I normally write about programming and Internet technologies, so this post about marketing and the law is a bit out of left field. But since I’ve had to consider the issue many times while running my prior company, and many of my readers are small business entrepreneurs, I thought this topic might be helpful. If this post can keep just one entrepreneur out of hot water, I’ll be happy I wrote it. (and if it helps you, let me know!)
Yesterday I got an email about a contest that Rackspace is offering: Win 8 months free Rackspace hosting, for up to $1000/month. Pretty good deal huh? All you have to do is sign up hosting account at Rackspace, and you might be the winner![1]
Bzzzt, wrong answer! Unfortunately Rackspace’s marketing department must not have realized they were violating a Federal Trade Commission law relating to games of chance; contest rules must include No Purchase Necessary otherwise the contest becomes a lottery and thus illegal! According to Polaris Marketing Research‘s article entitled Keeping Sweepstakes Legal:
Sweepstakes are generally permitted in most states as long as participants are not required to pay for the chance to win.
Let’s take a look at an excerpt of their contest rules (85Kb PDF) (emphasis mine):
One winner will be drawn at random… The prize is a waiver of a customer’s monthly recurring fee specified on the Service Order Form up to $1,000 per month for eight months. The odds of winning the prize depend on the total number of qualified entries received.
To qualify for entry in the drawing all of the following requirements must be met: (1) the entrant must be a new customer… (2) the Service Order form must be for a term of at least 12 months, (3) the setup fee must have been paid by the entrant…
Limitations…apply as follows: (1) up to $1,000USD…on the winning customer’s Service Order Form will be waived each month… (2) the winning customer shall pay the amount of the monthly recurring fee in excess of US$1000 per month…
More to the point, from LawPublish.com‘s Contests and Sweepstakes section of their Advertising FAQ for Small Business states:
Sweepstakes-type promotions that require a purchase by participants are illegal in the United States.
Just how serious is this? Someone in CVS Pharmacy’s marketing department was asleep at the switch evidently and New York’s crusading attorney general Eliot Spitzer managed to tag CVS for a $152,000 settlement on a sweepstakes violation. Excerped from the press release:
CVS … offered customers a chance to win a $1,000 … Gift Card … Consumers who … purchased Nicorette, NicoDerm or Commit, … were … entered in the sweepstakes. However, CVS did not make entry forms available … for consumers who did not purchase … and did not inform shoppers how to enter … without a purchase. "State law requires that consumers, regardless of whether they make a purchase, should have equal access and opportunity to enter and win sweepstake offers," Spitzer said.
The blog Resonable Basis offers an analysis of the CVS sweepstakes violation (emphasis mine):
…having an alternative or cost-free entry method is one factor that distinguishes a sweepstakes from a lottery. A lottery typically has three elements: (1) a prize, (2) chance, and (3) consideration (some cost) to enter. If operated by a private entity, a lottery is generally illegal. … Those that want to use a promotion must structure it as a sweepstakes and not a lottery. … Thus, a company that wants to use a sweepstakes to generate interest and sales must make sure that one of the three elements of a lottery — a prize, chance, and consideration — is absent. Those companies that want to offer a prize, which most do, cannot require consideration to enter and must give consumers an alternative — cost free — method of entry.
What’s even more painful was that CVS had gotten caught in the past! From the same press release:
The settlement with CVS follows a prior settlement in June 2004 in which CVS agreed to resolve similar allegations related to its "Trip of a Lifetime" sweepstakes with the grand prize trip to Oahu, Hawaii.
And if all this semi-legal mumbo jumbo get’s you down, the FTC has a consumer protection article entitled Prize Offers: You Don’t Have to Pay to Play! that puts it in simple terms most of use humans can understand. And the relevant point here is:
Legitimate sweepstakes don’t require you to pay or buy something to enter or improve your chances of winning … If you have to pay to receive your "prize," it’s not a prize at all.
So you can bet that Rackspace doesn’t use the Lustigman Law firm as their counsel, the authors of Experience and Peace of Mind (in) Promotion / Sweepstakes Marketing. Or if by some strange chance they do, Rackspace’s marketing department certainly didn’t run this contest by them!
Bringing this topic to a close, you might wonder why this law exists? After all, I’m sure many a legitimate market department has conceived a contest to spur sales. But even if it is done with the best of intentions, if it is a game of chance and you have to pay to play it becomes gambling, and that’s just not something most governments want to allow for many great reasons. And those that do won’t allow gambling without significant regulation and, of course, taxes!
On the other hand, if it were allowed, I can just see the spam now:
Pay only $100 for your subscription to any of the following magazines, and you’ll be entered to Win ONE BILLION DOLLARS!
Your chance to win is 1 out of 1 trillion.
After posting this, my next step will be to contact Rackspace’s CEO and let him know he needs to quickly send out a correction. Wanna bet someone’s head is going to roll in the Rackspace marketing department?
AND FINALLY, don’t let this be you.
- I won’t even mention that at first glance the email implied that everyone could get eight (8) months free…
If sweepstakes and lotteries are based on ‘chance’ to win a prize. What is it called when a person wins the pay to play prize by PURE SKILL (not by chance, not by betting or wagering) ?
I would like to know that too. You may find your self paying to enter a chess competition and could be awarded a trip or cash for winning.
Typically games of skill are classified differently than games of chance. A chess competition is a game of skill.
I couldn’t find any good references but here is one okay reference: http://www.phoneplusmag.com/articles/361feat4.html
what about raffles where you buy a ticket to win something. those are everywhere. how do they get away with it because ive never seen a way to enter to win a car, motorcycle, etc without buying and paying for the ticket.
regarding games of chance or raffles does being a “for profit” or “non profit” have any differences?
@pj great question. Not being a lawyer I don’t know the answer. I knew about the other because I ran a business that needed to know about legality of promotions. I’ve never been involved with raffles so don’t know but I think it’s okay if a non-profit and if state/local law allows. Here are some links:
http://www.raffle-tickets.us/raffle-info-by-state
http://ceventura.ucdavis.edu/4-H_Program/Questions_-_Answers_on_Raffles-_Drawings-_and_Doorprizes.htm
http://www.out-law.com/default.aspx?page=9216
pj, if a non-profit in Florida is having a drawing for a car or motorcycle, they can suggest a minimum donation but all advertising and entry blanks need to state that no purchase or contribution is necessary:
http://www.leg.state.fl.us/statutes/index.cfm?mode=View%20Statutes&SubMenu=1&App_mode=Display_Statute&Search_String=drawings+by+chance&URL=CH0849/Sec0935.HTM
Thanks Mike. Found this as we were considering offering promotions like this. Thanks for explaining it simply.
@Micah: Glad it helped! Hope you are doing well.
Ok well, I am interested in starting a little money making website for myself. I was thinking of using CPAlead.com and their merchandise for my profit. If you dont know what CPAlead.com is, it provides a widget which blocks you from seeing the site every 24 hours, which simply to gain access to the website, you must complete some type of survey. There are 5 different survey options to choose from, AT LEAST one is always free, but it actually requires you to fill out the survey. So i want to come up with a clever name for a website, put this on it ( i gain $1 every time someone completes it ), and provide weekly/monthly/daily raffles ( depends on ammount of traffic) with prizes (size depending on ammount of traffic ), would this be in violation of the law, they don’t have to purchase, just have to do somthing.
Hi @JohnDoe (was this you? :-),
No violation, you are not asking anyone to pay to win something.
As an aside I absolutely despise sites that use CPAlead.com. They start talking at me with the audio on a volume as high as they can make it. They are disgusting! There are much better ways to make money on the web than CPAlead, IMO. Here’s a site where I make >$600/month in advertising direct from the vendors. Create an informational site that provides people with information about a set of products and/or services and directly to the vendors for advertising. Everyone benefits with such an informational site (assuming you provide real informational value) whereas with a CPAlead.com site you are just adding cancer to the web.
Hope you’ll see this and answer!
What about photo contests ?? I attend a Renaissance Faire every year and I like to enter the photo contest with all the pics I take. In the rules it states, “No Purchase Necessary” However, the ONLY way (that I know of, and I’ve been there 6 out of 8 years now), to get pictures of the Faire IS TO BUY A TICKET TO GET INTO THE FAIR. Does this make it illegal ? Can I just go there and tell the ticket takers that I’m only taking photos for the Photo Contest?” Because then I wouldn’t have to buy a ticket ! I know there are people there w/ $10,000 cameras that take pics, but they’re prob. the promotions team or something. What constitutes a visit ? It’s hilarious I just realized this NOW after 8 years of going to the Ren Faire ! ;0)
Hi @FallenAnjel,
Thanks for the comment. That’s a gray area and since IANAL I’m not sure.
If you can only win by being in attendance but you have to pay to be in attendance, well, hmm. The real question to ponder is “Can it be considered gambling?” and I don’t know the nuances because I know many conferences where they have giveaways and you must be present to win.
HOWEVER, since it is a photo contest it is a GAME OF SKILL and thus probably does not trigger this legal concern. In most states it is perfectly legal to have to pay to win at games of skill, but GAMES OF CHANGES where you have to pay are Lotteries thus gambling and hence the problem.
See:
http://contests.about.com/od/sweepstakes101/p/whatarecontests.htm
http://www.legalmatch.com/law-library/article/games-of-chance-vs-games-of-skill.html
http://www.squidoo.com/contest-rules
-Mike
Thank you so much for posting this. I was wondering about the laws in Florida. I guess only state governments can run lotteries :)
Not sure if anyone still checks this old post, but does anyone know if international companies need to conform to this federal law if they allow US residents to enter their sweepstakes?
Hi @Jenn, Thanks for the comment. As for international companies that need to conform if US residents are allowed to enter, I would *guess* that only those who have a physical presence in the US would be required to do so much like how taxation works across state lines here in the US. But I am not a lawyer so I can’t really say, and my guess is that most other country’s would have similar laws anyway?
Hey Mike, I wanted to start a contest in my stores to create a little buzz in the area. An initial idea is to have customers create figures out of foil, cardboard, and other restaurant supplies that come with the meal (ie. soda cup, forks, ect). We’d like to have the contest start locally and then pan out regionally. We will have judges (most likely store GM’s and managers for lower level entries) and a guideline for how the art will be judged. However, is it illegal to require the purchase of an entree at our stores to be admitted into the contest since creating art is a skill? Thanks.
Hi @Trevor,
Thanks for the question.
Prefixing with “I am not a lawyer” I think you can easily do what you want in a few ways:
Give the public the option to acquire a “Figures Kit” that includes cups and forks, tinfoil, etc. You could make them fill out a long form to get a “kit” for free, asking them lots of information about themselves and their dining habits (which you can use for marketing analysis), or require the form be fully filled to get a kit. You could also require them to fill out the form on the web and you could mail them a kit.
This free kit would have the effect of making the contest legal because people would have an option to enter for free yet almost nobody will go to the effort unless your contest gives huge prizes. It’s also not getting around the spirit of the law; the law is trying to keep companies from preying on people who have an addiction to gambling and your contest sounds like a creative way to market to people who are going to pay to eat anyway and not one that is trying to prey on gamblers.
Allow them to use restaurant supplies from any restaurant, or even from home. A few people will do this but most won’t go to the trouble. This means you’ll be able to run your contest and not worry about the contest requirements.
Rename it a “Competition” or a “Challenge” or something else that implies “Game of Skill” vs. “Game of Chance.” Your idea really is about skills and not about chance and its completely legal to ask people to pay for games of skill; any professional sport that offers prize money but that charges an entry fee is an example.
Or do all of the above, just to be sure.
And be sure to market it using the phrase “No Purchased Required” with a footnote that describes how they can enter for free. Plus you might want to run my advice by a local lawyer just to be sure.
Finally, your contest sounds fun! I’d love to hear back from you with a link showing your promotion of the contest and also showing the winners. I assume you have a website for this or if not you’ll at least have a Facebook page?
Good luck!
-Mike
Hi im starting up a social network and im wanting some information on all of this stuff its so confusing im looking at holding daily prize draws which members can enter byy paying 50 sent an entry tho i need software to do it on my network if anyone would know a place and allso the law on doing this …? if anyone has any information on this and might be able to point me in the right direction please drop me a line riventiger@hotmail.com
Hi @Brian,
Thanks for the question. Unfortunately what you are trying to do is exactly what these laws were meant to eliminate. Your idea is basically a lottery, and that’s legally a no-no.
Sorry to be the bearer of bad news…
-Mike
thanks for that mike is there any way around that ? i do know on some places for instance like facebook or some other places they have games where they have free to join games tho the trick is if they want to boost them selves through the game they can buy coins where they can upgrade them selves and so forth and the winner of the game would win the prize is that a way around it or would that be running a fine line of the law….
Hi Brian,
It’s okay to charge for “games of skill”. It’s not okay to charge for “games of chance.”
Hope that helps.
-Mike
Today, I tried entering an online contest where if I made a correct guess of a celebrity to appear at a convention, I would receive special perks. However, I was rejected from entering, being told I had to buy a $75 membership. Is this legal or not?
