What is more enticing than the opportunity to win something? An increasing number of companies are betting that consumers will be drawn by the chance to win exciting prizes. With this in mind, many businesses have discovered effective ways to increase awareness of their brands through the use of sweepstakes and other promotions. Before deciding which “game” suits your needs and purposes, it is essential that you understand the differences between a raffle and a sweepstakes from a regulatory perspective. Promotions that are not set up in accordance with applicable laws will certainly not generate the kind of attention your business wants. To be sure that you not only select the appropriate type of promotion, but that it is also constructed within applicable regulatory guidelines, you are strongly encouraged to contact an experienced promotional law attorney.
The Differences Between Raffles and Sweepstakes Promotions
Before discussing the differences, here are some similarities between raffles and sweepstakes promotions: 1) both offer unique ways to generate buzz; 2) both present the opportunity to win prizes; and 3) both are regulated by state, federal, and, sometimes, municipal law, depending on jurisdiction. The differences are significant and require companies to proceed with caution. One of the most important differences is that raffles are a type of lottery in which prizes are awarded to people who pay for a chance to win. By contrast, sweepstakes entrants must not be required to pay to enter. Another significant distinction concerns the type of organizations that may legally conduct raffles. Some states, including New York and California, have statutes that limit raffle sponsorship to only certain classes of qualifying or authorized organizations. These mostly include charitable and not-for-profit enterprises. Another difference relates to the platform through which the promotion is offered. Generally, sweepstakes may be conducted online and via mobile applications. Not so with raffles — only some states and municipalities permit raffles to be run online.
General Requirements for Conducting a Raffle rather than a Sweepstakes
Raffles include all the elements of what makes up a “Lottery”: 1) prizes awarded to winners; 2) winners selected based on chance; and 3) consideration required for entry. To run a lawful sweepstakes, however, the element of consideration must be removed. As we discussed above, some states have enacted legislation that allows charitable organizations to sponsor raffles. Typically, entry eligibility and registration requirements, as well other filings, must be submitted to the applicable governmental body prior to initiating a new raffle promotion. Because of this, companies must consider the jurisdiction(s) within which the raffles will be conducted and thoroughly review the local regulations for compliance.
How Should a Business Institute a Raffle or Sweepstakes Promotion?
The first step should be to determine whether a raffle or sweepstakes promotion will be sponsored by a charitable organization or a for-profit entity. If the promotion will be run by either of the foregoing, the raffle route is an option; if not, the sweepstakes avenue will be the right course to pursue. Please note that there are a whole host of contest-related statutes and local regulations that vary widely by state and municipality. There are also federal requirements that govern certain contests. To make sense of the patchwork of applicable laws, and to avoid unnecessary regulatory and financial exposure, companies would do well to consult with attorneys who have experience in gaming and sweepstakes promotions law.
If you are interested in learning more about this topic or require assistance with a sweepstakes or raffle promotion, please email 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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