The Ultimate Contest Law and Sweepstakes Guide

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Are you interested in running a contest or sweepstakes campaign as a means to engage with new and existing customers? Crafting a successful contest or sweepstakes promotion can increase interest in your brand and grow your customer base. However, if you are not familiar with sweepstakes and contest law, you might be gambling with your future. 

As a consumer, you may be familiar with the TL;DR rules of any contest that you have entered: who can enter, how to enter, and what the featured prize is. However, as a business, much more needs to be considered from a state and federal law perspective. There are specific regulations that apply separately to contests, sweepstakes, social media promotions, and even mobile app promotions. An experienced sweepstakes attorney can help your team avoid a firestorm of problems that come with proceeding with any of the types of promotions set forth above.

Here are 9 things that your marketing team needs to know.

Contests, Sweepstakes, Lotteries: What’s the difference?

Though these words may seem interchangeable, there are legal differences between all three. Before deciding on what kind of promotion to create, familiarize yourself with these differences.

  1. First, a business or individual cannot conduct a lottery. Only a governmental entity can conduct a lottery. By law, a lottery has three elements: prize, chance, and consideration. If the element of “consideration” is removed, the lottery becomes a legal sweepstakes, and if “chance” is removed, the lottery becomes a legal contest. A sweepstakes winner is chosen at random, while a contest winner is chosen based on skill.
  2. Second, decide on prizes and prepare your privacy policy for the contest. Participants often provide their names, email addresses, phone numbers, and/or other information as part of the registration process. Your privacy policy will address how your business collects, uses, and shares this information. The promotion should display this to participants to remain compliant with applicable privacy and marketing laws.

Building Blocks for Sweepstakes and Contests

  1. Next, start to think about how one can enter your contest or sweepstakes. Remember that the Child Online Privacy Protection Act (“COPPA”) prevents businesses from collecting personal information from children under 13 years of age. Most sweepstakes require participants to be at least 18 years old. This information needs to be visible on the promotion registration page.
  2. States have specific guidelines that vary for contests and sweepstakes. Take Florida, California, and Texas for example. Florida contests and sweepstakes are subject to general promotional law. Additionally, if the aggregate prize values for the promotion exceed $5,000, the sweepstakes must be registered and bonded, and a list of winners must be filed. California contest laws dictate that participants may not be required to pay or make a purchase as a condition to entry. In Texas, contests and sweepstakes are subject to general promotions law and have no state-specific guidelines.
  3. What does “no purchase necessary” really mean? Sweepstakes that charge money to enter must provide customers with a free alternate means of entry. This “alternate means of entering” must have the same odds for winning the featured sweepstakes prize(s). Also, the free method to enter should not be an extensive social media to-do list. Keep it simple!

Social Media Promotions

Social media is essential for marketing your business. Therefore, why not run a contest with the help of some of your partners? 

  1. Remember to research contest guidelines already set by online platforms such as Facebook. These rules discuss the use of “likes,” “mentions” and “follows” in the marketing of a contest or sweepstakes. For example, Facebook does not allow certain language, such as “share on your friend’s timeline to get additional entries.” Accordingly, it is important to read the policies posted on Facebook, Instagram, Pinterest, and other platforms to get an idea of what the rules of the road are. 
  2. Your business needs to identify advertisements for your contest or sweepstakes. The advantage of third party promotion of your contest is obvious: by requiring consumers to promote a given product to enter a contest or sweepstakes, the advertiser can capitalize on authentic, word-of-mouth recommendations from consumers, rather than more mundane marketing methods. However, the FTC requires that any material relationship between the advertiser and the subject endorser be prominently disclosed. One example includes giving products and/or services to an influencer in exchange for a promotional post.

Promotional Law and Mobile Apps

Business owners have many options for how sweepstakes and contests can be run through mobile applications. Participants can download an app, agree to the terms, and register for a contest. Easy enough? Not so fast.

  1. When it comes to mobile app-based sweepstakes promotions, a pre-requisite is that participants must own a mobile device. For those who do not have a mobile device capable of downloading apps, there is no way for them to participate. Requiring that consumers have access to a mobile phone in order to enter sweepstakes promotions may be deemed “consideration.” As such, businesses may need to supplement a mobile app sweepstakes promotion with an alternative means of entry. This will allow for inclusion, and ensure compliance under current promotions, laws and regulations.

That’s just the beginning. What should you do first?

  1. Save your marketing team a headache and contact a sweepstakes attorney. With more than thirty (30) years in combined experience with online promotions, sweepstakes, and contest law, KMT has a team of seasoned veterans in house. Start by sending us an email 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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Photo by Giorgio Trovato on Unsplash

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David O. Klein

David O. Klein

David Klein is one of the most recognized attorneys in the telemarketing, technology, Internet marketing, sweepstakes and telecommunications fields. Skilled at counseling clients on a broad range of technology-related matters, David Klein has substantial experience in negotiating and drafting complex licensing, marketing and Internet agreements.

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