Digital sweepstakes are becoming increasingly popular with marketers and agencies because of their ability to drive objectives such as social media engagement and first-party data acquisition. When deciding to run a promotion, it’s important to understand and comply with local, state, and federal laws. In the United States, these laws have state-by-state variations, but the general administration of sweepstakes share similarities.
When planning to run a sweepstakes, we at Realtime Media suggest gathering the proper legal administration team to ensure 100% compliance before your promotion goes live. That’s why we offer an expert, full-service team that will handle every step of this guidance.
Please note, this guide is not a substitute for legal advice, nor does this checklist determine if your sweepstakes is in compliance with all applicable local, state, and federal laws. We strongly suggest consulting with our legal services to draft and review your official rules and policies before launching a promotion.
Sweepstakes are great marketing promotions that provide entrants into a game of chance. The winning entrant receives a prize that is typically predetermined by the sponsor. Sweepstakes are governed by different laws and regulations within the United States. Sweepstakes laws can have many different requirements that are impacted by both state and federal law.
Official Rules layout the compliance of your entire promotion – this set of rules must align with local, state, and federal laws. While there are many templates available online to draft your own rules, we advise a proper legal consultation to ensure full compliance.
Many brands, marketers, and agencies make the mistake of selecting easy-to-use sweepstakes software to manage their promotions, often forgetting to include a proper set of rules. Be sure to avoid this, and consider a full-service option from a sweepstakes management company.
While the perceived external costs may differ, you can ensure your promotion is completely compliant and avoid even costlier legal ramifications. These efficiencies grow over the course of multiple promotions, as our processes at Realtime Media increase your team’s capacity to launch fully compliant promotions while we handle the tedious details.
Social Media Policies
Each social media platform has their own distinct rules, policies, and guidelines for promoting contests and sweepstakes (commonly promoted as ‘giveaways’). Always consult these terms before incentivizing any action within that social platform to advertise, promote, or share your campaign.
For example, Facebook has its own policies for sweepstakes or contests – As expected, they expect you to be responsible for lawful operation of the promotion (such as official rules, offer terms, and eligibility requirements such as age or residency) and more. They also require content such as a release of their platform and acknowledgement that they are not associated with Facebook. For the full details of their guidelines, please consult their policy page.
Be sure to view other social networking sites’ policies such as Instagram and Twitter. Social media is important for driving engagement for your sweepstakes further, so be sure to brush up on their policies or consult the proper legal team.
Sweepstakes registration and bonding, state-by-state
Registration and bonding has many state-by-state variance based on prize value. For example, Rhode Island requires a registration for sweepstakes that exceed a total prize value of $500(bonding is not required), and applies to retailers only.
Prizes that exceed $5,000 in value require registration and bonding in states such as New York or Florida. It’s common for brands to avoid certain states by excluding consumers in these areas from participating.
While this can be a tricky part of running a promotion, we have the legal administration available so that your sweepstakes can have national reach without cutting corners (or in this case, states).
Sweepstakes Eligibility Requirements
Official rules will always need to include an eligibility section that outlines who can participate and enter. In relation to state-by-state rules, you must clarify if residents in particular states are not eligible to enter. Age and residency requirements are typically the most common eligibility requirements to define who may or may not enter.
The details of this section are critical – Having the right set of parameters for eligibility can prevent damage to your brands reputation. In addition, understanding these regulations allow you to include or ward off consumers who may or may not meet your consumer profile (such as minors under 18).
No Purchase Necessary / Alternative Means of Entry
No Purchase Necessary is the first statement within official rules to protect the participants, by law in the United States. Asking participants to take actions that require time, money, or effort constitute as consideration, and doing so can often constitute a sweepstakes as an illegal lottery, putting the brand or sponsors at risk. Consideration can be tricky, as it’s best to consult the proper legal services to ensure compliance.
Because of this, sweepstakes can offer an Alternative Means of Entry (AMOE) to make it effortless for entrants to participate. Many of our clients at Realtime Media have taken advantages of our services and legal administration to develop their sweepstakes with an AMOE. The main benefit of an AMOE is that it benefits both the sponsors and the consumer while remaining compliant.
For example, perhaps a sweepstakes is asking users to post a photo on social media for instant entry – this takes effort, which violates the consideration criteria. However, an alternative means of entry in your official rules can provide an effortless way for one to participate, such as an online form or mail-in entry, without needing to post a photo.
In this example, many entrants will still support your original social media objectives by posting to enter – however you’ve outlined an alternative method for those who do not wish to post photos, keeping your sweepstakes compliant.
Promotional Details encompass many standardized expectations of a promotion. For example, how many times a person may enter, or the start and end dates of the promotion. This piece should exist within your official rules, and many full-service platforms will help you notify entrants on how many chances they have remaining or earned.
Advertisements and Abbreviated Rules
Abbreviated Rules are essentially a short-sum of your Official Rules and Disclosures. They may vary by state and may need to be tailored based on each state’s laws regarding promotions. If you plan on advertising your sweepstakes or contest, you may need to tailor the content of each ad based on these regulations.
In addition, some states have disclosures about details such as the size of text in advertisements containing promotions, such as Colorado.
Affidavits and Releases
Winner Releases are usually required for high-value items such as cars, trips, and cash pools. The winner(s) of your promotion should be required to sign an affidavit of eligibility and often a liability or publicity release. These documents declare a winner as eligible to win and should be completed before they receive their prize.
