California Sweepstakes and Contest Laws

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.

California Sweepstakes and Contest Laws

California’s sweepstake and content laws are quite strict when it comes to alcohol. You cannot require or even encourage someone to purchase alcohol to win a prize, therefore you cannot offer game labels on corks, bottle caps, labels, or other alcoholic beverage packaging. You cannot require people to visit a retail location that sells alcohol to complete an entry. So, if entry forms are being offered at liquor stores, bars, or other licensed locations, there must be another way to get them. Furthermore, alcohol cannot be the sole prize awarded. Instead, it must be an “incidental part of a prize package”.

Disclaimer: This information is not complete and only aims to display the most prominent state-specific deviation from Federal laws.

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