Federal Sweepstakes and Contest Laws
In the United States, promotions are controlled by the Federal Trade Commission, the Federal Communications Commission, the United States Postal Service, and the United States Department of Justice. These organizations regulate the nation-wide rules relating to sweepstakes and contests, like:
- Winners are required to pay taxes on any prizes won; a prize over $600 is considered miscellaneous income to the government
- Sponsors must issue a 1099 form to winners’ of prizes valued over $600
- Guns offered as prizes must be transferred to a Federally Licensed Firearm Dealer who will go through the process of registering the gun to the new owner
- Official rules must clearly identify the value of the prize as the ARV or Approximate Retail Value based on the fair market value at that time
Registration and bonding will be determined by the prize value and is handled on a per-state basis.
Additionally, the United States has strict laws barring private lotteries, so in order to be legal, sweepstakes and contents need to differentiate themselves from lotteries. A lottery is defined by law as a promotion that has all three of the following elements:
- The promotion is offering prizes that have value
- The winners of the promotion are chosen at random
- There is an element of consideration
In order to NOT be classified as an illegal lottery, at least one of these elements needs to be missing. Because prizes and luck are central to sweepstakes, the element of consideration is usually eliminated.
Minnesota Sweepstakes and Contest Laws
In Minnesota, if a person has to pay shipping, handling, or any other fees to obtain a prize, be eligible to obtain a prize, or participate in a contest, there has to be a statement in 10 point bold typeface appearing immediately near each listing of the prize in written prize notice saying “You must pay $XX to receive this item” or “You must pay $XX to compete for this item”, whichever is more applicable.
Disclaimer: This information is not complete and only aims to display the most prominent state-specific deviation from Federal laws. This information is for general reference purposes only and is not to be considered legal advice or opinion.