Sweepstakes and Contests Legal Speak

Running a sweepstakes or contest on social media can draw a lot of attention for you or your client’s business. However, there are several pitfalls you want to avoid.

Many times a sweepstake can resemble an illegal lottery.  A lottery has three parts: consideration, chance, and a prize.  Consideration involves entrants paying to enter, buying something to enter, or use effort.  Chance means it is beyond the winner’s power.  The Prize is something of value.

Prize + chance + consideration means you just created an illegal lottery in all 50 US states.

Prize + chance means it is a legal sweepstakes

Prize + consideration means it is a legal skill contest

In the legal sweepstake you must not have consideration.  Consideration can be either monetary or non-monetary.  Monetary consideration includes purchase of a product.  Non-monetary requires the entrant to use effort to enter the contest.  Tweeting, referring a friend, or downloading an app for your phone are not consideration. While completing a long survey could be consideration.

In a legal skill contest chance should be limited.  Most states will accept some chance element.  The skill must be a “bona fide” skill and there must be adequate standards. As a trivial question, if there is a tie, then skill must determine the winner not chance.  A “bona fide” skill means that people who are skilled have a clear advantage over people who are not skilled.

I would suggest you include at least these three sections in any sweepstake or contest: void where prohibited, no purchase necessary, requirements for entry, where to find a complete set of rules, and when the contest will be over.