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).
Sweepstakes
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.
Contest
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.
Lottery
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.
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.
Contest Rules Generator
Answer a few questions and get a solid starting-point rules document in under 5 minutes. Built for simple promotions with prizes of $500 or less. This is a template, not legal advice — always have a licensed attorney review your rules before you publish.