Hi Tommy:
It sounds very suspect, but I’d have to see the contest to see if they are skirting the rules. Also, if they are outside of a jurisdiction that has these laws, they would still be illegal but if they law has no jurisdiction it may be moot. Of course, I am not a lawyer so this is just my impression.
Hope this helps.
-Mike
Mike, my company publishes magazines, and we have a photo contest that is designed to bolster our subscription sales. We do this by stating that you must be a magazine subscriber to be eligible, but we also include a disclaimer that a purchase isn’t necessary and outlining how entries can be submitted without being a subscriber.
Currently, we plan to ask if our site users are subscribers, and those who answer “No” will be directed to the subscription page before continuing on to the contest entry form.
Are we good?
Here’s a question to add to the discussion – with all those companies that ask you to “like” them on Facebook and share or retweet a message in order to be considered, is that even legal?
You have to perform a task that could easily be considered a marketing job (low-wage, but it provides a direct benefit to the company in question). Wouldn’t this quid pro quo trading marketing services for an entry count as a “purchase” in the eyes of the law?
Hi @Andy: Thanks for the comment and sorry for the late reply. I think you are good because your photo contest is a game of skill, not of chance. But remember, IANAL so best to ask your legal counsel if you want to be 100% sure.
Hi @Chad: Thanks for the comment. Remembering that IANAL, I’m pretty sure that all the “like” requests are 100% legal. The “no purchase required” laws were passed because without them companies could legally run gambling events. But there is no such prohibition for requiring people to give you there time. Requiring time and effort vs. requiring a purchase is I think much better in the eyes of the law, and in my eyes too. FWIW.
Hello Mike,
Thank you so much for helping everyone with this tricky subject. I have a question for you if I may. I run a small accessories business. I would like to offer a photo contest of my customers wearing my accessories. I would like to post these photos on facebook and have people vote for them. The customer with the most votes will win a grand prize (being a game of skill, yes?) and I will have a seperate drawing for all of those who participated in the voting for a chance to win a smaller prize (being a game of chance) and therefore requires no purchase to enter. I am I going about this the right way? Or am I still not using the game of chance and game of skills properly?
Sorry, I realize that was unclear. There will be a contest (the photo contest) on which the customers must be wearing my product, and must get the most votes to win. There will also be a seperate sweepstakes, where the voters go into a seperate drawing with one person winning the smaller prize.
Hi @Crystal:
Thanks for the comment. With the caveat again that I am not a lawyer I think your contest approach is spot-on, i.e. skills and chance.
Good luck!
-Mike
Hi Mike. Many contests state you can write in and request your free game piece or entry or (….) as no purchase required, but can it be viewed that mailing a request or entry requires a spenditure (stamp and envelope) and thereby makes it not cost-free …. would it thereby be illegal? I can see an addicted gambler spending alot of money in stamps and envelopes trying to get a win. Or is it acceptable because there is no transfer of funds to the entity running the contest? It would be a cost to the entrant but not income to the contest. Does it come down to the point of not so much keeping it a “cost-free” issue but a “profit-free” issue (which may be why it’s ok for the non-profits to run these?)?? Thoughts? I know YANAL but thought I’d throw this out there for more deep thought and brain-fuel.
Hi @Bruce:
Thanks for the comment.
My guess is that the mailing issue is okay because the expenditure does not transfer money to the contest holder.So I think “profit-free” describes the intent of the law better than “cost-free.” But again, I am not a lawyer so can’t say for sure.
Ya know, with so many people asking questions on this post me-thinks I should find an appropriate lawyer to many comment…
-Mike
Hi Mike. Of course it’s always good to remember several points: the lawmakers MAKE the laws, but it’s judges who INTERPRET the laws (and thereby support our reference to the INTENT of the laws). There are the lawyers who ARGUE the laws – and win and lose cases, so still comes back to the judges’ interpretation and decision. It would be interesting to examine examples of previously established court decisions in gray-area cases (not that we’d have time and ambition to research for them). So, with a big sigh and wrinkled brow, we throw our shoulders into a shrug having to be satisfied at least with an understanding of the general requirement and intent. If we don’t try to bypass the beaten path, we won’t find ourselves in dangerous woods. :)
Hi @Bruce:
All those reasons, and more, are why IANAL. :)
As for court decisions at least you can look at the Elliot Spitzer/CVS case (although something tells me the brass at CVS shared a private chuckle when the name “Ashley Dupré” dominated the news cycle back in 2008… ;-)
-Mike
In order to accept taking your bet on which head is going to roll in the rackspace marketing department, I only ask if I must buy something to enter.
Hi Mike! I would like to create a scratch card game for my pizzeria (not requiring any skill) where the player could win free food, discounts or a grand prize. We would distribute these cards for FREE to current customers as well as mail them to all of the residents in our delivery area as a promotional tool. Would that be considered a lottery? Also would the prizes have to be no purchase necessary prizes or could we also have “free _x_ with the purchase of __x__” prizes?
Would we have to provide those scratch cards to the public if someone came in asking to take part in this game?
Actually, the way they have it phrased they might be totally safe. The prize isn’t 8 months of free hosting, it’s a waiver of fees for 8 months. If you’re not a customer to begin with, that prize would have 0 value for you.
The only way they’re running a risk is with their requirement that you be a new customer. By making existing customers ineligible, they are flirting with some serious legal issues …
Hey @EricMann – Thanks for the comment.
Prefaced with IANAL, it really doesn’t matter what they win (free hosting vs. waiver of fees) it is still a contest and a purchase is required to have a chance to win. The legal test is if it is a game of change were the winner gets some prize, no matter what the prize is.
FWIW, they changed it but I never updated my blog post (I should have, my bad.)
I know you already answered Chad’s question about having to “like” a business on Facebook to enter a contest, but what about people who don’t belong to Facebook? Why should we be required to join and give private information to an external, totally unrelated company in order to enter a sweepstakes or prize giveaway—or even get a coupon? I found your article because i was looking for hope that there might be legal recourse to stop companies from trying to force everyone to use Facebook (and to a lesser extent, Twitter). There are even websites that only allow commenting if you use a Facebook login! I refuse to be strongarmed into it, but I see that my family may lose out in some cases. I just don’t see how it’s fair to say everyone must join Facebook to participate. I have written many emails to companies regarding specific instances where they require customers to join Facebook to participate in something, but I never get any response. Will there ever be consideration for people like me who refuse to give our personal information to Facebook?
Hey Mike – While I know you are not a lawyer (yet you have obviously done a fair bit of research), do you think the following would be legal:
Instead of the Rackspace poster indicating that a new customer could win 8 months free (which is illegal), had it said, “As a thank to our customers for 8 great years, on December XX, we are going randomly select one of our existing customers and give them their next 8 months of hosting for free.” Technically this would still be a chance event, however, the target audience would have changed; that is, since existing customers are now the target audience and they do not need to do anything additional (i.e. they are not being enticed into making an additional purchase for this chance), might it be reasonably argued that it is not a lottery/gambling but a thank you?
This would be like a store who surprises (i.e. no previous announcements) their 1 millionth customer with some sort of prize. In such a case, a purchase was obviously necessary for the chance to win the prize, however, since it was a surprise and there was no enticement to make a purchase for such a chance, would this be considered a lottery/gambling? Granted, this one millionth customer example differs in that there was not previous announcement of the prize prior to the event actually occurring.
Even as a write this, I doubt that a court would be fooled by such language (because despite the fact it may be aimed at existing customers, new customers may join by December XX for the chance to win 8 months – in which case they are making a purchase for the chance to win a prize which, as you have discussed, is illegal). However, I would enjoy hearing your non-legal opinion on this.
Thanks
Mike,
Great article, thanks for the article.
With the “no purchase necessary” is there any limit to the number of free entries you are required to give away. I am thinking about McDonalds Monopoly, where I could just keep buying big macs all day and keep playing. Does that obligate them to give an unlimited number of entries away?
Also, do you find that companies make it more difficult to enter a contest by requiring people to send a letter, when they could just have them send an email ?
I realize how old this article is, but I came across it after getting an email from footagefirm.com offering prizes randomly to customers who purchased a special package. There is no other link in the email or on the site offering alternative entry methods so I googled the particular law, bringing me here.
For giggles, I ran a whois on footagefirm… they’re owned by Rackspace.
Hi @Chris,
VERY interesting. Big thanks for the comment. I would love to see the email you got; forward to mike < .at.> newclarity.net please?
BTW, I double checked your results and I’m pretty sure that FootageFirm is not owned by Rackspace, only that they have their website located there. The tell? They have their domain name registered through GoDaddy; RackSpace certainly wouldn’t do that for domains they own.
Also, are you familiar with RevoStock? Full disclosure, they are a client of my company NewClarity; we built this from them:
Hey Mike,
Actually, I no longer have the message, reporting it as spam shortly after I got it. That said, the website, up until sometime this weekend, was the deal I previously mentioned and nothing else. Before I spammed the message out, I replied to it mentioning that the contest may have violated FTC regulations by not offering the alternate method.
It might not have anything to do with the switch on the site, but it was pretty well timed.
@Chris – Cool. Thanks for the follow up.
Greetings Mike;
How does the “Like us on Facebook” to enter a contest NOT violate the law?
I as a consumer, I want to enter these contests for iPads, video games, etc. . . but the ONLY way to enter is that I must “Like” the company on their Facebook site.
I for one do not participate in Faceplanting, Twatting or MeSpacing as I feel that they are all violations of privacy issues, and I also for one, have a life that does not revolve around a computer.
In addition, these social networking sites ARE creating REVENUE for their companies through the support of advertising dollars generated to attract MY attention.
Why is this not illegal? and / or require the old school enrollment process?
Hi @Madawg,
Thanks for the comment. First, IANAL so take the following explanation with that understanding:
The reason requiring a purchase is illegal is it would otherwise allows companies to effectively sanction gambling; i.e. “Buy a McDonalds Hamburger for a chance to win $10,000,000!” Clearly that’s little different from selling lottery tickets and it would drive people to buy Big Macs in hopes of winning. That’s not good for society, so they disallow it legally.
OTOH, clicking a “Like” does not require the person entering the contest to part with legal tender and thus does not have the same negative affects on society. Yes, people for whom privacy is paramount consider this requirement offensive, and as someone who is not a fan of Facebook I can empathize. But it’s not illegal because it’s not the same thing.
In a prior era companies might have promoted contests that required contestants to provide their address and phone number and I would assume that people who find the “Like” requirement offensive would also find a address and phone requirement offensive. But it wasn’t any more illegal to require address and phone than it is to require a “Like.”
Maybe if enough people object to requiring “Likes” for contest entrants then a law could be passed to make it illegal. But I highly doubt that will happen, at least not in the USA. Maybe in South Korea?
Hope this helps.
-Mike
P.S. Clearly you are hoping to gain a value from entering, and likewise the contest promoter is hoping to gain collectively from your interest. If having to “Like” is too offensive, maybe you could decide simply not to enter?
Thinking of going into a small local clothing business with a friend and he has this promotional idea that his customers all pay for a particular product and then if enough customers pay for the same product, they play a game where they have to answer a certain number of questions correctly (base on skills). The one who answers the questions the fastest wins a nice prize. Sounds simple but I’d like to would this be considered gaming? games of chance? what would be the legal hurdle of any?
I’m a big fan of the Colbert Report, so I’m not trying to get Stephen in trouble, but…
there’s a Super Pac Treasure Hunt contest where people must by a $99 super pac kit and follow the clues to find the final clue and win. First, the super pac kits sold out really fast–I know that’s not illegal–but more to the point, there was no advertised way to obtain a kit with clues without purchase (or enter in any other manner without purchase that I could find on the site). Since it’s a treasure hunt, does that make it a “game of skill” and therefore exempt from the “no purchase necessary” requirement? Or should others legally have the opportunity to participate even if they didn’t buy a kit?
http://colbertsuperpac.com/
@Charlie – Thanks for the question. Hmm. That’s a grey area to me. It might be okay, but it feels a little shady. Remember though, IANAL so best to ask your own legal counsel to be sure.
Hi @R. – VERY interesting. I too like Colbert, but I don’t know if that would qualify as “game of skill” from this perspective or not. Maybe you can ask a lawyer.
You know, I really need to find a lawyer that would like to answer questions here. Hmmm.
Can I limit the number of times a person can enter to one without a purchase, but the give an additional entry form to people who make a purchase of a certain amount or who make a food donation for our local food pantry?
Hi @holanscar: Thanks for the question. Not sure about that one but probably not because its a lot like gambling. Best to ask a lawyer.
Mike, what about non-profits. Can they run “donate” and get a chance to win a prize type events, where the only way to participate is by donation?
Thanks for the article. The company I work for was advertising a contest (skill) and this ultimately led me to the right answer on the FTC website. It’s surprisingly easy to understand for a government site: http://www.ftc.gov/bcp/edu/pubs/consumer/telemarketing/tel17.shtm
“Skill Contests
There’s one notable exception: skill contests. These are puzzles, games or other contests in which prizes are awarded based on skill, knowledge or talent – not on chance. Contestants might be required to write a jingle, solve a puzzle or answer questions correctly to win.”
