By Sherri Brennen
When conducting a giveaway it is very important for marketers to avoid conducting a lottery. The only lotteries permitted in the United States are exclusively government run, and a few states prohibit them completely.
What is a Lottery?
A lottery is a game of luck that requires some type of entry fee. A lottery has three determinate elements: Prize, Chance and Consideration.
What is consideration?
Consideration refers to anything a person has to pay or do to have a chance to win. It can be as simple as paying for a 900 number phone charge, subscription fee, required purchase or having to engage in an activity such as filling out a long survey.
What is a sweepstakes?
Unlike a lottery, a sweepstakes is a promotional drawing in which prizes are given away at no charge to entrants. Winners are selected at random. Winning is simply the luck of the draw. Most social media giveaways are actually sweepstakes. To keep a sweepstakes from becoming an illegal lottery there must be no consideration.
What is a contest?
A contest is an event where people try to win a prize by doing something better than the other entrants, such as a photo or essay contest. A contest is different from a sweepstakes because there is an element of skill is involved. The prize is awarded on the basis of skill and not luck as in a sweepstakes.
What is a raffle?
A raffle is nearly always reserved for non-profit groups and operates similar to a lottery. People buy a ticket for a chance to win a prize such as in a church raffle. The difference is that the prize must be awarded. (Example: A lottery prize can be rolled over such as in Powerball.) Keep in mind that each state has its own laws pertaining to raffles.
Do I need sweepstakes rules, terms and conditions?
Absolutely! It is It is extremely important to have clear rules and conditions for any giveaway. They should be easily accessible for for all potential participants to access. In the event of a dispute or complaint you can simply refer to the rules.
This information is intended only as a guide and is not a legal document. Be sure to follow the advice of your legal counsel on any and all giveaways and promotions.