a foreign lottery. You may not use ShortStack to conduct a lottery. Do not run a lottery.
Before you host your next campaign, familiarize yourself with best practices regarding writing regulations, and then download and complete the document (included below) to post rules and requirements specific to your campaign. Go through the document and wherever you see [bracketed text in orange] replace the bracketed text with details about your company, prize, and rules.
Note: If you are hosting your promotion on Facebook, you must also adhere to Facebook’s guidelines.
Best Practices
In the United States, Internet sweepstakes and contests focus on federal laws against online gambling. Here’s what you need to know:
Official Rules should include:
- “No Purchase Necessary”
- “Purchase does not enhance chance of winning”
- “Void where prohibited”
- Details regarding non-monetary consideration
- The identity of the host/promoter
- Entry procedures and beginning/ending dates, including time and time zone
- Eligibility requirements
- An explanation of all methods of entry
- A clear description of the prize(s); certain states have stricter regulations (see examples at the end of this document)
- Date winner(s) will be chosen and notified
- Judging criteria must be clear and sponsor should be able to show how the winner was determined based on objective criteria
- Method of selecting a winner (to avoid any appearance of impropriety, it is recommended that sponsors avoid conducting their own drawings or determining the winners of their own contests)
- Publicity rights regarding use of winner’s information (sponsor should obtain written consent from Entrant to ensure compliance with state laws)
- Publicity rights regarding use of Participant’s information (sponsor should obtain written consent from Entrant to ensure compliance with state laws)
- Liability limitations
- Odds of winning
- Physical address, not a PO Box
- Contest/Sweepstakes sponsors must be careful about advertising prizes by using the brand name of a prize without the consent from the trademark owner in the title. For example, if you are giving away an Apple iPod, the contest name cannot say “Apple” or “iPod” unless Apple was a cosponsor of the promotion or gave consent in the contest title. However, they can list the item in the official rules as part of the prize list.
- If the prize winner is subject to U.S. taxes, the host is required to send the winner a 1099 in January of the following year.
- It is recommended that records for the promotional campaign should be maintained for 2 years.
State Exceptions
Many states in the U.S. individually regulate promotional campaigns, especially when prizes include alcohol, tobacco, or firearms. It is important to know that promotional campaigns are governed by the laws and regulations of the state in which the contestant lives. As you write your contest rules, take note that individual states have individual considerations. For instance, below you will find a list of some state-by-state examples.
IMPORTANT NOTE: This list of state examples is neither complete nor updated. It is recommended you obtain legal guidance from an experienced attorney before conducting a promotional campaign.
• Colorado
— Prohibits purchase requirements even if the contest winners are selected based on skill.
• Florida
— Prize worth $5,000 or more must be bonded and registered 7 days before sweepstakes begins. Must be able to provide a list of winners to anyone who requests it.
• Maryland
— Prohibits purchase requirements even if the contest winners are selected based on skill.
• Nebraska
— Prohibits purchase requirements even if the contest winners are selected based on skill.
• New York
— Prize worth $5,000 or more must be bonded and registered 30 days before sweepstakes begins. Must be able to provide a list of winners to anyone who requests it.
• North Dakota
— Prohibits purchase requirements even if the contest winners are selected based on skill.
• Rhode Island
— Retail outlets offering a sweepstakes with prizes valuing more than $500 must register promotion with the state.
• Tennessee
— Prohibits sweepstakes agencies and sponsors from requiring sweepstakes prize winners to submit to “in perpetuity” publicity releases.
• Texas
— Special rules apply to sweepstakes with prizes more than $50,000 such as not automatically entering an individual in a sweepstakes because the individual has made a purchase
• Vermont
— May not require people who request a list of sweepstakes winners to pay for postage for the response.
— Prohibits purchase requirements even if the contest winners are selected based on skill.
• Virginia
— Cannot require a “player” to visit a location to enter due to this being a form of consideration that would convert an otherwise legal sweepstakes into a lottery.
• Washington
— Prohibits “unfair or deceptive acts or practices in the conduct of any trade or commerce.”
— Must provide disclaimers and material terms and conditions in sweepstakes offer.
Customizable Official Rules
__ By checking here and populating the Customizable Official Rules, on behalf of myself and on behalf of any entity for which I am acting (together referred to as “Customer”), Customer accepts all risks and acknowledges that promotional campaigns come with complicated and ever-changing legal regulations and restrictions, Customer understands that it should obtain legal guidance from an experienced attorney before conducting a promotional campaign and populating the Customizable Official Rules, and Customer hereby agrees to hold harmless and indemnify ShortStack and its contributors for any loss, damage, or legal liability associated with Customer’s use of the Customizable Official Rules.