Unlike sweepstakes, skill contests may legally require contestants to buy something or make a payment or donation to enter.
Dear Mike, I cannot purchase from both the mail I receive from PCH and the
computer. I have purchased a lot, did my whole Christmas shopping one
year through them and now I have a lot of medical bills to take care of. It
does say “No Purchase Necessary”, which I do not believe. But I receive at
least two if not three packets in the mail. We are retired and really do not
need more things to add to our house.
In today’s mail I received a notice with my bank statement that they are having a promotion wherein you must have their Bank’s Visa card and make a minimum $15 purchase in order to get an entry into their contest. There is no alternate means of entry and I believe, after reading posts above, this is illegal. To whom do I report this?
Hi @kayzee – IANAL so I could be completely wrong, but they might get away with it because you can only make one entry, right? The problem with purchases required is that some people would buy many in hopes of increasing their odds; you can’t do that here, right?
In this case you are also not buying from them, you are buying from anyone and it’s not unreasonable to think you are going to use one of your credit cards to pay for something in the +$15 range anyway, so even if it does tangle with the law, I doubt you’ll find anyone to prosecute them, especially considering how powerful the bank lobbies are these days.
As for who to report it to? Not sure? FTC? The state’s attorney general?
Maybe a lawyer seeing this would answer?
You can enter this “contest” as many times as you want as long as you can afford to keep putting $15 or more on this bank’s credit card. They do benefit when you use their credit card and only their credit card gives you an entry into this contest. This looks like a lottery to me, based on the postings above.
@kayzee Ah, if they allow you to do this repeatedly then I do think it might violate the law.
As an aside, I didn’t say that they bank doesn’t benefit only that you would not be buying directly from them. They’ll make a percentage of between 15 cents and 60 cents on a $15 purchase. But the point was you would not be constrained who you Could buy from except that it must be with a merchant that accepts their card and that’s typically not a limitation if you are going to buy something. But again, if you can “enter” multiple times, that’s probably going too far.
As for who to report to, I really don’t know. I’m just someone who wrote a blog about something I noticed based on my prior business experience and it has obviously interested a lot of people but this is otherwise not my area of expertise.
If you do figure out how to report this maybe comment again so that others in the future who read this and have the same question can benefit from your efforts? Good luck getting it reported.
What if the competition we plan to run has a winner chosen not by chance, but most creative entry for a marketing idea? Our company is in it’s infancy and the challenge is meant to promote sales (since you have to be a past customer to submit an entry) and benefit us as well through the ideas we receive. If the winner is not chosen by chance as outlined above, does the rule of no purchase needed still apply?
What if the competition we plan to run has a winner chosen not by chance, but most creative entry for a marketing idea? Our company is in it’s infancy and the challenge is meant to promote sales (since you have to be a past customer to submit an entry) and benefit us as well through the ideas we receive. If the winner is not chosen by chance as outlined above, does the rule of no purchase needed still apply? Thanks!
What if the competition we plan to run has a winner chosen not by chance, but most creative entry for a marketing idea? Our company is in it’s infancy and the challenge is meant to promote sales, since you have to be a past customer to submit an entry, and benefit us as well through the ideas we receive. If the winner is not chosen by chance as outlined above, does the rule of no purchase needed still apply? Thanks!
What if the competition we plan to run has a winner chosen not by chance, but most creative entry for a marketing idea?
Our company is in it’s infancy and the challenge is meant to promote sales, since you have to be a past customer to submit an entry, and benefit us as well through the ideas we receive. If the winner is not chosen by chance as outlined above, does the rule of no purchase needed still apply? Thanks!
Hi @Carly Garcia,
Thanks for the comment. You are asking about what’s called “Games of Skill” vs. “Games of Chance” and yes contests for games of skill are perfectly legal (although IANAL so can’t give legal advice. :)
Search for the word “skill” in the comments on this page and you’ll see we’ve discussed the topic quite a bit. Hopefully the comments will give you enough understanding of the distinction.
Hope this helps.
-Mike
Hey mike, seeing as how you are still answering questions on the topic of “games of skill” vs “games of chance”. I would like to ask your take on the following scenario. I create a website in which you can play a bingo-like game and win cash prizes. In order for it not to be a lottery game, i would sell a product from my website and the purchasers of that product will receive “free” entries to my “bingo”-type game. People could also print out a long questionaire and snail mail it to me for a free entry, as per “no purchase necessary”. Again, what would be your take on this? Would most of my bases be covered for this not to be considered a lottery? Thanks in advance for your feedback, Enrique Kreuz.
Hi @EKreuz,
Thanks for the comment. Your scenario is nuanced enough that I wouldn’t want to guess at how a lawyer or a court would view it. I will say though that your scenario seems like it would be attempting to find a loophole in the law, to circumvent that which the law was intended to guard against. Said another way it seems that even if your scenario would not violate the letter of the law it would almost certainly violate the spirit of the law. But that is just my opinion so who knows?
Hope that helps.
-Mike
@MikeSchinkel has been amazing at putting together this information and responding to posts/questions. I’ve noticed that MANY of the questions posed here can be answered in the first section of this document, published by the Los Angeles County Bar Association:
http://www.lacba.org/Files/LAL/Vol30No5/2395.pdf
The most valuable information I found is summarized below (in case the document ever goes offline):
If a contest offers a prize, is a game of chance, AND requires consideration, it is an illegal lottery. Get rid of any one of those three elements, and it is a sweepstakes.
A prize is ANYTHING of value awarded to a winner. This is virtually impossible to eliminate, since anything the sponsor gives away will likely have some value, otherwise people wouldn’t be signing up to win it.
Consideration is anything of value that the entrant provides to the sponsor, whether it be money, referrals, or anything that requires significant time or effort from the participant that the benefits the sponsor. This can easily be eliminated by offering an alternate method of entry (AMOE). The AMOE must have equal chances of winning, equal deadlines, and equal prizes. The AMOE must not rise to the level of consideration. The AMOE must be clearly and conspicuously disclosed in all advertising materials for the contest. The AMOE must not be disadvantageous or burdensome when compared to the standard method of entry. Requiring internet access to enter is not generally judged to be consideration.
Chance is the opposite of skill. If prizes are awarded based on something with objective criteria that can be judged, and the judges are qualified to evaluate the entries, it is a game of skill. Otherwise, it is a game of chance.
Hi @Josh,
Wow, thanks for the great comment. Just curious, are you a lawyer and/or how are you so knowledgable on the subject?
-Mike
@MikeSchinkel I just summarized what I read in a document put together by the LA County Bar Association. So the information originates from actual lawyers (presumably – at the very least, members of the California Bar), but I am not a lawyer. I was looking for information to provide to a local small business that emailed me with an illegal looking promotion, and I ran across both your site, and that other document.
Hi @Josh,
Cool. Thanks for the update.
-Mike
I am selling a product. packaged postcards. within these packs of postcards, includes 1 card, redeemable for a free custom guitar. I am not selling entries into a raffle, sweepstakes, or other thing. I’m selling postcards. What are your thoughts
Hi @Dustin,
Although IANAL I think that you’d need to include some other way that people can get an entry card for free if they want to. I don’t think that other way has to be convenient, like maybe you could allow them to write you via postal mail to get a free card but I can’t be sure that would be okay because, again, IANAL. Contact an actual lawyer if you want to make sure.
Hope this helps.
-Mike
In your unprofessional opinion as not a lawyer, could I offer a free entry through mail and charge $1 for shipping?
Thanks Mike.
Hi @Dustin,
Again, as not a lawyer, I can’t say but I think a test to apply is “Is what I’m doing an attempt to get around the spirit of the law where people pay for a ‘lottery’ ticket or not?”
To me what you propose seems to fail that test because you are asking them to send you money. If instead you asked them to send you stamps which you’d use to mail the card to them then it might be okay, but again (drum roll please :) IANAL.
Hope this helps,
-Mike
Yes, I understand that, but the original spirit is to be giving. A cool reward and limited edition art, and in the spirit of baseball card packing style. Each pack of the pre-posted pack amount includes a signed piece of art, hand numbered, and one just happens to include a postcard that says ‘send this in for a free guitar’.
The spirit and goal is to provide a cool reward, even at a low cost, to drive sales quickly, to award the guitar in a reasonable time, not having 150 packs left when it is won, because in the spirit of the contest, all packs are packed before any are sold, and i don’t know where the card or pack is amongst them.
So, the spirit originally intended is to merge cool rewards, limited edition art, and sports card packing distribution.
I could easily provide a postcard sent in a SASE sent to me, but to be fair to the contestants sent in, i’d have to open a pack and distribute those cards out, which isn’t in this spirit.
Again, i understand you are not a lawyer, and i’m not looking for legal advice, just a nice discussion on the subject. :) And I appreciate the quick replies.
I have included my website, which has the product I am talking about.
Thanks! Dustin.
on another thought and possible avenue, is it sketchy, if I sold them to a charity i’m on the board of, for fundraising purposes?
Hi @Dustin,
You don’t have to convince me. I’m no authority on the subject, I’m just a guy who happened to know a little about the subject, wrote about it, and now lots of people want to ask my advice about it. I do my best to help but it’s not my expertise and it’s not even remotely associated with how I make my income.
If you are confident what you are doing is within the spirit of the law then go for it. On the other hand if you’d prefer to manage your risk in case your interpretation is wrong, talk to an actual lawyer to make sure.
Hope this helps.
-Mike
Thanks Mike. I tend to overexplain. LOL. Thanks for the discussion.
What an interesting article AND comments! It strikes me that this post is over 6 years old and the last comment was just days ago. Secondly, I skimmed all of the comments and responses but may have missed it; but nobody seems to be the slightest big indignant at the law itself and the lawyers that come up with this garbage. Or the government that upholds this insanity. We just came off one of two weeks a year where the govt tells us what time it is. Maybe I still haven’t adjusted and am grumpy. But this is something I always wondered about. Now I know. And it still doesn’t make any sense to me. Somebody said it here: so the govt is the only one that can have a lottery. You can read all of the very creative ideas that people have here to promote their business, market their ideas, and bring a little extra value to their customers. But no you can’t. We all need to start having a lot more admiration for the creative minds like you see on this thread and less for lawyers and this modern administrative state. I’m going to bed and will not participate in Daylight Saving Time ever again.
Hi @Hugo,
Thanks for the comment.
Yours is an interesting take. I will say that in this particular case I do think the law against private lotteries is a good law because lotteries don’t actually add value for anyone other than the company selling the tickets and probably for the few winners. On the other hand lotteries take advantage of so many people’s desire to “get rich quick” rather than working for it and they create very little value for the economy (other than funding education like here in Georgia which I must admit is a good thing.)
But if everyone were able to hold a lottery we’d have so many scammers taking advantage of people that I believe it would have a major negative effect on our society.
BTW, I’m a serial entrepreneur that ran into this this law for marketing campaigns we wanted to run but since I’ve really the reason for the law I’ve supported it.
Mike, please stop giving legal advice, especially since some of it is wrong. BTW, IANAL. I simply have an interest in this subject matter.
The best reference I have found in this area is Prof. I. Nelson Rose’s book Gambling and the Law. Re your answer to Bruce, in the book, Prof. Rose says, “There is nothing in the common law definition of gambling that requires that the promoter take the consideration, only that the bettor put up something of value.” Costs of stamps, phone calls, and texts have been allowed in AMOE’s (alternate methods of entry). But, enforcement varies from state to state. The state of Michigan brought suit against Sears for requiring a visit to the premises in order to enter a chance promotion.
Every state has raffle (a form of lottery) laws, usually requiring a license. Licenses are usually restricted to non-profit organizations, maybe political organizations.
Kaysee should report the bank to the OCC (http://www.occ.gov/). Actually, I have found that just threatening to report a bank to the OCC is enough to stop illegal activity. A gambling promotion by, or in, a bank violates federal law Title XII and could result in serious trouble. http://www.americanbanker.com/magazine/117_6/-314022-1.html
Any individual who violates gambling laws is risking a felony, fine, and jail time. Even lawyers sometimes give incorrect advice on gambling. And, YANAL. The lawyer should be experienced in promotion law. So, your best answer to all of these questions is the final line in this editorial: “Show it to a lawyer.” http://www.dmnews.com/editorial-no-purchase-necessary/article/78211/
Hi @Kathy,
Thanks for taking the time to comment. It’s nice to have someone else comment who apparently has some knowledge of this issue.
However, I’m a bit taken aback by your tone. I am not giving legal advice as you assert, I’m giving layman’s risk-management advice regarding a matter of law from the perspective of someone who has paid lawyers in the past to discuss this issue with me. The fact that YANAL either makes your comment a bit hypocritical, especially when I wrote “But again, I am not a lawyer so can’t say for sure” in my reply to Bruce.
Ironically a friend of mine who *IS* a lawyer called me today to ask for some advice on my actual expertise (about WordPress) and I told him about this post, my replies to comments and then your comment and he scoffed about your comment and said “It’s a free country, we have free speech and you can write whatever you want!”
