Sweepstakes Laws: Build a Strong Legal Foundation for Successful Sweepstakes

Sweepstakes are popular marketing tools to drive engagement with your brand, improve brand recognition, and generate excitement about your company’s products or services. In fact, 55 million Americans participate in these sorts of contests every year, providing your brand with a great opportunity to boost engagement.

However, running successful sweepstakes requires more than just creatives and giveaways. It demands a strong foundation of legal and compliance measures that govern such promotions.

If you want to run sweepstakes, you should always double-check every element of the promotion with your lawyer(s) before releasing the contest publicly, work with experienced sweepstakes vendors and ensure they comply with all local, state, and federal sweepstakes rules and laws. And be sure to work with a sweepstakes agency that has the right experience.

We have closely examined the most important sweepstakes laws and regulations:

• Alternate Means of Entry (AMOE)
• No Purchase Necessary Laws (NPN)
• Federal Sweepstakes Laws
• US State Sweepstakes Laws
• Bonding and Registration

From eligibility requirements and price restrictions to disclosure obligations, we got all covered for you. Let’s get started with understanding sweepstakes first and then discuss the specific laws, regulations, and compliances.

What are Sweepstakes?

Sweepstakes are promotional events or campaigns where winners are drawn randomly from among the valid participants. The prizes can range from cash and vacations to products, gift cards, or exclusive experiences.

It involves various forms of entry, such as filling out a form, submitting an email, sharing content on social platforms, visiting a website, or watching a video. Generally, there is no purchase necessary to enter the sweepstakes. If it's not clear, see real sweepstakes examples here.

How to Navigate Sweepstakes Laws and Compliance?

It might seem like a complex process, but with careful planning and attention to the required details, you can ensure that your sweepstakes marketing campaigns meet the necessary regulations. Use this checklist to avoid missing anything before releasing your sweepstakes to the public.

Let’s talk about some important laws and regulations to consider.

Sweepstakes Laws and Requirements

1. Alternate Means of Entry (AMOE)

Alternate Means of Entry, or AMOE, allows your customers to participate in sweepstakes if it involves a kind of monetary benefit for the company, like a purchase or donation. The most common alternate entry methods include online entry forms, entry by mail, telephone entry, entry through social platforms, In-person entry at the store, and text message entry.

The alternate means of entry should be readily available, free of charge, and not impose any significant burdens on participants compared to those who choose to purchase. Sweepstakes organizers must ensure that the AMOE is fair and does not disadvantage participants who opt for the free method of entry.

2. No Purchase Necessary Laws (NPN)

When running sweepstakes, you must know “No Purchase Necessary Laws.” The law in some states says that if you are running sweepstakes, you cannot ask participants to make a purchase or provide them with other considerations like increasing the chance of winning by making a purchase.

3. Federal Sweepstakes Laws

Your sweepstakes should comply with Federal Trade Commission’s general advertising guidelines. There is no single federal law that exclusively governs the sweepstakes. However, several agencies, including the Federal Trade Commission (FTC), the Federal Communications Commission (FCC), the United State Postal Services (USPS), and the United States Department of Justice (DOJ), apply rules and regulations.

Here are some key federal laws to consider:

• FTC Act: The FTC prohibits deceptive and unfair trade practices; it requires certain information, rules, and transparency in the prizes. It should include basic information about the sponsor, promotion duration, winner selection method, types of prizes, eligibility requirements, T&Cs, liability limitations, and privacy policies.
• Deceptive Mail Prevention and Enforcement Act (DMPEA): It is applied only to the sweepstakes made available through direct emails, and includes best practices for fair hosting of the sweepstakes.
• Internal Revenue Service (IRS): It says, that the sponsor or the contest is responsible for issuing IRS 1099-Misc. Income tax form to the winner if the price won value is over $600.
• CAN-SPAM Rule: The CAN-SPAM Act sets the rule for commercial emails to give recipients the right to stop emailing them. It states to use accurate subject lines, make clear messages, and include an opt-out mechanism.
• California Consumer Privacy Act (CCPA): The act states that California residents have certain rights and control over their personal information. If you collect information on California residents through YouTube sweepstakes, regardless of your business location, in that case, you need to provide notice about data collection, honor rights to access and delete data and implement security measures to protect personal information.
• General Data Protection Regulation (GDPR): While GDPR is not a law in the United States, there are different privacy laws regulated at federal and state levels. It is necessary to disclose how participants' data will be used and protected.

4. US State Sweepstakes Laws

Some states have additional laws or requirements that you need to comply with. In addition to federal laws, you’ll want to check into the various sweepstakes laws by different states to ensure you don’t end up with strict penalties.

Here are some State Laws:

• New York: The sweepstakes with prices over $5,000 must be registered and bonded 30 days prior to the sweepstakes opening dates. The list of winners must be provided to anyone who requests it.
• Ohio: Sweepstakes must not force participants to visit a store unless a participant has already visited the store to make a purchase or attended a sales presentation.
• Florida: If the total price is over $5,000, it must be registered and bonded 7 days before the sweepstakes begin. You also need to file the winner list with the state and provide a list to anyone who requests it.
• Maine: Sweepstakes may not collect health-related or personal information from participants under the age of 18 without first obtaining verifiable consent from legal guardians or parents.
• North Dakota: No skill-based sweepstakes may require a purchase or other forms of consideration.
• Rhode Island: The prize pooled valued above $500 must be registered with the state if there is a retail store in the state. Bonding is not required.
• Tennessee: You cannot release the personal information of the winner in public in perpetuity.
• Texas: If you are organizing sweepstakes in Texas and the prize is valued at more than $50,000, you cannot automatically enter customers into sweepstakes every time they make a purchase.

The remaining states and above mentioned states follow the general promotion law across the US.

5. Registration and Bonding of sweepstakes

Registration and bonding are two important requirements for running sweepstakes, although they may not be required in all jurisdictions. The specific requirements for registration and bonding can vary from state to state within the United States. Here's a general overview:

Registration of Sweepstakes:

Sweepstakes registration refers to the process of providing certain information to the appropriate authorities in order to legally conduct sweepstakes. Some states require sweepstakes operators to register their promotion with state agencies or disclose specific details about the promotion, such as the start and end dates, prize descriptions, and eligibility requirements. The purpose of registration is to ensure compliance with state regulations and provide transparency to participants.

Bonding for Sweepstakes:

• New York: Sweepstakes with a prize value exceeding $5,000 must be registered and bonded with the New York Secretary of State's office.
• Florida: Florida requires registration and bonding for sweepstakes with prizes valued over $5,000.
• Rhode Island: Sweepstakes with a prize value exceeding $500 must be registered with the Rhode Island Department of Business Regulation. A bond or an alternative form of security may be required.

In Conclusion

Familiarizing with the relevant sweepstakes management laws and regulations across different states is important. Complying with the laws can prevent penalties and minimize legal risks. By ensuring transparency, providing clear terms and conditions, and avoiding deceptive practices that can minimize legal risks.

Contact us today to learn more about how our turnkey, industry-agnostic sweepstakes platform can help you create compelling sweepstake campaigns to acquire and engage your customers.