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Below is an example of rules and guidelines you could use for a social media sweepstakes. You would replace the [orange bracketed text] with information specific to your company and your sweepstakes.
THESE RULES SHOULD BE REVIEWED BY A LAWYER WHO SPECIALIZES IN SWEEPSTAKES OR CONTESTS TO ENSURE YOU HAVE DONE EVERYTHING PROPERLY AND THAT YOU ARE PROTECTED WITH THE RULES YOU'VE CREATED. THESE ARE IN NO WAY TO BE USED AS FINAL RULES, JUST A STARTING A POINT.
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NO PURCHASE IS NECESSARY TO ENTER OR WIN. A PURCHASE DOES NOT INCREASE THE CHANCES OF WINNING.
1. Eligibility: This Campaign is open only to those who sign up at the [Campaign URL] and who are [years of age or older] as of the date of entry.The Campaign is only open to legal residents of [list eligible countries and/or states], and is void where prohibited by law. Employees of [your company name], its affiliates, subsidiaries, advertising and promotion agencies, and suppliers, (collectively the “Employees”), and immediate family members and/or those living in the same household of Employees are not eligible to participate in the Campaign. The Campaign is subject to all applicable federal, state, and local laws and regulations. Void where prohibited.
2. Agreement to Rules: By participating, the Contestant (“You”) agree to be fully unconditionally bound by these Rules, and You represent and warrant that You meet the eligibility requirements. In addition, You agree to accept the decisions of [your company name] as final and binding as it relates to the content of this Campaign.
3. Campaign Period: Entries will be accepted online starting on [start date, time, and time zone] and ending [end date, time, and time zone]. All online entries must be received by [end date, time, and time zone].
4. How to Enter: The Campaign must be entered by submitting an entry using the online form provided at [Campaign URL]. The entry must fulfill all Campaign requirements, as specified, to be eligible to win a prize. Entries that are incomplete or do not adhere to the rules or specifications may be disqualified at the sole discretion of [your company name]. Optional verbiage to include: You may enter only once. You must provide the information requested. You may not enter more times than indicated by using multiple email addresses, identities, or devices in an attempt to circumvent the rules. If You use fraudulent methods or otherwise attempt to circumvent the rules, your submission may be removed from eligibility at the sole discretion of [your company name].
5. Prizes: The Winner(s) of the Campaign (the “Winner”) will receive [list prizes and approximate retail value]. Actual/appraised value may differ at time of prize award. The specifics of the prize shall be solely determined by [your company name]. No cash or other prize substitution shall be permitted except at [your company name’s] discretion. The prize is nontransferable. Any and all prize-related expenses, including without limitation any and all federal, state, and/or local taxes, shall be the sole responsibility of Winner. No substitution of prize or transfer/assignment of prize to others or request for the cash equivalent by Winner is permitted. Acceptance of prize constitutes permission for [your company name] to use Winner’s name, likeness, and entry for purposes of advertising and trade without further compensation, unless prohibited by law.
6. Odds: The odds of winning depend on the number of eligible entries received.
7. Winner Selection and Notification: Winner will be selected by [a random drawing or by community vote] under the supervision of [your company name]. Winner will be notified by [enter means of notification (e.g., email, telephone, etc.)] within five (5) days following selection of Winner. [Your company name] shall have no liability for Winner’s failure to receive notices due to spam, junk e-mail or other security settings or for Winner’s provision of incorrect or otherwise non-functioning contact information. If Winner cannot be contacted, is ineligible, fails to claim the prize within [xx days] from the time award notification was sent, or fails to timely return a completed and executed declaration and release as required, the prize may be forfeited and an alternate Winner selected. Receipt by Winner of the prize offered in this Campaign is conditioned upon compliance with any and all federal, state, and local laws and regulations. ANY VIOLATION OF THESE OFFICIAL RULES BY WINNER (AT [your company name]‘S SOLE DISCRETION) WILL RESULT IN WINNER’S DISQUALIFICATION AS WINNER OF THE CAMPAIGN, AND ALL PRIVILEGES AS WINNER WILL BE IMMEDIATELY TERMINATED.