In (practically?) all my comment replies on this post I have made it clear that IANAL and thus anyone who would take legal advice from me as the final word on a legal matter (or from you, for that matter) is a fool. What I have done is make people who’ve read this post and any of my comments aware that there is a potential concern they need to worry about and thus should contact their lawyers if they find themselves are in any grey area.
Further, I am just a guy who wrote a post about a topic that I knew a little bit about that UNFORTUNATELY someone who gets a lot of traffic and lots of comments for his post where this post does not relate to any ongoing interest I have (and note I have no ads on this site – I decided Google AdWords were cheesy – so I get NO benefit from traffic or comments.) Every time I get a comment on this post I think to myself “Ugh, now I have to waste another 10-30 minutes answering” which is exactly how I felt and worse when I got your comment.
Why don’t I (1) take the post down, (2) turn off comments, or (3) just not answer? Because (1) I have an compulsive need to maintain history so can’t bring myself to delete the post and besides I think the post actually helps people. (2) Because I haven’t taken the time to figure out how to disable comments on just this post; I’d probably have to write code for it and I have too many other things I need to write code for. (3) I think it’s rude not to answer comments, I guess my parents just raised me to have consideration for others.
So why is a not-a-lawyer so interested in this topic? You did not give me your URL so I can’t learn more about you and LinkedIn has 23 of you so you are effectively anonymous and thus without any viable credentials.
I’m curious though; why is it that you feel you can give legal advice when YANAL yet feel it is appropriate for you to admonish me for writing what you think is legal advice? According to the fact YANAL you are no more qualified than me? And yes, some lawyers give bad advice; they are humans and humans are fallible. But so am I and so are you.
I have an idea; given that I’d rather not spend my time answered questions on this topic anymore which you want to admonish me for doing, and you seem to be the self-appointed expert why don’t I just forward you all the comment notifications and then you can come back here and provide them an answer that is “better” than the ones I might provide?
I’m COMPLETELY SERIOUS; since you don’t like my answers if you’ll promise to answer all the future questions asked on this post I’ll stop answering.
I mean.. I appreciate your answers.. 🥺 I’m sorry that one asshat said all that though.. and also that you actually don’t particularly like getting comments and wasting your time.. time is money and as you stated – answering these doesn’t pay you anything. I get it.
Your replies have probably helped millions with their curiosity, and ALL of them have been either prefaced with IANAL, or ended with contact a lawyer, or both! That persons comment is just so left field and sounds salty and totally uncalled for – yet you replied with such dignity and respect. You’re a kind soul, I’m just commenting to say thank you!
A reply is not needed 😅 I don’t wanna make you waste more time, just hoping to uplift your spirits. 💖
Well that escalated quickly =)
Thanks for your posts and taking time thru these 6.5 years to keep responding to people.
@Marc – Yes, it did escalate. I guess I was having a bad day. :(
Anyway, thanks for taking the time to post your appreciation.
Hawaiian Air has a contest, but they run it thru Facebook. Facebook requires
You to join in order to enter the contest. Is join to play the same as
Pay to play?
Hi @Chris,
Thanks for the question. I don’t think it’s the same as pay to play given they company isn’t getting directly paid for a joining of Facebook and it doesn’t cost someone a fee to join Facebook. But some lawyer might make an argument that it is the same and then take it to court; until then we won’t know for sure because US law is based on precedence. FWIW, and again IANAL.
Hey Mike,
We, a small for-profit company, started a raffle, and THEN a friend mentioned there might be some legal issues with it. So I’m trying to find a good-natured work-around. The goal is simply to raise funds and offer a chance at winning a legitimate photoshoot and website. So the cost for a ticket is $1 and they are placed in a bowl and the winning ticket wins. So my question is this:
1) Can we first, change the name from raffle, to “sweepstakes,” and then still charge $1 for entry, but also state on the website, No Purchase Necessary, and offer the ability to Mail-In a form for free, giving them equal opportunity to win as well. Would the contest, now become legal?
OR
2) Change the name to “Contest” and add some level of skill, where the person with “Most Creative Photo Idea” for their shoot, would win. Still charging the $1.
We’re a small business with a good heart, and had no idea there were laws regarding a raffle contest. Now we know. Thanks for your help!
I also just saw your convo with kathy a few posts up from here…and you responded Exquisitely Well! Mike…Thank You! I appreciate your humility & knowledge, no matter how imperfect or whatever anyone may feel. You provide a glimpse of understanding on a subject that can make or destroy someone’s business. I implore you to focus on the NUMEROUS comments from people you have Helped, versus the ONE from someone…who…well…you said it best in your reply. Thanks Again Mike! I encourage you to keep helping people!
Hi @Derrick,
Thanks for your comment. Remember, IANAL but…
1.) I don’t think you need to rename it although you can, but if you offer a mail-in form for an entry I’m pretty sure that’s all you need to do.
2.) That should work. But it could also limit entries so you may want to do #1. If you do a contest, might want to charge more per entry.
Yes, it’s not obvious to someone who doesn’t know, like I once didn’t know, but once you learn why the law exists it usually makes sense.
Hope this helps, and good luck!
-Mike
@Derrick
Looks like your second comment crossed my first reply to you. Thanks so much for the kind words. It’s hard to know if I came across reasonable or like a jerk, so glad to hear you thought I was for the former. Again, hope my advice helps.
-Mike
Thanks so much Mike! And you have No idea how I appreciate your timely response as the Contest launched today and I was informed today. I’ll seek legal advice, but you gave me hope and a direction! Thanks Again!
@Derrick – Glad I could help.
Good luck, and if you remember come back and let us know how it went after you finish the contest.
-Mike
Great thread and thanks for keeping it going all this time.
I’m curious about “win your purchase” promotions, where a retailer says “one of our customers will win their purchase free”. If you Google “Win Your Purchase” you’ll see hundreds of these.
They seem illegal – purchase is required, drawing is random. Maybe because the $$ provided is actually for the product it’s not considered consideration for the contest? Also I don’t see any of them offering a way to win without purchasing a product.
Would appreciate any knowledge you can share. Thanks!
Hi @Bob,
Thanks for the kind comments.
You bring up a really interesting question, one I had not explicitly considered before.
So I did Google “Win Your Purchase” and the first page gave me results that confirm you comments. Looking at them I visited four (4) that had an alternate method for entry and two (2) that did not. The four that do are:
These two make no mention of “No Purchase Required” and are probably (unknowingly) violating the law:
The thing is regarding these laws, violating them doesn’t always mean you’ll get caught by law enforcement and/or prosecuted. There has to be law enforcement paying attention and prosecutors who care about this issue, which typically means they pursue things seen as problems by the government, i.e. theft, murder, corruption, etc., things that the public cares about and/or things that can advance their career.
In the “violation” cases above if nobody ever contacts the government to complain about those two sweepstakes, and if it’s only one person does the contacting I doubt law enforcement or prosecutors would care enough to even contact them. Especially if it’s a small company; their reach is limited, few citizens would care and many might see it as government overreach and they couldn’t afford to pay a big fine either.
On the other hand if a company as large as Coke were to run a “Win your Purchase” promotion and didn’t offer a no purchase required way to win, I can guarantee you that a lot of people would complain and law enforcement and prosecutors would see it as high profile and pursue it vigorously (unless the economic development portion of the government overrode their zeal.)
Interestingly they almost all appear to be from Canada, and one from Australia; I wonder if this is culture specific to Commonwealth realm nations? :)
I don’t think I’ve yet said explicitly is that I’m pretty sure of the general laws on this topic related to the USA but have no idea of the law in other countries such as Canada and Australia although for first world countries I assume the laws are similar.
Anyway, hope this helps.
-Mike
Thanks for replying, very helpful.
I’m not sure I get the “no purchase necessary” language in those – if it’s “win your purchase”, and you don’t make a purchase, do you win – nothing?
Also the usemyke.com terms, for example, cite a requirement to “answer a skill testing question” which seems like a weak attempt to make it a skill contest. And *then* they tack on NO PURCHASE NECESSARY.
So in that case at least is seems like they did their homework (read this post maybe ;) and covered themselves.
Very interesting page thank you, I was wondering if there was a way to ask people to put their names down to be picked to be a buyer of a item without breaking the law ? I sell hand made items and have many people wanting my work, I wanted to be able to find a way to pick a name at random who will be the buyer of that certain item. I don’t charge people to put their name down but I will be charging the winner for the item. Is this against the law and if so how could I do it without breaking any laws ? Doing it first come first served wasn’t working
Hi @Cara,
Thanks for your comment and especially for providing a scenario that is unlike any others discussed here; how refreshing!
And let me congratulate you for being in a position where your demand is greater than your supply; kudos! Many people would love to be in the position. :)
To answer your question let me start by saying (again) that I am not a layer so can’t speak to your needs, and not living in the UK I have even less knowledge of your laws but that said I would be very surprised if you would have any issue at all with what you proposed unless you have some very peculiar local ordinances.
I can’t see anything wrong with your idea and it almost certainly does not violate the spirit of the laws that we have been discussing here. You are not creating an “ad-hoc lottery”; basically you are simply offering a method to choose how to allocate to your prospective buyers the opportunity to purchase an item which has a limited supply.
Another method for doing what you are asking is to offer an auction with a minimum bid; that might be the better way to go assuming you are interested in maximizing your revenue. But since an auction is almost certainly legal so should be your idea to randomly select the buyer. And sure, you can capture their name, no problem with that; company’s do it all the time on the web.
Hope this helps.
Thank you so much, I feel very blessed my art work is so popular. I do auctions but they end at such high prices it stops most from being able to own my work so I list set priced and cheaper ones but doing first come first served upset a lot of people due to the same people always getting there first, raffle style way of picking a buyer is very popular with my customers but I have been told Facebook states I now have to use a third party app so I wanted to make sure I’m not breaking the law. This page is a god send, thank you… Please keep it going.
Hi @Cara,
Again, I can’t be *certain* what you are doing is legal but I’m pretty sure it is. You might want to ask a local lawyer for an opinion, just to be sure. Not sure what’s up with Facebook but it’s probably a business decision by them.
Also, why don’t you leave a link to your website or Facebook page so we can see your work?
-Mike
Motivate the masses. Says I won a prize and bought nothing. Bring home the parade.
Do you think it’s still a lottery individuals can wager a specific amount between $20 and $100USD and the system allows them to select whatever they want for a redemption? In this system every single person WILL win a prize that they themselves will select. So the concept is kind of a blind purchase in that they will be purchasing a product but they don’t know what the product is until the server presents them with the items we have available. Do you think a no purchase necessary component is required in order to be within compliance? Thanks!
Hi @JC Marcase,
Thanks for the comment and that’s an interesting spin I’ve not heard of before.
My gut tells me it would probably require a way to play w/p pay because it’s based on chance and not skill, and for it to be viable for the provider of the offer it would need to payout less total than they take in (not that I’m sure that the latter would matter but it does seem to me like that would contribute to being seen as gambling.)
Consider a slot machine that always paid at least a nickel for every quarter that was entered. It seems to me that’s effectively what you are proposing and I can’t see such a slot machine as being viewed any other way besides gambling.
OTOH, and I’ve said many times above, IANAL so best to get legal advice if you really want to pursue this. Hope this helps.
-Mike
Great insight Mike…consideration is ruining a great plan of mine.
Hi Luke from Nov 30 2011 (sorry for the late reply):
Great question, and I don’t know if there is a limit, but it would seem that not having a limit would open a company up for question on the issue. And yes, they probably do want to make it harder to get a “free” entry; if you were trying to use a contest to sell something, wouldn’t you? (ignoring that doing so is probably following the letter of the law and not the intent.)
-Mike
What about a company that forces you to buy a yearly “membership” in order to buy their product?
My insurance company is owned by an association that makes all customers purchase a membership in order to be insured. The whole thing pisses me off. This sounds like extortion to me. Isn’t this against the constitution?
JJ
Hi @JJ,
Thanks for the comment.
Well, I don’t think requiring all customers to purchase a membership has the same issues related to sweepstakes; AFAIK (and yet again, IANAL) there are perfectly within their legal right to require that of you.
That said, maybe it’s time you shop for another insurance company?
-Mike
Mike, As many have said, it’s amazing and shows true commitment to the many years and much advice you have given here.
Knowing you are not an attorney and that I would best get advice from one, I pose following:
What is your layman’s opinion on having a prize giveaway (and would it be referred to as a sweeps?) where they have a no purchase option (simple site registration) as well as further options based on tasks they can carry out as a paid member of the site. The payment for membership is for the administration of the main functions of the site and, if members decide to do any of those functions, they can earn more entries (unlimited if they’re really busy). NONE of the functions involve games of chance or skill and they don’t have to get more giveaway entries, if they choose not to.
Is that clear enough to you?
*A “No purchase” entry option is available just for registering and no payment necessary.
*Becoming a member, the fee is to cover the regular use of the site and the functions of that site
*Additional entries can be earned as a by-product of utilizing the functions of the site, but it’s up to members if they want to redeem for more entries
Thanks for reading and replying. It is appreciated.
