Sweepstakes law is a heavily regulated area. Navigating the myriad rules and regulations that govern sweepstakes, contests, and promotions can be mind-boggling to those who are unfamiliar with them. Sweepstakes sponsors and skill contest operators must comply not only with federal statutes and regulations, such as the Federal Trade Commission Act, but also with the rules of every state in which it will offer residents an opportunity to participate in the sweepstakes or skill contest. An experienced sweepstakes lawyer can guide clients through the maze of sweepstakes law.
Below is a very high-level, incomplete, general overview of a few aspects of sweepstakes law. Do not rely on it as legal advice because it is not legal advice.
What is a Sweepstakes?
Gambling is illegal. Most everyone is familiar with the type of gambling offered in casinos and placing bets on the outcome of events, but many people don’t realize that sometimes a business’s promotional tool–intended to be a sweepstakes–may constitute illegal gambling.
Gambling requires three elements be present: consideration, chance and prize. Paying an entry fee or purchasing a product in exchange for an opportunity to win a prize at a random drawing, for example, constitutes illegal gambling. (There are certain exemptions under certain, limited circumstances for religious, charitable, and government sponsored gambling, e.g., raffles and lotteries).
If “consideration” is removed from the equation, then the promotional tool does not constitute gambling but is, rather, converted to a sweepstakes. The primary way in which advertisers eliminate “consideration” is by offering participants the opportunity to play by mailing a 3 x 5 index card with the applicable entry information, or provide the required information via email or an online form.
Notably, “consideration” can include anything of value, which may extend beyond exchange of money and could include things like requiring a person to sit through a marketing pitch.
Some states–New York, Florida and Rhode Island–require that a copy of the official sweepstakes rules be filed with the appropriate governmental agencies in those states under certain circumstances.
In New York, if the combined retail value of the prizes exceeds $5,000, the promotion must be registered at least 30 days prior to the state date of the promotion, along with a copy of the official rules, a surety bond or open a trust account in the amount of the combined retail value of the prizes.
Florida has the same monetary threshold (greater than $5,000), and also requires the posting of a surety bond or opening a trust account in the amount of the total retail value of the prizes, but the promotion must be registered within 7 days of the promotion start date rather than 3o as in New York. There are certain requirements for filing a list of winners in New York and Florida as well within certain time periods.
Rhode Island has a registration requirement as well, but only if the promotion will be advertised in retail outlets in Rhode Island and the total value of prizes exceeds $500.
What is a Skill Contest?
Similarly, if the element of “chance” is eliminated, then the promotional tool becomes a skill contests. In skill contests, the element of “chance” is not present when the winner is selected on the basis of the quality of the contestant’s entry. Examples of skill contests include essay contests, baking contests, photography contests, visual art contests, musical contests and athletic contests.
It is important to ensure that those who will judges the entries in a skill contest have the requisite background and experience in the field, and the judges qualifications should be listed in the official rules.
Some states have laws that explicitly–or arguably–prohibit the presence of “consideration” in a skills contests, including Arizona, Colorado, Illinois, Maryland, Nebraska, North Dakota and Vermont. To play it safe, skill contests should be void and not made available to residents in these states.
Sweepstakes Lawyer Experience and Legal Knowledge
Sweepstakes and skill contests can be highly valuable advertising and promotional tools, but it is essential that a business wishing to run a sweepstakes obtain advice from a sweepstakes lawyer who is qualified in the field of sweepstakes law. With more than 23 years of experience representing clients ranging from Fortune 500 companies to celebrities to small business owners and entrepreneurs, the Fasthoff Law Firm and its sweepstakes lawyer is able to guide clients through the legal maze of sweepstakes laws and skill contest laws. Feel free to contact the firm now to discuss how we may be able to assist you and your business.
Some of the clients for whom Hank has provided representation and legal services include:
Contact the Fasthoff Law Firm Today
Sweepstakes and skill contests are highly valuable as promotional tools, but it is important to structure and run them properly. The Fasthoff Law Firm and its sweepstakes lawyer has been advising clients on sweepstakes law matters, skill contest law, and drafting official rules for sweepstakes and skill contests for many years. Contact the Fasthoff Law Firm, a sweepstakes law firm with offices in Houston and The Woodlands, to learn more about how we can assist in helping your business properly conduct a sweepstakes or skill contest.
Hank is AV-rated (highest) by Martindale-Hubbell, is a Top Rated Intellectual Property Attorney by Texas Super Lawyers®, was ranked for five consecutive years as a Texas Super Lawyers® Rising Star in the fields of Entertainment and Intellectual Property, and has been ranked from 2013-present by US News & World Reports’ Best Lawyers® Litigation – Intellectual Property Litigation.