Liability and publicity release allows brands or other parties the right to use, display, and/or publish winners information in any promotional material related to the sweepstakes. Liability statements release the brand or sponsor from any liability in regard to taxes, claims, demands, or losses related to the promotion.
Realtime Media offers full-service Legal and Prize Administration, including winner verification and fulfillment of prizes (including logistics and initial prize strategy). We recommended our legal services for professional expertise on Affidavits, Releases, and more.
1099 Forms and More
The IRS requires the value of sweepstakes prizes to be included in a winner’s gross income. In addition, your official rules should always inform winners their liability for any and all taxes related to accepting the prize – including notification that they will receive a 1099 form in the amount of the prize. You will need their social security number, which is typically included in the affidavit they will sign if they decide to accept the prize.
Prize Fulfillment and Legal Administration are the most critical and time-consuming parts of running a sweepstakes. Realtime Media can handle full-service administration of both tasks, including sweepstakes management. We offer individual services, in addition to full-management from sweepstakes or contest development, to prize fulfillment, and legal administration.
As noted earlier, this guide should not be taken as a substitute for legal advice. Please consult our legal experts or your own promotions lawyer before deciding to develop or publish your promotion.
General Sweepstakes Law Requirements
Among other considerations, the following factors should be kept in mind when setting up a sweepstakes promotion: Consumers must not be required to pay to enter. There must be a free, alternative means of entry (“AMOE”). Eligibility requirements must be spelled out.
- Ensure you don't run an illegal lottery. ...
- Give people a free alternative way to enter the sweepstakes or contest. ...
- Make your sweepstakes or contest easy to enter. ...
- Be upfront about your sweepstakes or contest prizes and rules. ...
- Follow state laws governing promotions.
A sweepstakes or giveaway is all about chance: after everyone has entered, a winner is chosen randomly. A contest is more than a random chance to win: each entrant has to demonstrate some sort of skill or talent and judges pick a winner based on pre-set criteria.What items should be on a compliant sweepstake checklist? ›
- A “No Purchase Necessary” Disclaimer. ...
- Start and End Dates. ...
- Eligibility Requirements. ...
- Method of Entry. ...
- Limitations. ...
- Odds of Winning. ...
- Description and Value of the Prize(s) ...
- How the Winner(s) Will Be Selected and Notified.
Each sweepstakes needs to adhere to federal and state legislation. Drafting the official rules is one of the most important elements of your sweepstakes, as this is not only your “official contract” with the public, but it also shows state regulators that you are complying with the various laws set forth.What is consideration in a sweepstakes? ›
To briefly introduce these elements: Prize: Anything of tangible value that will be awarded to a winner or winners. Chance: Winners are determined by chance, usually a random drawing. Consideration: Purchase of a product or service, a payment or extensive effort needed to participate in the promotion.Is it legal to do raffles on social media? ›
Operating or conducting a raffle via the Internet is also prohibited. However, the organization conducting the raffle may advertise the raffle on the Internet. See Penal Code section 320.5 and Laws and Regulations.Are Facebook giveaways legal? ›
According to Facebook's rules, you can only run a contest from a Facebook Page, Group, Event or App. Contests on personal Timelines are not permitted. Facebook's Promotions rules with regards to personal profiles.What type of marketing is sweepstakes? ›
A sweepstakes is a marketing or consumer sales promotion that involves the offering of prizes to participants, where winners are selected by chance and no consideration is required.Is a giveaway the same as a sweepstakes? ›
Sweepstakes (also known as giveaways) are prize contests where winners are selected randomly from all eligible entrants.
There is no consideration involved with sweepstakes, so no purchase is required to enter, and a winner is picked entirely at random. For example, giving away a $100 Amazon gift card and choosing a winner at random is considered a sweepstakes.How do you run a successful sweepstakes? ›
- Setting Contest Goals.
- Selecting the Contest Prize(s)
- Setting the Participation Rules.
- Choosing Entry Options.
- Determining Start & End Times.
- Setting Up The Giveaway.
- Promoting the sweepstakes.
- Picking and announcing the winners.
- Email your current customers.
- Share your giveaway on social media.
- Add a pop-up on your website.
- Team up with influencers and partners.
- Create a hashtag for your giveaway.
- Encourage participants to promote the giveaway.
- Write a blog post.
- A statement that there is “no purchase is necessary to enter”
- A statement that “a purchase will not improve an individual's chances of winning”
- The nature, quantity, and estimated retail value of each prize.
- The schedule of any payments that will be made over time.
- Sponsor's name.
Selling the Property
Then, the person will need to pay federal and state taxes for the winnings. This leads to the sale of the property to potential buyers in the area. To provide a better monetary opportunity, the seller will either accept a cash award or sell the property quickly to ensure a profit from the contest.
Sweepstakes (also known as giveaways) are prize contests where winners are selected randomly from all eligible entrants. Prizes might range from stickers and t-shirts to mansions, automobiles, and vast sums of money. Also, the only requirement is that the award has some monetary value or is a prize pool.Is entering a sweepstakes the same as gambling? ›
Officially, sweepstakes are not considered gambling, and laws clearly distinguish between the two forms. In order for any game of chance (sweepstakes are games of chance) to be considered gambling, participants would need to use their own money. Sweepstakes do not ask consumers to use their own money.What to do if you win a sweepstakes? ›
Sometimes a win notification will tell you the prize is on its way, and you don't have to do anything else. But you'll usually need to take action to claim your prize, like responding to the winning email or getting a notary to witness you filling out your claim form, and you'll have a limited amount of time to react.