Hi @Rachel – Thanks for the comment.
Hmm. Yours is a really interesting hybrid. My IANAL response would be to look closely at how your winners are selected. You didn’t say but since you mentioned their activity wouldn’t require skill I assume you’d select winners by chance? If so then I think it would still be considered a sweepstakes. If not, maybe not.
Honestly, this one sounds like you should talk to a lawyer as it’s beyond my layman’s ability to guess.
Good luck with it and if you do ask a lawyer it would be great if you could give us an update. Thanks in advance.
-Mike
Since writing the other night and researching the subject further, including other venues we had plan to utilize, we decided to go in a different direction and your response seems to indicate that was a smart choice.
Thank you!
@Rachel,
Glad I could help, even if it was only slightly.
Good luck with your endeavor.
-Mike
This law is pure idiocy. If I want to sell product and randomly give away a percentage of my revenue as cash prizes to purchasers in order to drive sales AND reward those who help me generate those sales, what business is it of the government to prevent that? Where is the FREEDOM? Who loses? Certainly, all the potential prize winners lose because now they have no chance to win anything. I lose because I have less of an ability to drive sales, promote my business, and create buzz and word of mouth. The manufacturers of what I would sell lose. The more I bang my head against laws of this idiotic country the more I dislike it. America is not the land of the free. It’s the land of the taxed and controlled.
Hi @Buzz,
While I appreciate the comment, let’s keep this focused on the topic and not devolve into a rant about everything we hate about the current government, or worse a contentious debate! Truth-be-told I could rant about the the NSA, Edward Snowden and Bradley Manning for hours but then that’s not the point of this blog post. :)
-Mike
Hi @Manolis,
I’m so sorry for the very late reply, I just discovered your comment in spam
Although IANAL I’m pretty sure that as long as you allow someone to request a scratch card for free assuming they offer you a postage paid envelop then I think you are pretty much okay. And the reality is that (almost) nobody will every take you up on it but it gets around the law when your intent is reasonable marketing as in your case vs. trying to scam people.
Although IANAL but I think this is absolutely okay because those are more promotions and/or for customer appreciation than a lottery. I think the problem is when your giveaway gives away things for free, or offers something of huge value for a trival cost.
Ask your lawyer but I’m pretty sure you can ask them for a stamped envelope for each card. That said, if you don’t promote the fact that customers can get one by asking then chances are nobody will know to ask. And if a few did, you still got them as customers so where’s the real loss?
Finally, if a lot of people did it then terminate the offer and do something different; be sure to print on the cards that you can terminate at any time so that you won’t be put in a bad position if someone on social media told everyone in town that they could ask for the card (OTOH, if you got lots of new customers, would that be so bad?)
Good luck.
Hi @blue,
Sorry for the very late reply. I just found your comment in the spam folder.
IANAL so I’m not sure of the law, but I wouldn’t see a Facebook promotion as “requiring” you to join Facebook. Of course if you want to particate you have to but there’s no law I’m aware that says any and all prize giveaways need to be made available to any and all people. For example, prizes are given away to attendee of events that require the winners to be present to win and there’s not lottery concern here if you don’t have to pay to enter.
Similarly having to be on Facebook to win is just like having to be in attendance at an event to win. There’s no law that I’m aware of that gives someone the right to win something whenever a company sponsors a contest.
It all depends on what “fair” means. And although it may not be fair I can’t believe it would be illegal, and frankly I would oppose efforts to make it illegal because making it illegal could have many unintended consequences of making other desirable things illegal.
Sorry to say, but the world is changing and just because we don’t like it doesn’t mean it is or even should be illegal. In my case, if I believe strongly in something they I choose to forgo the benefits of participating. Maybe you should too?
Hi @Brian (comment #40),
Thanks for commenting. Sorry for the late reply, just found your comment in spam.
My non-lawyer thoughts are that the cut-off date for “customers as of” would have to be the day before they announced the giveaway otherwise is becomes a back-door incentive to buy and that’s what lottery laws are trying to avoid.
It’s also a tiny bit of grey area in that it could be an incentive for customers not to leave, but I doubt that would be enough to trigger legal oversight.
In this case I think there is no problem at all. As I interpret it the problem occurs when the prize becomes an inducement to spend money; if it’s unexpected then I don’t think it would be a concern.
Now taken to the limit, let’s assume that Walmart started doing similar non-promoted daily giveaways in every store. People would become accustomed to it and would potentially be incented to buy things in hopes to be win that day’s giveaway. I could easily see that they could be prosecuted for that because, as I would argue, the prize is no longer “novel” and thus it becomes a strongly implied lottery. Just my thinking, anyway.
Well, since I write answers as I read per paragraph of comments, I’ve already written your same conclusion above. :)
Thanks again for the comment.
A post from 2006 and still giving.. awesome!
Thanks @Mike!
Very interesting stuff. So, I read for awhile, until my eyes started to get tired, including the http://www.lacba.org/Files/LAL/Vol30No5/2395.pdf article,but it didn’t quite answer my question: What if I find a contest where one has buy a subscription, answer a question correctly and THEN the remaining participants are chosen at random? Does the question eliminate the chance criteria? Or does the randomness eliminate the skill of answering the question?
Hi @Jack,
Thanks for the comment.
As with all my answers to questions on this post I have to start with IANAL but my gut tells me that the purchase at the beginning and the random selection at the end will negate the skill required to answer the gating question although I can’t be sure without the specifics.
The rule of thumb I would use is to consider the spirit of the law; if purchasing increases chances of winning than it’s more like gambling and is not likely to be legal. If purchasing is an entry fee to participate in a true competition requiring skill to win, then it’s more like a contest and more likely to be legal.
So anything that tries to find a loophole in the law still violates the spirit and as such is more likely to be found to be illegal if challenged in court. But again, that’s just my non-lawyer opinion.
-Mike
thanks for the opportunity!
!
I’ve noticed an increase in even major companies skirting or outright violating the law. When you call them out by asking, no DEMANDING they give you an alternate entry method they are like Deer in Headlights.
During the Real Estate (Agent/Bank Created Bubble) Run Up there was a contest I saw that was only for people who had purchased a home through the sponsor…and the contest company was in New York! NO Alternate entry!!!
Now I see a major corp with heavy ties to D.C. with a contest where you have to PHOTOGRAPH (not render in cyberspace) your kitchen design with their Appliances!!! No Purchase Necessary? Are they LENDING entrants their products to be photographed?
Conte$t – thanks for the comments. If you see those I’d suggest you contact the attorney general in the appropriate jurisdiction. Or at least link to them here!
Great post, I’ve learned a lot from it, but have a question for you. I’m a for profit business in California.
Want to have a monthly give away of an item. Entry would be free by mailing me name, address and phone number. Drawing would be random at the end of the month. Would I also be able to charge $1 for additional entries and or count a comment and like on facebook as an entry?
Hi @Brandon,
Thanks for the question. That all sounds good except maybe the $1 for additional entries; you really should ask legal counsel about that because I’m just not sure.
OTOH, given it might trigger the gambler urge, it’s probably not something that would be legal. The Likes on Facebook are almost definitely legal, though since it doesn’t cost them anything and you can’t spend them, directly at least.
-Mike
What I’d like to know is how all these online contents get away with demanding access to your ‘friends’ list or email contacts in order to enter. Those lists have monetary value so how is it any different than requiring a purchase?
Hi @Amy,
Thanks for the comment. They get away with it because there is currently no law against it. :)
Seriously though, the reason why “No Purchase Necessary” is illegal is not because of gaining access to assets of value but that those laws are designed to keep companies from running what is effectively a lottery which is a gambling endeavor and thus regulated.
You providing access to your list does not reduce the money you have (at least not in an obvious way) and after you’ve given it once you can’t get “addicted” and then give it to the same company again and again. And even if you did give it a 2nd time you would not sustain a loss from the 2nd time. So asking for a list is not like running the lottery and thus, not illegal.
Hope this helps.
Do government entities, such as elementary schools, have any sort of immunity?
We have a very trivial matter at the moment where our Maryland elementary public school is have a “Guess the number of balls” raffle for students, but only for those who purchase a school lunch. Due to food allergies, our kids bring their own lunch every day.
Not that we’d bring this to court, but is the law on our side or do they have some sort of immunity because they are government run? I’d want to know if I can warn them that they’re running afoul of the law in hopes that they change the rules.
Thanks,
-Mike
On second though, my previous post falls under “raffles” and is totally different as seen in the comments. You can delete my comment, sorry to bother you. Great article by the way and kudos to you for still answering people after all these years.
Hi @Mike,
Thanks for the comment. I actually have no idea all my experience is business. You could always tell them it applies to them and let them learn otherwise. :)
-Mike
I have a question. There is this guy on YouTube that is giving away several custom computers to his subscribers of this YouTube channel. The title of the video is “Multi-System Liquid Cooled PC Giveaway”. But the only way to enter is by buying his bands music, without doing that, you won’t be entered into his public giveaway. This isn’t the first time he’s operated one of his giveaways this way, a couple weeks ago he did the same thing with another giveaway. Isn’t it illegal to hold a public giveaway and make people buy something just to be able to enter?
Hi @MichaelT,
Thanks for the comment. Although IANAL, I’m pretty sure his is a clear-cut case of violating the law. Of course, what law may matter, depends on what country he lives in?
If he’s a US Citizen at least, make a comment and send him a link to this post; he probably doesn’t realize he’s violating the law. This is a law that most people are simple unaware of.
-Mike
He is a citizen of the US, and I have sent him the links to this and several other wabpages by facebook that give the rules that he must follow. I know he’s going to be upset to get it, he doesn’t think he’s doing anything wrong. But it’s unfair to tell people that if you want to win something, you first have to pay me money. I wouldn’t even have said anything if he called it a raffle, but he calls it a giveaway. And I wouldn’t mind buying his music if it was something I actually liked. But I’m not paying for something that I will never use just to get a chance to win something else. And besides, $25 is a lot of money to pay for music.
@MichaelT – You could contact the Attorney General in his state, but they probably couldn’t care less.
I hear you about paying for his music, but realistically what’s the chance you’d win anyway? I pretty much ignore all giveaways because the reality is the chance of winning is so small anyway, why try?
Let me ask you something that perhaps you may be able to answer. Let’s say hypothetically I were to hold an online raffle to give away something, no purchase required. Everyone who signs up get’s a free entry into the draw, although if you wanted to make another entry you were required to pay $1 per entry. Would this be in violation of the Federal Trade Commission law, even though it is a no purchase required draw?
Hi @Ryan – Thanks for the comment.
Although IANAL, I’m pretty sure it would violate because once they enter the first time then it becomes purchase required and is like gambling, which is what they want to avoid enabling.
Of course if you allowed them to get addition entries beyond the first free one via postal mail, I think that would not violate the law (i.e. they send you a postal mail requesting an entry and then you give them one for free, for each mailed request they send.)
Of course if you charged $49 cents per entry than it costs them the same to mail you a letter as it does to pay you for the entry so that might be a way to skirt the law…
I’m just floored that you’re still answering questions about this topic. Thank you for your dedication!
I have an interesting scenario I’d like your thoughts on. A few years back I entered a “giveaway” for a video game by spending “points” I had accrued via in-store purchases at Game Stop (which were equivalent to about $70 worth of merchandise). They also offered a No Purchase option by mail, which I took advantage of to the tune of about $100 worth of stamps (what can I say, I really wanted to win). Months passed and I figured someone else won the contest, but then something started to nag at me. What if nobody won?
I started doing some research and could find no information about who had won the prize. In fact, the original promotion and all details about it have mysteriously vanished from Game Stop’s website. I attempted to contact both Game Stop and the developer of the game for information about the contest and received no reply. At this point my curiosity had turned to frustration, and I began to wonder if they even had the giveaway in the first place? And even if they did not, did they break the law? Who would hold them accountable?
Then I started thinking about other “raffles” I’ve participated in over the years… $10 or $20 here and there for a chance to win a rifle/tv/etc. What’s stopping those people from just packing up their booth out in front of BigBoxStore and rolling around in all the money they collected? In all of your research, did you ever come across any laws that state the prize actually has to be given to the winner? I mean, it seems totally obvious that not doing so would be illegal, but how would anyone ever know?
Hi Mike,
I need your comments please.
Our online store sells US merchandise to consumers all over the world. All our clients do a once off online registration before first purchase and thus become a customer. We offer a service to all our customers by exporting goods to their door. Then we offer VIP membership to regular shoppers at a $ monthly/yearly fee which gives them things like free shipping etc. We now want to take a x percentage of the membership revenue and give that back to our loyal members in the form of a daily/weekly or monthly cash prize/gift card or voucher. From what I read above, this sounds to be illegal? Would it be legal if we allow all registrants the chance to win the prize, even if they are not VIP members?
Thanks and regards
Chris
Also,
This option to pay for membership at our online store, get members benefits that others won’t get, like discount pricing on all stock, free shipping, and then the chance to win some prizes. We see it only as an added benefit to become a member, but also in return will boost membership sign-ups and sales.
