Sweepstakes & Contest Laws
A Legal Guide for Operators and Game Hosts
No Purchase Necessary Laws essentially prevent chance-based prize promotions from asking people to provide payment to enter, unless a free entry alternative is readily available.
While this is key information, it is important to remember that No Purchase Necessary Laws don’t apply in every country, and what is actually considered ‘payment’ can vary quite substantially.
To help you find the No Purchase Necessary Laws that apply to your promotion, we’re going to take you through some country-specific laws.
If you’re running an international promotion it’s generally a good idea to comply with the laws and regulations of each country your promotion can be entered from.
The No Purchase Necessary laws in the U.S.A. are fairly straightforward. If you are running a promotion where winners are chosen randomly you cannot ask for a purchase or other forms of consideration as an entry unless you also offer a free entry alternative.
If you run a skill-based contest where winners are selected based on merit, you are free to ask for purchases or any other form of consideration.
However, there are some exceptions to this rule. Colorado, Maryland, Nebraska, North Dakota and Vermont all prohibit purchase requirements, even in contests where winners are chosen on their merit.
Promotions run by private businesses are governed by different laws depending on which state you operate in, so checking out your local laws or consulting a lawyer is always a good idea.
Running a contest or giveaway is a brilliant (and surprisingly cost-effective) way to engage your audience, generate fresh leads and drive a ton of meaningful actions.
Any time you run a contest or giveaway it’s important to exercise a degree of caution and ensure you’re complying with any relevant laws that may apply. One of the most important laws you should be aware of when running a prize promotion are No Purchase Necessary Laws.
In this guide we’ll walk you through everything you need to know about No Purchase Necessary Laws and answer all the questions you might have.
We’ll cover:
No Purchase Necessary Laws are laws in some countries that prohibit chance-based prize promotions from incentivising entrants to make a payment, complete a purchase, or provide other forms of consideration.
These laws exist in the U.S. and several other countries around the world, and while they differ from country to country, they generally state that if you a running a giveaway, sweepstakes, contest or any other type of prize promotion where winners are determined by chance, you cannot:
In several countries, including the U.S., No Purchase Necessary Laws operate around the idea of “Consideration”. As we mentioned above, you may be at risk of violating No Purchase Necessary Laws if you are running a chance-based prize promotion that requires entrants to make a purchase or otherwise provide consideration.
Consideration refers to ways people can “buy” entries through monetary, and occasionally non-monetary actions.
If you’re running a chance-based prize promotion in a country with No Purchase Necessary Laws it doesn’t necessarily mean you can’t ask users to make a purchase, it just means that you can’t:
Basically, you can still ask users to enter your giveaway by making a purchase as long as you offer a Free Alternate Method of Entry.
Alternate Methods of Entry (AMOE) are free and easy ways that users can enter promotions instead of making a purchase. So if you’re running a chance-based promotion that lets people enter by buying your product you should make sure you also offer a free way for people to enter instead of making a purchase that awards them the same number of entries.
When you offer a free entry alternative the purchase is no longer mandatory and no longer gives people increased odds of winning your prize, which means that your promotion is no longer in violation of No Purchase Necessary Laws.
You just need to make sure people can’t get entries for making a purchase and completing your AMOE, as that would still give people who make a purchase a distinct advantage and put you back to square one.
Some common types of AMOE are entering via email, mail, or completing an online form. If you run your giveaway with Gleam’s easy-to-use Competition’s app we can automatically add an Alternate Method of Entry to any campaign that can be entered by making a purchase.
The AMOE will be automatically added to your campaign’s Terms and Conditions in any country where No Purchase Necessary Laws apply, completely taking the hassle out of having to create and manage your own free entry alternative. Have a play with our demo below to see our free entry alternative in action:
Running a contest or sweepstakes is an effective way to drive your business goals. Digital promotions are a strong strategy for engaging with your audience. They help drive actions, grow your brand, and accelerate your marketing.
However, there are a lot of legal considerations to be made with running a contest or sweepstakes. In many countries, contests, sweepstakes or giveaways, lotteries, and raffle promotions that include a prize create a confusing landscape for marketers.
Without the right legal administration , your promotion could mistakenly violate the law or be considered an illegal lottery.
Sweepstakes (also commonly referred to as “Giveaways”) are one type of promotion that can keep your business in compliance of No Purchase Necessary laws. Sweepstakes promotions consist of three key features:
As you may have noticed, these types of promotions are very similar to lotteries. With the exception of the third requirement (entry without purchase or consideration).
Contest promotions typically require a skill or criteria to be fulfilled by entrants. For a promotion to be deemed a contest, entries must pertain to skills and winners chosen on merit. There’s a difference between Sweepstakes and Contests – Unlike sweepstakes, contests winners are NOT chosen randomly.
Typically, contests are judged by either the host, community voting, or selected by a third party (such as a contest administration company or prize fulfillment service). Contests by nature remove the random drawing of winners, which is one of the three key traits of a lottery. By doing this, contests do not conflict with No Purchase Necessary laws.
We’ve got some examples of contests within our case studies, including an LG and Netflix sponsored “B&Binge” contest. Other examples of contests include:
Contest campaigns are excellent for generating user-generated content for your brand, expanding your reach to new audiences, and curating content for future marketing efforts.
Commonly referred to as the FTC, the Federal Trade Commission is a government body that serves and protects American consumers. They conduct investigations on consumer complaints, including those involving illegal lotteries.
For any sweepstakes or contests scams, fraud, and lottery-like activity investigated and uncovered by the FTC, perpetrators can be prosecuted, charged, and penalized by local and federal governments.
The Federal Communications Commission (FCC) regulates the media in the United States. In relevance to promotions, they have the authority to cease any advertising that promotes illegal lotteries or scams. In addition, they will take action against deceptive marketing (such as misleading prizes).
The FCC operates much like the FTC, following consumer complaints and stepping in with an investigation and taking legal action against any foul-play.
Promotions can be governed different depending on the state they are operating in. We recommend consulting a legal administrator for sweepstakes and contests to ensure compliance in the states, regions, or countries you wish to execute your promotion in.
Digital promotions are excellent for supporting many different business goals. Before introducing one into your marketing, it’s important to understand topics such as sweepstakes laws, promotion laws, and other legal barriers that could land your business in hot water.
No Purchase Necessary Laws are intended to protect consumers, however, Alternate Means of Entry (or AMOE) clauses can help keep your promotion compliant while strengthening your goals. There’s a very thin line separating sweepstakes and contests from becoming illegal lotteries. Consulting a legal administration partner is the best course of action to ensure your promotion does not violate any federal or state laws.
At Realtime Media, we facilitate all aspects of running contests and sweepstakes from initial development to prize fulfillment services. Our expert legal team can draft official rules for your promotion and is bundled with our all-in-one PromoPick solution. PromoPick is trusted by some of America’s largest brands looking for a fast and cost-effective way to launch a contest or sweepstakes.
Follow Federal & State Legal Requirements and Regulations. Please always consult with a real legal advisor and/or licensed attorney. This is simply a guideline to get you started in the right direction.