First off, what is Discord? For the uninitiated, according to its website, “Discord is a voice, video and text communication service used by over a hundred million people to hang out and talk with their friends and communities.” It is further described as comprised of “servers that are organized into topic-based channels where you can collaborate, share, and just talk about your day without clogging up a group chat.” There are many ways to use and enjoy Discord, personally and socially, and also, professionally. In fact, businesses have been utilizing Discord as a promotional tool. For example, many companies are now offering “Discord Sweepstakes” to the public, as a new and exciting way to generate interest in one’s business, products and/or services. Yes, sweepstakes. But, as readers of our blog know, it is essential that sponsors of sweepstakes promotions ensure that their sweepstakes contest rules comply with applicable laws.
Did you Know that Some Companies Use Discord Sweepstakes to Give Away NFTs?
There are myriad online invitations for consumers to join Discord communities and, by doing so, to automatically enter a sweepstakes for a chance to win an exclusive NFT (Non-fungible token). On the other hand, some NFT collection minters are also offering sweepstakes entry to purchasers of their NFTs (the content rules for which, of course, must also provide a free alternative means of entry). For brief edification purposes, NFTs are unique and frequently one-of-a-kind digital files, such as images or short videos, that use blockchain technology to establish verified proof of ownership.
Sweepstakes promotions are certainly a creative and alluring way to market a business’s goods or services, to reach users not otherwise accessible, and to be involved in the NFT craze. But we can’t emphasize enough that these contests, whether on Discord or some other media channel, must adhere to state and federal regulations applicable to: (1) sweepstakes in general and, (2) the ownership and transfer of NFTs. Although not a Discord Sweepstakes, Wawa, Inc. recently created its popular Hoagiefest NFT Sweepstakes Game, which marketed its unique digital artwork collectables as part of a sweepstakes promotion. In addition to gaming regulations, Wawa, Inc., as sponsor of the contest, must also be sure that the rights associated with its NFT collection are in order.
What to Consider When Planning a Discord Sweepstakes
As with any promotional contest, sweepstakes rules should include, among other things, the promotion’s duration, entry eligibility, winner selection process, prize amounts, number of available prizes, and a free alternative means of entry (“AMOE”). Unless an AMOE is offered, these contests will violate applicable state lottery laws. Please note that if the contest prizes are NFTs, there are additional (and equally as important) issues to consider, such as ownership of NFT intellectual property. Regarding ownership, an NFT license agreement serves to protect the original creators’ intellectual property rights and financial interests in and to their NFTs even after consumers buy them. NFT creators, in their licensing agreements, may set out exactly which rights original owners and buyers hold in purchased NFTs. So be sure that if/when your Discord Sweepstakes marketing materials advertise the chance to win NFTs, that ownership of the tokens (and the underlying intellectual property) is clearly and legally established.
In this ever-changing Web3 regulatory landscape, companies would be well-advised to consult with an experienced gaming and technology attorney to ensure appropriate legal compliance. If you are interested in learning more about this topic or require assistance in connection with putting together an NFT game promotion, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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