Hi @Chris,
Thanks for your questions. Hmm. That’s a grey area for me, I don’t know. It’s not like people would be incented to buy multiple VIP memberships in hopes to win, so you may be okay. But then I’d buy an hour of lawyer time and run it past him or her to make sure.
-Mike
@Chris – And if you do find out from a lawyer, it would be great to let others know in the comments here. If yes, please mention the jurisdiction(s) covered.
Will do, thanks
Hi Mike
would it be legal to ask users of a game to click an ad if they want to get another 1000 chips to play again. I dont ask for any money to buy chips. but I want to give cash prices for the winner.
tia
Hi @Toni,
Thanks for the comment. Yes, I think that would be legal. Again, IANAL but I’m pretty sure since you would not be charging the “gamblers” but instead the advertisers you’ll be okay.
Of course trying to find advertisers willing to pay for that might be the other struggle.
-Mike
Hi Mike
thank You for the answer and all the efforts You give to answer all questions. ( I have read all Q&A)
is there a special reason why You are saying it might be difficult to find advertisers?
I want (if possible) to add it to facebook and still dont know to have it also as HTML5 or Android/IOS app
sure that regarding advertisers I need many daily page views.
how would an ad view if I have a player who will play the game for a few hours a day? he will see the ad many times, so would this count as one view or as many he saw? sorry if it is off topic or silly question.
tia
Hi @toni,
Thanks for the compliment.
The goal of advertisers is either direct response (often sales) or branding, and getting people to mindlessly click on an ad won’t increase anyone’s sales.
And unless what your users have to do is tied to their brand such as a puzzle they have to solve that makes them think about the brand then your reason for getting people to click on ads provides no benefit to advertisers, at least for legitimate advertisers.
OTOH I’m sure people trying to distribute backdoor viruses would be happy to pay for clicks, but that would be rather unethical, no?
So, if you want advertisers I’d recommend thinking like them and asking yourself if you would pay for those clicks? If you can come up with a way to get advertisers excited about those clicks, then you’ll have something.
Good luck.
-Mike
@Mike
thanks again for the detailed answer.
I fully understand Your point and gave me a lot of new thoughts :)
as I already mentioned I want to give the winner a cash price. can I make the rule that each player gets 100 chips for free and the one who reaches 10k chips first is the winner of xxx$ cash?
or would this smell like a contest/tournament and maybe not be legal anymore?
tia
Hi @ton/tia:
Contests and tournaments of skill are completely legal. It is games of chance that are generally not legal. So go for it!
-Mike
Hi MIke
the game I want to offer is a game of chance. will it still be legal when I will say that the first who will reach the 10k chips target will win a cash award? each player starts with 100 chips (free)
Toni
Hi @toni,
I guess what I was saying, if you make it a game of skill (doesn’t have to be significant skill, just not chance) then you are okay. If you make it a game of chance and you don’t charge them for the chance then it’s okay.
Anything beyond that has exhausted my layman’s understand and it’s time to seek advice from legal counsel who actually know the laws for certain, unlike my simple understanding, which could be wrong in your case. Remember, IANAL. :)
Good luck.
-Mike
@Mike
thank You for Your patience and help, very much appreciated
Toni
Hi Mike! I know YANAL but I wanted to present this scenario anyway and get your opinion. :)
I am teaching an online class, where people have paid to take the class from me. The class hasn’t started yet, but I decided a couple of weeks ago that I would give away some prizes during the class each week. I thought I would just take all the names of the students and put them in a jar and draw them out. I thought it would add interest during our webinars.
In advertising the class, I’ve made no mention of prizes being available, so no one can use that as a reason to take my class. (Well, I did post once on FB a photo of some of the stuff I thought I’d give away when I came up with the idea.)
If I want to just give away something, does everything have to rise to the level of a sweepstakes? Can’t I just give a prize to someone if I’m not using that as an inducement to pay for my class?
So, if I want to run a “contest” to win a package (Pepsi for a year, free guitar, perks at a concert, etc..) and they are entered when they purchase pre-sale tickets in Illinois, that would be illegal? Unless, I give them a way to enter by a free method, such as by mail or email? Am I understanding your example right?
Hi @iTomHarness, although IANAL, pretty much yes. There needs to be an option to enter with having to make a purchase.
-Mike
Hello. I was wondering about a game I am currently making if it falls into illegal territory. Haven’t really been able to find any good resources online to say yay or nay.
The game involves making a random choice, ei a room for your character to walk into. If you choose one of the right rooms, the character moves to the next level, if you choose the wrong room, the character gets set back to level 1.
The real question I have is, is it legal for me to pay a prize for the first person that reaches X amount of levels? There is no entrance fee for the game, it is free to download and play, and the only stuff you can buy in the game is cosmetic art packages which affect nothing for the gameplay. There will be ads in the game, but nothing that “takes substatial” time from the player, they are just always present on the screen.
I would like to do something like pay 1 player a month for whoever reaches the max level or whoever gets the highest. Again, there is nothing you can purchase which increases your odds of winning.
Hey Mike great info you stirred up. So I’ve read most all of this thread…and what if I simply sold products people wanted at a fair price and then I randomly held a “customer appreciation” drawing. To give myself a marketing advantage over my competition, I could say 1 in every 500 customers has the opportunity to become one of our Customer Appreciation Ambassador’s. Am I not allowed to give something to one or more of my customers to say thanks for buying that widget so long as the widget purchase was their primary incentive for becoming/continuing to be my paying customer?
@mikeschinkel
In your “Not A Lawyer” opinion, can a membership-based gym have a periodic prize giveaway of products and promo stuff for “members only”. No purchase necessary beyond their regular membership fee. Only requirements are that they are active (paying) members, that they show up to the gym and that they post it on facebook at least once during the giveaway period. if you’ve already answered similar questions, I apologize.
@Ebony – Thanks for the comment and so sorry for the late reply, you have probably already delivered the class that you asked about.
In my NAL perspective I think you *might* be violating the letter of the law but not the spirit, and given that the chance that a procesutor would ever go after you is (IMO) slim-to-none. And if one did my guess is a judge would probably dismiss the case.
Again IANAL, but since your situation was not violating the intent I doubt you’d ever get in trouble. Unless you started making literally millions off your class; they you might need to worry. (Problems you wish you had? :-)
-Mike
Hi @Shane,
Thanks for the comment. My NAL intuition tells me you should be okay assuming you don’t imply that buying stuff in the game improves their chances of winning. Good luck.
-Mike
Hi @Dave,
Thanks for the comment. I really think that your approach would tread on the law a bit too much. You’d probably be okay if you would add some level of skill somehow and/or allow people to enter who do not buy by sending you a postal letter asking for entry. You could *probably* also give them a credit for some amount in your store. And you can probably do it if you get them to Tweet something in exchange for the credit.
I dunno. Seems like grey area to me. You might be okay or might not, but then again IANAL as I keep saying. :)
Good luck!
-Mike
Hi Jayme,
Thanks for the comment.
In my “NAL” opinion, I think you can make it work. If showing up to the gym a certain number of times is required, then that’s somewhat a form of skill and posting on Facebook is a form of skill (a skill for the benefit of this question, that is.) And if there is only one entry to win, i.e. one entry per membership, I think that helps.
So, while you might want to check with an actualy lawyer, you are probably good to go on this. Good luck!
-Mike
Mike and others,
In the USA, the FCC requires that sweepstakes may not have all 3 of the following: prize, chance, and consideration. I own a business that pays members to view advertisements and we give out jackpot entries into a nightly jackpot.
Since there is no purchase or any payment from our members to us, would this still be classified as consideration and thus an illegal sweepstakes?
Thanks for you time,
Tony
I don’t to make any purchase.
How do IO enter.
Just got an email from Oprah’s O magazine and based on this thread, seems like a clear violation.
“Because we so value our subscribers, we want to share an incredible opportunity: Join O’s Circle of Friends at the Premier level and enter to win a one-of-a-kind copy of our very special 15th anniversary issue—signed by Oprah and adorned in Swarovski crystals!—plus beauty products worth $500! This is just one of the perks enjoyed by O’s Circle of Friends Premier members. Interested?” If you click on “register”, it tells you that you pay “only” $199 to join ($”597 value”)
What do you think?
I do not need anything else, I do not want to buy any thing. I want to enter without any purchase as your ads say.
Hi @Tony,
Thanks for your comment. Personally I don’t think your business would be violating the “no purchase required” law since you are only asking for time, which might even be construed as a form of skill?
But, as I’ve said above, IANAL so I can’t be sure. Good luck.
-Mike
Hi @Antonio – Thanks for the comment.
How do you enter what?
Hi @Ja Fe,
Thanks for the comment. I think O magazine is in clear violation. Unless of course there is fine print some where that offers a no-purchase alternative. What’s the link they send you to?
-Mike
Hi @Elaine,
Thanks for the comment.
What do you want to enter? And what do you want to NOT buy?
Also, you do realize that the ad displayed is not “my” ad, correct?
-Mike
Hi, I’ve purchased products such as Prize Candles, which are a candle with a piece of jewellery inside.
According to their website, you have a “chance to win” a piece worth up to $5000 in every candle (by entering a code found in the product into their website).
Is “gambling” on something like that in the product itself not in violation of the anti-sweepstakes/lottery laws?
I’ve also seen similar companies run promotions (contests?) where buying a particular product, a holiday one for example, gives you a “chance” to win other prizes, like TVs or game systems.
Is that part illegal (I haven’t seen an entry-less way to enter offered)? What’s the difference between the jewellery “prize” and the electronics “prize”, if there is one?
Thanks in advance for your help.
Hi @Alice,
Thanks for the comment. Given what I know I would think that these Prize Candles are indeed in violation of the law (although IANAL so can’t say for sure.)
And if they are illegal then just like the person who runs a red light when nobody else is around they have gotten away with it thus far. Probably because no one has complained to anyone in law enforcement who cares enough to charge them.
-Mike
Thank you for all the information you have provided.
We are a restaurant. We have created a loyalty program for our members (it is patent pending) where a customer walks in and texts a code to a telephone number. This activates a game (currently a spinning wheel) and the customer wins a discount of 5% to 100% OFF a meal. This discount is displayed on a big screen and sent by text to the customers phone. By spinning the wheel for the first time they opt in to our loyalty program (they receive a text message stating that) along with options to opt out.
Obviously we use their tel number to market special offers to them (each offer has an opt out clause).
Are we in any way falling foul of the Lottery and sweepstakes rules? These discounts are not for the general public, only for our members (becoming a member is obviously free). We also have a sign in our restaurant stating standard text messaging rates apply (we do not profit from them ). Would love your opinion.
Hi @Andy,
Thanks for your comment.
Based on my non-lawyer experience, I’m pretty certain that your program does not run afoul in any way with the “No Purchase Required” laws. You are not charging them for a chance to win something, and you are only giving them a way to get a discount, not something free.
And since the laws are okay with requiring a contest participant to pay for a stamp to mail in a request for an entry I think text messaging charges would be viewed as the equivalent.
So I would not sweat it at all; I think you are fine. And is sounds like a great promotion; best of luck!
-Mike
Dear. Mr. Schinkel,
This law was just brought to my attention recently as I had a raffle in my store (Ca). Each time the customer bought $10 worth of merchandise (and they took the merchandise home, I’m not just charging for the raffle ticket) they got an entry into my raffle. After 4 months of that the customers gathered and I gave away a really kick *ss prize and someone went home really happy.
I was going to start a 2nd raffle and a customer tells me I have to have ‘no purchase necessary’ in my wording. My question is this, can I continue the way I have been if I add ‘no purchase necessary’? If I add that and then enter each person who asks to enter the free of charge. If I have a sweepstakes, can I still give out “sweepstakes entry forms” for purchases also? Thank you so much for this thread and advice, you’re saving so much hassle I’m sure everyone appreciates your time. Thanks!
I’m doubt any one will be able to answer this as it was written so long ago but I’m curious and new to all of this so i wanted to be sure before i spend money I don’t really have on a prize lol. I was curious, I am technically not a business yet, and am still incredibly small to a basic Facebook page and website for graphic design. I am planning on throwing an online party to celebrate an achievement of my page. THE POINT- I wanted to do a contest or giveaway featuring a large prize, something big to catch peoples eyes. Of course big for me however is a 50 to 100 dollar prize. Anyway I was planning on having them purchase or donate say a minimum of $1 for one entry. But from what i read that is illegal. And from what you wrote it looks like if i throw in an entry that does not cost say ex. follow my website then it is not longer illegal? am I understanding this correctly?
Breezy
Hi @Jim A:
Thanks for the question. Although IANAL I’m pretty sure continue as is if you offer a ‘no purchase necessary’ option. It can be in fine print and I think you could even require they postal mail you a request for an entry or something to keep a few people from asking for a ton of free entries.
If you do the above, (almost?) nobody will actually go to the trouble and you’ll be able to continue as is. At least I’m pretty sure of it. If it were me I’d do the above and then just ask for forgiveness if it was not sufficient (I doubt anyone government official will raise an issue if you are offering a method for free entry.)
