What Every Marketer Should Know About Sweepstakes and Contest Laws in the U.S.

One of the reasons why contests and sweepstakes work so well is because consumers have faith that these promotions are legitimate and that the prizes promised will be delivered as presented. This was not always the case, but today laws are in place to protect consumers and fine companies that don’t play nice. In the U.S., the Federal Trade Commission (FTC) regulates most sweepstakes and promotions. The rest of the regulatory work is handled at the state level, with every state having their own set of laws for sweepstakes and contests. SMS sweepstakes are also bound by these rules.

Disclaimer: I’m not a lawyer and the following information is not legal advice. It’s meant to guide marketers in running promotions. You should contact an attorney for specific advice.

All sweepstakes in the United States must meet the following regulations:

1. No purchase necessary. You can enter the sweepstakes without buying a product or service.
2. Winners are required to pay taxes on prizes they win.

What is the difference between sweepstakes and contests?

  • In Sweepstakes the winner(s) is selected randomly from a group of entries.

What should I do if the sweepstakes prize is $5,000 or more in cash or value?

  • When the approximate retail value of all prizes exceeds $5,000, the sweepstakes (contests do not need to be registered) must be registered in the state of New York and the state of Florida. Registration must be done 30 days prior to the start of the promotion in NY and 7 days prior to the start in Florida.

Do I need a surety bond?

  • A surety bond is basically an insurance policy that New York and Florida hold to guarantee the sponsor will award all prizes. If you register your promotion in Florida or New York, you will need to set up a surety bond in the amount of the prize value.

I heard that in Rhode Island you also have to register your sweepstakes?

  • It’s true, but only if you are running a retail sweepstakes with a prize valued at more than $500. A retail sweepstakes requires the participant to walk into a retail store in the state of RI to enter.

What if I’m giving prizes that are less than $5,000 in cash or value?

  • Then you are good and there’s no need to register the sweepstakes in either NY or FL.

What if my promotion is targeted to children?

  • When promoting to children, the Children’s Online Privacy Protection Act (COPPA) comes into play. Operators of commercial website(s) and online services directed to children under the age of 13 that collect personal information, like a sweepstakes, must be compliant with COPPA. This requires posting your Privacy Policy and obtaining verifiable consent from parents to the collection of information from their child. Big League Chew Sweepstakes Official Rules offer a good example.

What about Mobile, Text to Win (SMS) Sweepstakes and Contests laws?

  • I thought you’d never ask. All federal and state laws apply as in regular sweepstakes. In mobile sweepstakes or contests, where the participants enter the contest via text message (SMS), all of the Mobile Marketing Association’s Best Practices and the Telephone Consumer Protection Act (TCPA) rules should be upheld. As of 2014 the TCPA requires additional opt-in language similar to this;

What about Facebook promotions?

Facebook recently simplified its sweepstakes and contest rules as follows:

  1. You are responsible for the lawful operation of that promotion, including; The Official Rules and Offer terms and eligibility requirements.

What about Instagram promotions?

  1. Every contest must include some variation of this statement of release:

Need to see specific rules and laws rules and laws by state?

Would you like to see past examples of sweepstakes and contest Official Rules?

Don’t let all of the legal speak discourage you from launching sweepstakes or contests. They are one of the best promotional tools out there by far and you won’t regret your decision to hold one. Like all promotions, just make sure to cross your T’s and dot your I’s. I

If you need any help with your next promotion contact us. We are here to help!

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