Is your Giveaway Game Against the Law?

Is your giveaway game against the law? Giveaways and games are a great way to grow your reach and engagement on Facebook, but can quickly cross the line into the realm of lotteries if you’re not careful.

Takeaway: In this article you’ll learn the various government agencies responsible for monitoring sweepstakes and lotteries: the FTC, the FCC, the USPS, and your state’s regulations to empower you to make the best decisions for your business.

Note: I am not a lawyer, if you need specific legal advice it’s always a good idea to hire one.

What is a Lottery?

A promotion is considered a Lottery if it involves three basic characteristics:

Chance, a Prize, and Consideration

Consideration means something of value. In this context, a Lottery is a game of chance in which the winner wins a prize, but entry is based on the entrant handing over something of value to the administrator of the Lottery. Consideration can be applied broadly. In this case, it means that participants give you something of value – cash or cash equivalent.

Lotteries are heavily regulated by the state and federal governments and it is against the law to administer one. Individual business owners cannot run them. Changing a lottery to a legal giveaway game means eliminating  one of the THREE characteristics: chance, prize, or consideration.

  • Eliminate the consideration aspect and it’s called a sweepstakes or a drawing
  • Remove the chance of winning, and you have a contest that is usually a sure thing or a contested game of skill or effort.

Most often, it is the Consideration that is eliminated, and that means that an entrant must not be required to pay to enter. However, significant effort may also be considered Consideration. The question is: Does the entrant give up something of value? If it takes a few hours to sign up, which is a lot of time, then it can also fall into consideration. In some jurisdictions, “referring a friend” is consideration – “add x to my group for a chance to win a prize” would be a lottery (and is against Facebook’s Terms of Use across the platform).

Is your giveaway game against the lawCommonly Asked Questions

What if I want to do a contest that says “Each purchase will give you an entry to X”?

As long as there’s a free way to enter (ie, a postcard entry, or submit your email), then your giveaway game is not against the law. Purchases cannot give you more of a chance to win than the free entries. Everyone must be on equal footing. Furthermore, the “free” entry must not be unduly burdensome – ie, it cannot require significant effort (ie, filling out a lengthy survey). For our purposes, you could also have a google form that people fill out with their name, and email address to enter, or a “comment here to enter”.

What if I say buy one get one free for everyone?

Since there’s no chance and everyone gets one, then your giveaway game is compliant.

Can we ask winners to pay for shipping?

No. When you run a sweepstakes or giveaway, it’s your responsibility as the giveaway sponsor to ship out the prize. Your winners will prefer it as well.

Can we ask them to provide proof of purchase?

That’s directly in violation of ‘no purchase necessary’ since you’re asking someone to see a proof of purchase.

How does McDonalds get away with game pieces on soft drink cups?

McDonalds offers an alternative method of entry. You can mail a handwritten, self-addressed stamped envelope to an address to get game pieces.

What if you can enter for free, but get additional entries for purchasing?

Sorry! If entrants are still paying you or plunking down money to increase their odds of winning, it’s a no-go. It doesn’t matter if the entry’s optional, it’s still consideration and is in violation of everything we discussed above.

Can I give a Coupon away as a prize?

It is illegal to require a purchase to redeem the prize from a sweepstakes. Since you have to spend money to use the coupon, your giveaway game is against the law. Compliance Suggestion: you can offer a large enough coupon that they can by an item with it. Alternatively, you can offer a free item as the prize.

Let me know what you think!

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