Hope this helps.
-Mike
P.S. Yeah to the form, but personally I’d worry about calling it a “sweepstakes” as Googling I get that “Sweepstakes are a form of gambling, especially on horse races, in which all the stakes are divided among the winners.” And gambling is exactly what the law is trying to combat.
Hi @breezy,
Thanks for the question. Yes, I think you understand correctly. I think you can require they postal mail you a request for an entry just like I told @Jim A above, but you need for it to be free although IANAL. Also, of the $1 goes directly to charity then even better, or at least it will have better Karma.
That said, you’ll have to have a lot of friends on Facebook to get many people to actually pay $1. I think you’d be better off asking for $10 (the decision to spend $1 or $10 is actually pretty similar psychologically) and it will be better for your charity. (Or did I misunderstand when you said “donate” and that you meant for them to donate to you?)
-Mike
What about a weight loss contest, where the person who loses the most weight wins a prize. This is not a sweepstakes, or game of chance. But i would want participants to purchase our meal plans in order to participate?
Hi @Amy,
Sounds like a game of skill, so I think you are good. But you might want to check with a lawyer just to be sure.
-Mike
Mike, quick question. In a “non-consideration” contest, do you know if it is permissible to give away Cash prizes in the state of Georgia??? or must you give away only items, like cars, tvs, etc…???
Hi @Ron,
Thanks for the question. I’m in GA too, but as far as I know there should be no reason you can’t give away cash. But, check with your lawyer…
As an aside, I think people might get more excited about things they can visualize they would not normally splurge on for themselves; most people will just pay bills if they get cash.
Hope this helps.
-Mike
Hi @mike here’s a question for you.
I am aware that you are not a lawyer but I have a question I can’t seem to find the answer to anywhere.We are a small marketing agency. We want to learn more about consumers. So we created a Facebook page where we could post surveys. If you take a survey you are entered to win anywhere from $10-$200. There is one winner per survey. Our goal is simply to collect opinions to learn more about the industry and better our clients’ following. Are we doing something illegal if we post surveys on this site? They do not have to purchase anything to enter. They simply have to take a survey no longer than 30 questions. sometimes there are shorter ones too. The survey length ranges from 3-35 questions.
Hi @morgan,
Best I know, you are good since you are not requiring a purchase.
Personally though, I would keep the survey’s closer to 3 than 35 questions. I myself reach survey question fatigue around 5-7 questions and just leave. Other’s might answer randomly to be entered to win. #justsayin
-Mike
Is there a way to legally sell a limited number of raffle tickets or something else (perhaps for instance, fresh baked goods or costume jewelry or flowers) for a chance to have a number or name drawn for the purpose of becoming the new owner of a used Jaguar automobile wherein a portion of the proceeds is donated to a charity?
Awesome info Mike! Super cool of you to keep up with responses after all these years. I was wondering if you could answer me this? I am starting up a new business and I will only cater to the residents of one apartment complex to start. I won’t require purchase, but can I close off who can win? Meaning, open to all residents of “ABC Apartments” only. I want our monthly drawings to be not only good marketing for the complex, but also a good sell for my customers. All customers would be automatically submitted into drawing each month, but others (residents only) would have to sign up online. Does that all sound legit?
Hi @Sherry – Thanks for the question.
Yes, but only if you provide people who want to enter a chance to enter for free. I believe you can require them to mail in a request with a self-addressed stamped envelope, which almost nobody will do, so that’s a way around it.
Hope this helps.
-Mike
Hi @Lisa – Thanks for the question.
AFAIK there’s no reason why limiting it to just people in one apartment complex should be an issue, unless there is some other law I do not know about.
The basic issue is “Are you enabling gambling?” If not, and it does not seem that you would be, then no problem.
To be super safe you can ask a lawyer but my guess is you’ll be okay.
Good luck.
-Mike
Mike,
What an awesome thread. Amazingly, I don’t think I saw my question covered, so I’ll add to the list.
We’ve worked with car dealers for years who have done “with purchase” giveaways and had no problems as there is no chance – every customer who buys a car gets a $500 Gift Card or a new gas grill.
Now we’re kicking around an idea with a car dealer client who wants to have a promotion with a prize board of 100 prizes that would range from $10 prizes to a couple of $500 prizes. Like the prior described “with purchase” giveaways – every purchasing customer would get a prize – so the odds of winning are 100%…but does adding “chance” to what prize they would win now make this a promotion that would require adding a “no purchase necessary” element? What are your thoughts? Any other resources you suggest I try to fly this question up the legal flagpole? The client is in Pennsylvania if that makes a difference. Thanks!
Hi Tim,
Thanks for the comment and question.
If everyone who buys gets the same giveaway then it is not gambling, so no problem.
But if you add chance to the size of the giveaway then it *might* cause a problem. However given that the prizes are much smaller than the purchase (I assume a car purchase?) I don’t know if it would be a real issue.
But these questions are above my pay grade. You should ask a lawyer (and come back and let us know the answer!)
Good luck.
-Mike
Thanks Mike,
I actually have a call opened with the FTC and am waiting to get a callback from one of their staff attorneys with their opinion on if this would constitute an illegal “lottery” or not because of the “chance” variable. I’ll report back. :)
So, brainstorming what to do in the event the FTC lawyer says no, you’d better not do that…I’m thinking that we’ll maybe offer a “$100 gift card with purchase” for the first 30 car buyers starting August 15th…and then take the remaining budget and fund building a reduced prize board that would become a “register to win – no purchase necessary” element of the promotion. I think we can request a “test drive” to enter – unless they don’t have a drivers license in which case you just enter them to avoid having an issue.
The question I do have – do non-purchasers have to be given an “equal” chance to win?…or simply be given “a chance” to win? Is it legal to give each buying customer 10 entries compared to to a single entry for a “no purchase necessary” entry? Or is that a no-no too? Thanks.
Mike, This thread is epic. Usually a thread will only continue this long if people are yelling and screaming at each other. Outside of that one lady that wanted to tell you to stop giving legal advice (ridiculous), it is actually a pretty good informative read. I think this represents an unfortunate situation where we get so many regulations that we need to pay people to explain the laws to us. Even if you were a lawyer, it would still be your opinion. No judge excuses a criminal because their lawyer told them it was ok. I digress.
The questions I have are regarding a spinning wheel we built. We planned to let people who spent $10 dollars or more in the store spin and win any of the prizes on the wheel. There are no real big money prizes. Mostly coupons or 50 cent prizes etc. It is more for fun. Research on legality has me questioning this.
Could a physical wheel spin be considered a skill game? All the prizes are visible and the only rule we would have is the wheel needs to go around once before stopping. It would take a whole lot of practice, but you could get pretty good at it. As much skill as the toy claw games should be considered, and you actually get something no matter where your spin lands.
Would we be better off just letting everyone who comes in the store spin the wheel? In this case we would limit one spin per person for each day we brought the wheel out. One spin per person per day seems like a reasonable restriction. Maybe a good one for the spirit of the law protecting obsessive gamblers.
Because there are unlimited amounts of each prize on the wheel, could this be different than a raffle/sweepstakes where there is only 1 big prize and only 1 person will win it?
Just curious what your N-A-L opinion is.
Thanks for all the time you have already put in to this!
Hi @Michael G,
Thanks for the comments and question. While I too hate to pay $350/hour for a lawyer when the market for my services seems to max out at $100/hour, I do see the benefit in paying them when nuances of the law are important. I happen to be interviewing lawyers right now who have expertise in GPL and open-source because that is something non lawyers rarely understand fully.
As for your “spin the wheel for a purchase” not sure if I would offer to let anyone spin because you might see people returning daily for a free spin. I would just offer a free spin if they mailed you a SASE (self-addressed stamped envelope) and you could return them a ticket in the mail to give them a free spin. I doubt anyone will actually go to the effort but it should cover you, I think.
Of course, that is just my N-A-L free advice, so value it for what you paid for it. :) Good luck.
-Mike
Hi Mike,
I have a question. My daughter has a rare form of epilepsy and I started a side business to raise money to pay for her medical bills, etc. Would it be legal to hold a raffle for a prize, if the tickets are technically given to people that purchase an item from me? I.e. $1 for a pen and you will also get 1 raffle ticket. If not, would it be legal to charged an entry fee and then email a question or riddle and the first person that answers wins the prize?
Hi Mike,
I work for MyLotto, and i would like to discuss with you on PM regarding advertising in your site. Im also available on skype as adam_3114. Would appreciate your answer either way.
Best,
Ryan
Hi @Vanessa,
Thanks for the question, and I am so sorry to hear about your daughter.
Unfortunately your raffle is gambling and will get you in hot water. If you want to run a raffle then you will need an option to get a free enter; look above where I talk about SASE.
On the other hand, why not just run a GoFundMe campaign? I bet it will be a lot more successful if you have friends on social media that will promote it for you:
http://www.gofundme.com
I hope that you can meet your financial needs and that your daughter’s health improves. Best of luck.
-Mike
Hi @Ryan,
Thanks for the offer but I don’t accept affiliate advertising on this site.
-Mike
What gets my goat is when Hawaiian Airlines offers giveaways for trips and point. The catch is you have to join FaceBook to enter. Seems my info is a commodity these days. Is the airlines required to offer another way to participate without having to join a social network website?
@Chris,
Thanks for the comment.
You are not the first one bothered by this requirements; search this page for all the references to Facebook in comments.
But AFAIK there is nothing illegal about it. H.A. have decided they want to incent you to like them on Facebook so I guess that is the tradeoff you have to make if you really want to participate.
It’s like so much of life, nothing is really “free”; it often amazes me why people expect otherwise. FWIW. :-)
-Mike
Thank you Mike so much!!
I didn’t get a response for the other question though. Could I charge a fee for a “Guessing Game”? Would that be considered a came of skill? $1 per guess… Guess how many candies are in the jar and win…
I like the games because at least they get something that doesn’t cost me a lot of money and it gets the girls excited.
I’m glad I came across this site. I did not know this. I was starting a website up to give people restaurant gift cards for free. All they had to was sign up. I only take so many sign-ups at a time (so I don’t run out of gift cards at any given time). However, I was going to have a paid part for $10 where only those that paid would have their own special drawing 4 times a year. They don’t have to sign up. I was just trying to have an added perk for ones that paid…basically, they have their own thing?? It is still chance. It was just going to be a raffle for the ones that just signed up and a separate one for the payees. I can’t do this either?? How do people get away with just regular raffles?? I’m disappointed. :-(
**Correction, where I said “They don’t have to sign up.”… I meant no one is required to pay. Everyone who wants to be in the raffle must sign up regardless. Just wanted to clarify my statement.
Oh…one last thing I forgot to add, everyone when they sign up and when it is “open” gets a gift card initially FREE. No purchase necessary. The raffles are after the fact and for the non-payers and the payers separately. Sorry for so many emails. The payments are simply to help with me getting the gift cards as I buy them personally myself and ask for donations from the restaurants.
Mainly it is my own personal money though…
Hi @Keri,
Thanks for the comment.
So I am pretty sure what you are planning for would violate the law. That said, I think your concept is intriguing and so I think you could easily come up with real additional values for those who pay and not have to fall back to a raffle, which won’t motivate that many people anyway.
For example, organize special dining experiences at your restaurants and let the people who pay get to chose one they want to attend.
Good luck!
-Mike
Hi @Vanessa,
Generally if it a game a skill you can charge a fee. So I think you’d be okay. Especially if you are charging a fee. If you limit entries (i.e. 1 per person) that would help too because then it won’t have the potential to effectively turn into gambling.
-Mike
Not sure if this has been asked or not…I’m starting a business and understand I cannot require people to purchase something in order to win prizes. However, is it legal to advertise that I’m “giving away” prizes to customers at various “customer # milestones”? In other words, to say “100th customer wins a Yeti cooler” or “1,000th customer wins a gift card”? It isn’t a drawing, but they are making a purchase, probably after realizing they’ve won something though.
Hello Mike,
This is one awesome thread. You should win some sort of award for keeping it up for so long. :-)
Okay here is my question. On our website we offer free gifts to people who spend over a certain amount. The higher the amount of the order the higher the value of they gift the get to select. AFAIK, this is not illegal.
This year we decided to have an “ultimate free gift” with a value pretty high ($500) to be given randomly to a customer. In your non-lawyer opinion is this a violation of the law? Are gifts illegal?
Thank you.
Hi @Bill,
Thanks for the comment.
I think the question to ask would be “Is chance involved?”
What you have been doing involves no chance since everyone gets a gift, so it is likely that it is legal.
Your $500 gift, however, is selected by random and thus does involve chance so it would likely be illegal. Tie it to something like a guess at the number of marbles in a jar and the one with the closest answer gets the gift and then you are probably okay.
But again, I am not a lawyer so I can’t give valid legal advice. :)
Good luck,
-Mike
Hey Mike,
I entered a daily sweepstakes and I have been entering for about 6 months, and it has recently been telling me that that I have already entered for the day- when I have not. If they do not end the sweepstakes/ put my entries in, could I sue them for loss of entry?