8. Rights Granted by You: By entering this content (e.g., photo, video, text, etc.), You understand and agree that [your company name], anyone acting on behalf of [your company name], and [your company name]’s licensees, successors, and assigns, shall have the right, where permitted by law, to print, publish, broadcast, distribute, and use in any media now known or hereafter developed, in perpetuity and throughout the World, without limitation, your entry, name, portrait, picture, voice, likeness, image, statements about the Campaign, and biographical information for news, publicity, information, trade, advertising, public relations, and promotional purposes. without any further compensation, notice, review, or consent. Optional verbiage for sweepstakes: By entering this content, You represent and warrant that your entry is an original work of authorship, and does not violate any third party’s proprietary or intellectual property rights. If your entry infringes upon the intellectual property right of another, You will be disqualified at the sole discretion of [your company name]. If the content of your entry is claimed to constitute infringement of any proprietary or intellectual proprietary rights of any third party, You shall, at your sole expense, defend or settle against such claims. You shall indemnify, defend, and hold harmless [your company name] from and against any suit, proceeding, claims, liability, loss, damage, costs or expense, which [your company name] may incur, suffer, or be required to pay arising out of such infringement or suspected infringement of any third party’s right.
9. Terms & Conditions: [your company name] reserves the right, in its sole discretion, to cancel, terminate, modify or suspend the Campaign should virus, bug, non-authorized human intervention, fraud, or other cause beyond [your company name]’s control corrupt or affect the administration, security, fairness, or proper conduct of the Campaign. In such case, [your company name] may select the Winner from all eligible entries received prior to and/or after (if appropriate) the action taken by [your company name]. [Your company name] reserves the right, in its sole discretion, to disqualify any individual who tampers or attempts to tamper with the entry process or the operation of the Campaign or website or violates these Terms & Conditions. [Your company name] has the right, in its sole discretion, to maintain the integrity of the Campaign, to void votes for any reason, including, but not limited to: multiple entries from the same user from different IP addresses; multiple entries from the same computer in excess of that allowed by Campaign rules; or the use of bots, macros, scripts, or other technical means for entering. Any attempt by an entrant to deliberately damage any website or undermine the legitimate operation of the Campaign may be a violation of criminal and civil laws. Should such attempt be made, [your company name] reserves the right to seek damages to the fullest extent permitted by law.
10. Limitation of Liability: By entering, You agree to release and hold harmless [your company name] and its subsidiaries, affiliates, advertising and promotion agencies, partners, representatives, agents, successors, assigns, employees, officers, and directors from any liability, illness, injury, death, loss, litigation, claim, or damage that may occur, directly or indirectly, whether caused by negligence or not, from: (i) such entrant’s participation in the Campaign and/or his/her acceptance, possession, use, or misuse of any prize or any portion thereof; (ii) technical failures of any kind, including but not limited to the malfunction of any computer, cable, network, hardware, or software, or other mechanical equipment; (iii) the unavailability or inaccessibility of any transmissions, telephone, or Internet service; (iv) unauthorized human intervention in any part of the entry process or the Promotion; (v) electronic or human error in the administration of the Promotion or the processing of entries.
11. Disputes: THIS Campaign IS GOVERNED BY THE LAWS OF [your country] AND [your state/province], WITHOUT RESPECT TO CONFLICT OF LAW DOCTRINES. As a condition of participating in this Campaign, participant agrees that any and all disputes that cannot be resolved between the parties, and causes of action arising out of or connected with this Campaign, shall be resolved individually, without resort to any form of class action, exclusively before a court located in [your state/province] having jurisdiction. Further, in any such dispute, under no circumstances shall participant be permitted to obtain awards for, and hereby waives all rights to, punitive, incidental, or consequential damages, including reasonable attorney’s fees, other than participant’s actual out-of-pocket expenses (i.e. costs associated with entering this Campaign). Participant further waives all rights to have damages multiplied or increased.
12. Privacy Policy: Information submitted with an entry is subject to the Privacy Policy stated on the [your company name] website. To read the Privacy Policy, [privacy policy URL] click here. Note: a privacy policy is optional, but may be required when running a promotion on the web when using third party platforms or when using features from social channels. Including this information makes it clear to your users how you are going to use their information.
13. Winners List: To obtain a copy of the Winner’s name or a copy of these Official Rules, mail your request along with a stamped, self-addressed envelope to: [your company name] [address] [city] [state/province] [postal code] [country]. Requests must be received no later than [date, time, timezone].
14. Sponsor: The Sponsor of the Campaign is [your company name] [address] [city] [state/province] [postal code] [country].
15. Facebook: If you use Facebook to communicate or administer a contest or sweepstakes, include the following: The Campaign hosted by [your company name] is in no way sponsored, endorsed, administered by, or associated with Facebook.
16. ___ By checking here, You, the Contestant, have affirmatively reviewed, accepted, and agreed to all of the Official Rules.