Sweepstakes Law Basics

What is a sweepstakes?
A sweepstakes is a promotion in which a prize is awarded on the basis of chance rather than skill. If a prize is awarded on the basis of skill the promotion is considered a contest.

How is a sweepstakes different than a lottery?
With the exception of state run lotteries and authorized raffles, lotteries are illegal under state and federal laws. Generally, a lottery is a promotion in which all three of the following elements are present: 1) prize; 2) chance; and 3) consideration.

Can I require the purchase of a product to enter?
No. A legitimate sweepstakes (as opposed to a lottery) removes the consideration element from the promotion. There are many factors that come into play in avoiding the consideration element and it presents a trap for the unwary.

What is consideration?
Consideration is a legal term which generally means an undertaking in response to a promise. There are generally two types of consideration in the context of sweepstakes promotions: monetary and non-monetary. Monetary is typically the payment of money, such as the purchase of a product or a service or the direct payment of an entry fee. Non-monetary consideration is an entrant’s expenditure of considerable time or effort.

What are the official rules?
All sweepstakes must have official rules, which is the contract between the sponsor and the consumer. The rules CANNOT change once a sweepstakes has begun.

The official rules must typically contain the following information: 1) A no purchase is necessary; 2) start and end dates; 3) eligibility requirements (age, residency, also specify exclusions); 4) method to enter – be sure to also include a “no purchase” method of entry; 5) any limitations on the number of entries by a signal person or household; 6) odds of winning; 7) description and value of the prize(s); 8) how the winner(s) will be selected and notified; 9) restrictions on receiving the prize; and 10) and sponsor’s name and address. Additional disclosures are required depending on the type of promotion and the jurisdictions and channels in which it is offered. Internet promotions may trigger other additional requirements.

What are the registration requirements when offering a sweepstakes?
In Florida, New York and Rhode Island sponsors are required to register all sweepstakes where the total retail value of all the prizes is greater than $5,000 ($500 in Rhode Island for retail store promotions). The registration must be filed with the following:

What are the bonding requirements when offering a sweepstakes?
In Florida and New York a bond in an amount equal to the total value of the offered prizes must be submitted with the registration.

What disclosures are required?
The laws regarding sweepstakes depend on many factors, including the jurisdiction in which the promotion is offered and the marketing channel used. For example, sweepstakes offered through the mail must contain in more conspicuous type the following disclosures in three places (text, rules, and entry form): No purchase is necessary. A purchase will not increase your chances of winning. Sweepstakes offered through telemarketing have other mandatory oral disclosures under federal and state laws. In addition, state laws apply, which may require additional disclosures, and vary based on the amount of the prizes being offered.

What happens if I experience technical difficulties or a printing error?
A properly structured sweepstakes should provide a remedy for all potential contingencies.

What is required after the sweepstakes winner(s) are selected?
Records of the sweepstakes prize winner(s) should be retained for a period of no less than 4 years. Additionally, the sponsor must send a winners list Florida and New York to have their bond released. Other states require the posting of winner’s lists. In addition, in some instances the entry materials may need to be retained for a defined period of time.