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Sweepstakes and the Law: How To Ensure Compliance

— August 5, 2019

Thinking of running sweepstakes? Make sure you don’t run afoul of the law.

Sweepstakes are a big thing amongst businesses in the U.S., and making sure you are compliant with the law is essential. If you are interested in hosting your own sweepstake, it’s not as simple as setting it up and calling it a day. You need to ensure that you structure your sweepstake in a way that it conforms to promotional law.

Complying with the law isn’t as difficult as it seems once you know the ins and outs of what you’re doing. Take a look at the article below to learn all about sweepstakes and the law, including how to do it yourself, and where to seek help if you need it.

What are sweepstakes?

Sweepstakes are types of competitions where a prize is offered at random to a competition entrant or entrants. No skill is required – the winner is picked at random, so a sweepstake is entirely based on luck. The process usually involves the sweepstake being advertised, typically online, for members of the public to enter for free. Then, once an allotted period of time is over, the winner will be randomly selected to receive the prize.

How might a business benefit from sweepstakes?

You might not have considered it before, but sweepstakes have a potential high marketing value for a business. They allow you to show off your products and services to a large audience, who have been drawn in by the promise of a potential win in your sweepstake.

If your sweepstake entrants are interested enough in your products to want to win one as a prize, chances are, they will stick around on your website and take a look at what else you have to offer. At the very least, your brand name will now mean something to them – even if they have never heard of you before – so whether they win the competition or not, they will forever associate your business with a certain product or service. This means they are more likely to come back to you in the future, should you fit their requirements.

One of the advantages of setting up a sweepstake is that it is easy to do and cheap to run. You may bring a lot of people in, but if you’re only giving away one or two of your products as prizes, you’re not going to see much financial loss at all. This tiny loss will most likely be more than made up for, anyway, by your sweepstake entrants returning to your site to make a purchase.

You can also be clever with your sweepstakes to ensure your name is more likely to stick in your entrants’ heads, even long after the competition is closed. A sole promotion may give you the opportunity to add names to your email list, and grow your followers across your social channels, bringing in a greater brand exposure.

What are the laws regarding sweepstakes?

Although sweepstakes seem fairly harmless on the surface, there is potential for them to be used to take advantage of online applicants, and this is where the law comes in. If you live in the U.S. and you’re thinking of setting up a sweepstake, here’s what you need to bear in mind:

Paying or purchasing to enter is a big no-no

Unfortunately, online scamming is far too regular of a thing these days, and sweepstakes are a perfect opportunity for scammers to use the opportunity to take money from entrants in an illegitimate competition. The whole idea of a sweepstake is that the entrant may win a product by chance, and no payment or product purchase should be necessary. A purchase or a monetary payment made by the entrant, say, on another product you’re selling online, should not give the entrant an enhanced chance of winning.

Man pointing to slot in box while adult and child move to put envelope there; image by Arnaud Jaegers, via
Man pointing to slot in box while adult and child move to put envelope there; image by Arnaud Jaegers, via

The host & sweepstake details must be clearly identified

The entrants to your sweepstake need to be aware of exactly what it is they’re getting involved in. For this reason, your business, as the sweepstake host, needs to be clearly identified, as well as details of the sweepstakes, such as beginning and ending dates, and eligibility requirements. You also need to be clear on when the winner will be selected, and exactly what prize will be won. This cannot be amended once your sweepstake has begun.

Method of selecting winner must be fair

If necessary, you must be able to prove that your method of selecting the winner of your sweepstake was fair and non-biased. This is why many businesses will usually opt for somebody else to control the process for them, so they cannot be seen to have staged the winner in any way. It also goes without saying that there must be a competition winner, and it would be illegal to select nobody, or fabricate a false winner to avoid giving out a prize.

Winner’s information publicity rights

Think before you share your winner’s information to your website or social channels: you need written consent from them first, as according to the data protection laws, to be able to do that. Not only that, but all sweepstake entrants should give written consent to opt in to having their data, such as email addresses, names and phone numbers, used for your own marketing purposes. You cannot use your sweepstake to obtain personal information for your free use, so think twice before you consider adding names to your mailing list without consent.

Consider specific state laws

While the general U.S. laws are covered above, certain states may have different standalone laws regarding sweepstakes. Florida and New York, for example, state that any prizes worth $5,000 or more must be bonded and registered at least a week before the sweepstake takes place. In Rhode Island, retail outlets offering a sweepstake prizes of a total of more than $500 are required to register the promotion with the state. It’s worth checking your own state’s sweepstakes laws if you’re unsure.

How can I get help setting up a sweepstakes?

Whether you’re worried about getting on the wrong side of the law, or you just want some assistance in setting up your business sweepstake, there are a number of places online that offer sweepstakes management. If this is the route you choose to go down, you need to make sure the company you opt for clearly knows the ins and outs of the process. Look for long years of service, positive reviews, and easy contact-ability when making a decision of who to go with. 

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