Facebook. Contests. Sweepstakes.
What do Facebook, Instagram, Pinterest, and Twitter have in common? They all allow their participants an opportunity to create contests, sweepstakes, and other games of chance using their online venues.
One of my very successful speaker/coach clients recently said she wanted to conduct online sweepstakes for her vast coaching network. She gave me a boilerplate set of contest rules that she had gotten from another coach. We discussed the purpose for her contest and what she hoped to accomplish. In addition, I asked her specifically who she was targeting, what states she was including in her target group, what was the prize she was offering, and what did potential contestants have to do to enroll in the contest? The answer to those questions gave me a starting point for providing her with competent and accurate legal advice.
Online Sweepstakes. Sweepstakes. Contests.
Sweepstakes and contests have become the darling of creative entrepreneurs, as a way to attract customers to their brand. With social media venues, such as Facebook, Pinterest, Twitter, and so many others, conducting a contest is easier than ever before. There are many terms used to describe these types of promotions, e.g. sweepstakes, contests, trade promotions, gift prizes, game promotions, games of chance, but for our purposes let’s call them “Contests.”
Lotteries. Lottery. Contests.
There are a number of state and federal laws that need to be considered when structuring a Contest. The most important first step is to avoid being viewed as a lottery. A lottery is generally defined as a game with three components: 1. A prize, 2. The chance to win that prize, and 3. A form of payment in order to be eligible to win that prize. Who has not heard of the “Powerball Jackpot”? Just about any adult can walk into a 7-Eleven, in one of the states that allow lotteries, and purchase a lottery ticket. Lotteries can legally be conducted in 43 states, such as Illinois, New York, Florida, and California, and in some instances by a qualified not-for-profit. There are 7 states including Nevada, Alaska, Hawaii, and Mississippi, which do not permit lotteries.
Therefore, the first major hurdle to overcome is to make sure your Contest is not an illegal lottery. The way around that is to eliminate one of the three components. As always when it comes to legal issues, this question is not as easily answered as a layperson would assume. The question needs to be answered by a competent attorney who understands the nuances of Contest Law, and someone willing and able to research all of the applicable state and federal regulations. If you are found guilty of conducting an illegal lottery, you can be fined a hefty sum, and possibly serve jail time. Once the lottery issue is resolved, you can move to step #2 — preparing the official contest rules (“Contest Rules”).
Contest Rules. Contracts. Contract.
Contest Rules are contracts, and whether you see the word contract written anywhere, they are agreements that can bind the participant and the Contest sponsor. These Contest Rules must be drafted with extreme care. Certain material terms and a number of required disclosures MUST be included in every set of Contest Rules. Some states don’t even allow Contests. Other states have imposed strict compliance rules that require sponsors of a Contest to register and/or be bonded 30-60 days before conducting a Contest. Therefore, cutting and pasting Contest Rules that someone else has used is a bad idea, unless a knowledgeable attorney customizes them for you.
There are many other considerations you should be aware of before sponsoring your first or your next Contest.
I’m Attorney Francine Ward, and if you are interested in structuring a Contest, feel free to contact me to set up a time to talk. You can find me on Facebook, Twitter, LinkedIn, or through my website.