Running a sweepstakes is a great way to engage your audience and promote your business, but it comes with a range of legal requirements that you must follow. Failing to comply with these regulations can lead to penalties, lawsuits, and damage to your brand’s reputation. To ensure your sweepstakes are legally sound, it’s important to understand the relevant rules and consult with a sweepstakes attorney. In this blog, we’ll cover the key legal requirements for running a sweepstakes and provide examples to help guide you through the process.
One of the foundational rules for sweepstakes in the United States is that participants cannot be required to make a purchase to enter. This rule exists to differentiate sweepstakes from lotteries, which are heavily regulated. Lotteries generally involve three elements: prize, chance, and consideration (like a purchase). To keep your sweepstakes legal, you must eliminate the “consideration” by offering an alternative method of entry, such as mailing in a postcard or filling out an online form for free.
A company running a sweepstakes that offers a luxury vacation as a prize might allow participants to enter by either purchasing a product or submitting a free entry form online. This ensures they comply with the “no purchase necessary” rule.
Every sweepstakes must have a set of official rules that outline the terms and conditions of the promotion. These rules should include:
Your official rules need to be easily accessible and clearly stated so participants know exactly what to expect. A sweepstakes lawyer can help you draft these rules to ensure they meet all legal standards and protect your business from potential disputes.
A sweepstakes offering a car as a prize includes detailed rules stating that participants must be at least 18 years old, reside in the U.S., and enter before a specific deadline. The rules also describe how the winner will be chosen and the approximate retail value of the car.
Some states, such as New York, Florida, and Rhode Island, have additional regulations requiring certain sweepstakes to be registered and bonded if the total prize value exceeds a specific threshold. This means you may need to file your sweepstakes with the state and pay a bond to cover the cost of the prize. The purpose of these rules is to protect consumers by ensuring that sponsors are financially capable of awarding the prize.
A company offering a cash prize of $10,000 in its sweepstakes may need to register the promotion with the state of Florida and post a bond to guarantee the payout, as Florida law requires bonding for prizes valued over $5,000.
To ensure transparency, the official rules of your sweepstakes should include a clear disclosure of the odds of winning and the approximate retail value (ARV) of each prize. The odds may vary depending on the number of entries received, but they must still be stated upfront. Additionally, the ARV of each prize must be disclosed, even if it’s an experiential prize like a vacation or concert tickets.
In a sweepstakes where participants can win a weekend getaway, the rules might state: “Odds of winning depend on the number of entries received. Approximate retail value of the prize is $3,000.”
Running a sweepstakes involves more than just offering a prize and promoting it on social media. You need to follow a specific set of legal requirements to ensure your sweepstakes is compliant and avoid potential legal issues. Consulting with a sweepstakes attorney is essential to navigating these rules and protecting your business. From drafting official rules to handling state registration, a knowledgeable attorney can help you run a successful sweepstakes without risking legal trouble. Contact us today for a free consultation.
For more legal tips, give us a follow on Instagram, TikTok, Linkedin, or check out our YouTube Channel.
Subscribe to The Social Media Lawcast on Spotify Podcasts.
.
.svg/revision/latest?cb=20171117144331)
