Frequently Asked Questions
Should I run a sweepstakes or a contest?
This is probably the #1 question we get from new clients, and the answer is “it depends!” While these promotions are similar, they each aim to achieve a slightly different end goal. For example, contests are great for engaging your current customer base, whereas sweepstakes are better for those looking to build that database in the first place. Moreover, sweepstakes and contests have different official definitions, which means that there are different rules for each of them. We invite you to learn more about the differences between sweepstakes and contests.
What are some sweepstakes legal issues to be aware of?
A lot of the legal issues depend on which state the sweepstakes is run in. Each state has its own specific laws regarding sweepstakes, but there are also Federal sweepstake laws that need to be followed. These include paying taxes on any prizes won, recording winnings with the government, and transferring firearms through federally licensed dealers.
Which states have the most legal restrictions around sweepstakes?
Florida is the strictest state, with New York and Rhode Island following close behind. Both Florida and New York require registration and surety bonds for all sweepstakes, whereas Rhode Island only requires registration.
How do we set up a sweepstakes contest?
There are a lot of things that need to happen to run sweepstakes, and the state you are in will guide many of these. In general, sweepstakes usually require official rules, winner affidavits and releases, prize fulfillment, state filing and registrations, surety bonds, and tax forms. If you are unsure about the legality of your sweepstakes in your state, consider working with a sweepstakes management agency.
Are there companies that manage sweepstakes contests?
Yes! In fact, there are several companies out there that may focus on different areas, such as social media sweepstakes, photo sweepstakes, text-to-win sweepstakes, and more. It’s recommended you work with a company that’s well-versed in the type of sweepstake you plan to run.
How do I ensure our sweepstakes is legally compliant?
Be mindful of the federal requirements and look into state-specific laws. Each state has its own set of unique rules that need to be followed to ensure sweepstakes legality. You could need formal registration (NY, FL, RI) and payment of a fee or even need surety bonds or an established escrow account before the start of the sweepstakes. If your sweepstake involves alcohol, then there are even tighter regulations in 13 different states.
What are the official rules around a sweepstakes contest?
There are no universal rules, but each sweepstake must have its own set of Official Rules that are publicly available and explain your sweepstake. This includes things like eligibility to enter, the dates the sweepstakes is running, what the prize is and it’s approximate retail value, odds of winning, etc. Often there are some terms included, like “no purchase necessary” or “void where prohibited”. Once the sweepstakes promotional dates have been announced, you cannot change your Official Rules.
Are there ways around the “No Purchase Necessary” restriction for sweepstakes?
No; you can always request that a proof-of-purchase be sent in with a sweepstakes entry, however, you cannot require it as the sole means of entry. When drafting your rules, ask for a proof-of-purchase followed by an alternate means of entry (AMOE).
Can I give more entries to a person who purchases as opposed to someone using an alternate means of entry?
If your sweepstakes is properly conducted, all forms of entry must have a proportionate chance of winning, regardless of the form of entry. A non-purchaser must be able to obtain the same number of entries as a purchaser.
How specific can entry requirements be? Can I restrict entry to one gender?
While you can limit participation by age, gender, form of media (direct mail, Instagram, Twitter, etc.), or even trade (plumbers, teachers, wholesalers, etc.), we usually recommend against this, as it limits the reach of your promotion. Try to restrict entry only if the product or service in question is specific to one gender (ie. ultrasounds) or age-restricted (ie. alcohol or firearms).
How are prizes awarded in a sweepstakes contest?
Most often, people want to win the following things: cash, cars, and trips (in that order). For trips, airfare, hotels, and other travel considerations do not need to be included so long as that fact is clearly stated in all advertising. There must be winner selection and verification before a prize can be awarded. This can include random drawing(s) from eligible entries on a daily, weekly, or monthly basis, and/or at the end of the promotion. Then, via written Affidavit, each winner’s eligibility is verified to confirm their compliance and agreement with the Official Rules.
Who provides fulfillment of prizes in a sweepstakes contest?
Prizes are usually fulfilled by the company running the sweepstake or by a company running/managing the sweepstake on a different company’s behalf. If the sweepstakes’ Official Rules say that “unclaimed prizes will not be awarded”, then no, you do not have to give away all of the prizes.
How do we select and contact winners in a sweepstakes contest?
Selecting winners is usually done through random drawing(s) from eligible entries. Once a winner is selected and their compliance with the sweepstake rules is verified, contact them through the means provided on the sweepstakes form (usually email or phone). There is no Federally mandated period of time to hang on to entries, but generally 6 months is recommended.
Can a sweepstakes have a cause marketing overlay, where the winner receives a sum of money and can then choose a charity to give a matching sum of money to?
While this is possible, the IRS holds that the winner must pay taxes on the money that is donated to the charity, as it was the winner’s action that triggered the donation. If the winner itemizes their deductions, they could take an equal charitable deduction so that the net effect would be zero. However, this needs to be clearly explained to the winner.
How do I file taxes for a sweepstakes giveaway?
Winners of a sweepstake will receive a 1099 Form to file with the IRS. Prizes are considered taxable income regardless of whether the prize is cash, cars, trips, etc.