Hi Alexander,
Thanks for your comment.
I have no clue. But really, is suing someone for running a sweepstakes — IOW focusing on the negative — really how you want to spend your time? #justsaying
-Mike
Hi Mike- My apologies if you’ve already answered this question. I have a restaurant, and we’re thinking about running a promotion where if you buy a “Family Meal” you can win anything from french fries to a flat screen TV. Everyone who buys a family meal receives a prize, the prizes just vary; although you are not a lawyer, do you think this is legal?
You bring up a really, really good point.
So just to be clear. If a restaurant had a “coupon wheel” where after you bought your food you spun the wheel to see what coupon discount you got, it would be legal because there is no prize. No purchase is really necessary, if someone wanted to come in spin the wheel there is nothing to win.
One of the companies that I “follow” on Facebook is offering a $50.00 Visa Gift Card as a prize to 5 lucky winners of a random drawing. They require you purchase one of their products in order to be included in the drawing. There are no rules listed anywhere on their website, and nothing mentioned anywhere that no purchase is required to enter the giveaway. I messaged them asking how to enter without making a purchase and was told that I must make a purchase to be in the drawing. Is this legal? Thanks!
Great information Thanks for being so helpful Mike. In your NAL opinion would permissible to sell admission tickets to a prom expo that include a detachable entry to win one of 20 $500 vouchers good toward a prom dress redeemable at my dress store. Avenue for free entry on request by mail. Entry must be brought to the event or received by mail before expo date. Proceeds from ticket sales split between school drill teams who are selling the tickets and a national 501c who helps us get free advertising. If so, would it be permissible if we sell more than one admission ticket per person if they want additional dress giveaway entries?
Would it take out the element of gambling out if we gave away “$500 discounts” on dresses?
Okay, so my question is: Can one make some slot games on a web page, which uses tokens to play that can be bought to play your games? And also can you have prizes for the tokens they buy/win from the slots. GSN is famous for this, I am just wondering if I can also do this?
Hi, real fast q. I want to charge 1$ for membership every month for membership fees. (We are not a non profit fyi. )If i want to give away money to randomly to a selected registered member, m I going to be ok. I know its gray, but neither involves skill or chance. The membership fee is just for that. The givenaay is only for my members though. Thanks for being a solid contributor in society and honest.
wow lets try that again lol. Ok…. Ex. You like my club and want to sign up. I charge you a 1$ Per month to sign up and stay a member. You know when signing up that i will offer giveaways and other things as being a member with us. I hold on video the random selection. You win a good deal of money. You can not win two months in a row (a rule) and yet still have to pay membership fees every month. Lol ok hope this example translates better for my question. Thanks again.
I have a question about the PCH sweepsteaks. I have been entering for over 9 years. I now receive mailings from them telling me that because I have been a valued customer for 9 years and oder regularly, which I have done because of the things that are written in their mailings. They say in order to keep my name at the top of the drawing list I must place an order, is this legal? They state in the mailings that no purchase is necessary to win, but it is clear they are saying, THAT BY PLACING AN ORDER YOU INCREASE YOUR CHANCE TO WIN. To me that is the same as paying to have a chance to win. I have been caught up in this scam for too long, also the mailings that say, YOU HAVE WON, SO MANY MILLIONS OF DOLLARS AND ALL YOU NEED TO DO IS SEND TWENTY DOLLARS TO COVER THE HANDLING CHARGES OF TRANSFERING THE FUNDS TO YOU. This is a scam my elderly father has almost fallen for several times. It seems to me that if they say I HAVE WON the money that they should be required to deliver it to me payment or not. Can you please help me with these?
Hi Whitney,
As stated it is not legal.
However if you add fine print that says you limit entries to one per day and anyone that wants to mail you a self-addressed-stamped envelope (SASE) can you an entry for free, one entry per envelope then you will probably cover yourself. You will find (almost?) nobody will go to the trouble to send you a SASE and if anyone does, so what?
Hope this helps.
-Mike
Hi todd,
Correct. You can give discounts all day long using (almost) whatever gimmick you come up with.
Hope this helps.
-Mike
Hi Mike Harris,
No it is not legal. They could get sued.
Send them a link to this blog post!
Hope this helps.
-Mike
Hi Khanna,
As stated, I think you are fine because of “Avenue for free entry on request by mail.”
Hmmm. My guess is that you’d be okay if you offer them to get multiple free entries by sending in multiple requests by postal mail. But, as IANAL best to pay for legal advice if you don’t want to risk it.
Almost certainly it would.
Hope this helps.
-Mike
Hi Tail,
If the outcome of your slot games is determined by chance and not skill then they would not be legal.
If the outcome your games were somehow determined by skills then you should be okay.
From GSN‘s “Is Playing For Cash And Prizes Online Legal?“
Hope this helps.
-Mike
Hi Miked,
If you are concerned with being legal this is almost certainly not legal. If you provide some way for a non-member/non-paying person to get an entry then you should be okay. Search this page for “SASE” to learn how.
Same answer as above.
Hope this helps.
-Mike
Hi Janice Hickly,
As you describe it. probably not. But my guess is that since it is PCH they have lawyers that are good enough that they have covered their bases. Look for the fine print; chances are there is a way to get a free entry but it’s probably not worth the trouble.
Or, maybe they just implied it and don’t intend it, and the way it is worded they have enough wiggle room as not to get in trouble? I dunno.
Scam? Nah, just ethically-challenged marketing strategies probably.
One thing to consider is that print publishers are hurting now because of the web, which means PCH is probably hurting too. People do strange things when they get desperate…
Yeah, those are totally a scam. Stay away from them, as you know.
Problem is that law enforcement doesn’t have the resources to go after all the scammers, unfortunately.
Help how? Beyond what I wrote above that’s probably the best I can do. Remember, IANAL.
Hope this helps.
-Mike
P.S. Imagine if you had taken that same money you spent with PCH over the past 9 years and invested it in a mutual fund. I’ll bet you’d be a lot better off…
Is this legal, its the mail in method to receive a VS rewards card:
Period 3:All eligible entrants who are residents of the US, PR and Canada may enter by mail during Period 3 without making a purchase by legibly hand-printing your full name, address, valid email address, and date and year of birth on a 4 x 6 piece of paper, and mailing it, along with a legibly handwritten, self-addressed, stamped envelope with sufficient return postage and a return address, including first and last name, street address, city, state and ZIP or postal code, both in a sealed outer envelope with proper postage to Victoria’s Secret Secret Reward Promotion, P.O. Box 139024, Dallas, TX 75313 (General Access Mail-In Entry). Outer envelope of General Access Mail-in Entry must be postmarked by March 28, 2016, and received by April 4, 2016 in order to be eligible.
I can understand the price of the postage stamp and envelope to enter, but they are requiring us to pay shipping and handling to receive our “prize”. In the past, the reward card has been sent to your private email. Now, you have to pay for them to give you your prize (ie the price of a second postage stamp and envelope), making it a minimum of 99¢ to enter their sweepstakes.
Thoughts?
Hi mike,
I am making an informational website for my business which will include plenty of perks to subscribe for a cost of $10 monthly with this monthly price it will include option to get services from myself and other participating businesses I have spoke with that will discount some services as to help bring value to my site, my sites information will include videos and just in general a whole bunch of information in my field to help others understand the importance of my field.
I would like to give each person their own identification # that will enter them into a bi-weekly and annual drawing I would like to give away large prizes of coarse to help generate more subscriptions. From what I have read here in the comments that would be considered illegal (I’m in texas btw) my main question would be how can I get around this to make it legal I really just would like to give people more value to my site.
Could I put purchase not necessary but also if you are signed up you get an extra entry or would that be illegal for someone to have to pay to better their chances of winning one of the prizes of coarse for promotion purposes the more people subscribed to my website the more I could give away more often.
Tnt a gas station here where I’m from does a drawing you can pay $10 for like a raffle to win a new car they put in front of the store there is no way that I know of to enter this contest without paying the $10 is this considered illegal
Hi @mike p,
Although IANAL I think you can just use the SASE approach (search the comments for "SASE"). For every giveaway you could require them to mail one entry request, and require they can only get one entry per enveloped mailed to you.
Just use the SASE approach. If you want to be really sure, confirm with your lawyer.
They are probably breaking the law, because they probably don't know better. Bet they haven't read this blog post…
You can send the cops after them, or just live and let live. :)
-Mike
Just an observation when I was doing some research…
Here’s a contest on the FTC’s on website where they require you to be present at a DefCon conference to win. The conference tickets were $220 for 4 days.
See pricing of event for DefCon 22: http://cloud.rankengine.com/2M2O281c2Y0h
DefCon site: https://www.defcon.org/html/defcon-22/dc-22-index.html
FTC Contest for DefCon 22: https://www.ftc.gov/zapping-rachel/faqs
Hi @Chase –
Thanks for the comment.
Here is something that I wonder about. If you can only purchase 1 chance to win, is it the same concern as if you can purchase many chances to win?
Only a lawyer who knows this area could really say.
Then again, there is nothing that keeps someone from violating this law accidentally. Even government agencies. People are flawed. :-)
I have a client looking to run a promotion where anyone that purchases $1000 more worth of product in a specific time period will get their money back if a pro sports team wins a certain amount of games. Is this legal because everyone that purchased wins? Or, is it still illegal?
Am I permitted to gift a free spin to all buying customers as part of their purchase? Basically a “My Free Gift to You”? I do many “like” and “share” drawings on Facebook totally free of charge – but would love to reward my buying customers. Not unlike an Estee Lauder free cosmetics kit with any $49.50 purchase except mine would be a free spin or game of some sort.
Your dedication to this thread is beyond admiral and I will share it with many of my entrepreneur friends.
~Marlo
@Aime – I am not sure as IANAL, but given that it is a game of chance vs. skill then I think it would not be legal. If they picked the team it might be legal. Check with a lawyer if you want to know for sure.
OTOH, I think this would be a great way for your client to loose a lot of money so not even sure why they would want to do this?
@Marlo – As stated it sounds like a game of chance, not skill, so it would probably be in violation.
If you offered people to alternately postal mail in a to get a chance to spin then you’d probably be okay.
P.S. While I am happy to help, please don’t share the thread! I don’t want more unpaid work to do!
I also have a question. Working on FB.
If you are having a sale event and you post a “give away” one for customers only and one open to everybody, is it legal?
Hi @Elly – Thanks for the question.
Probably not (although I see companies doing that a lot lately.)
You could make it a game of skill (e.g. “Guess the # of marbles in the jar”) and charge people to enter, but let customers enter for free? Or you could provide an entry to anyone who is either a customer or requests an entry by mailing you a postcard in the post. It also helps to limit to one entry per person so they is not the incentive to buy lots of stuff to be able to have a better change of winning (because that is gambling and why it is illegal to offer giveaways to only customers!)
Hope this helps.
-Mike
P.S. I am only familiar with US law so while it is probably similar in Italy I am not sure.
Mike,
I don’t have any questions, I’m not looking for any advice. I would like to say that I thoroughly appreciate your honesty, integrity, and steadfast interest in helping people without any expectation of personal gain. Thank goodness you are not a lawyer because if you were we I venture to say we wouldn’t have had your total dedication in answering every question for these many, many years. In short, thank you sir, you are a true gentleman.
Thanks @Lisa!
Hi Mike,
This thread has been going on a long time… I appreciate the info and many smart folks out there. I have a unique twist on the giveaways and how to do it properly.
We are in our fundraising mode for our company which is a rent to own model where we let the customer pick the home, we buy it and then the exercise the option within 5 yrs.
What we want to do is this: As cash flow permits, we want to pay off on of the customer’s home and give them clear title. So not a contest, but a straight giveaway as part of our marketing budget. We feel that the free home would have legs in terms of marketing, but also it could be a life changing event for a family and even the next generation.
But can this be done without violating any laws. I have searched high and low and can’t find anything like what we are talking about doing…
Thanks,
Austin
We are trying to raise money for our 9 hole golf course ,that needs funds to repair mowing mowers, can we ask for a donation and then have a free drawing for a prize for everyone who donates, the prize will not come from the golf course, but from a individual who is donating it, we are in Colorado, and are a for profit golf course, but just don’t make enough money, very small town.thanks
We are trying to raise many to improve a race facility we have in Ohio. We have a prize we would like to raffle off but can’t find a legal way. Can I actually sell tickets as long as I offer a N.P.N. way to enter such as the SASE method? Or would it be legal to give each person a free ticket for every X amount of dollars they donate to the improvement fund?
I’m producing a PPV event and I want to do a drawing with a monetary prize for all the individuals that purchased the PPV – can I do a no purchase necessary but if you prove (with a receipt) that you purchased the PPV you get additional names put into the hat for the drawing?
Buca
PTO trying to have a “sweepstakes” to get ride of baskets donated for a bingo night that needed to be cancelled due to it being illegal for kids to play bingo in NJ. No monies accepted for bingo admission, no prizes given out…BUT at the end of the draw names from hat of all attending to win a free gifts with no charge in anyway. ive searched NJ gaming rules, its not a raffle, bc no fee paid to enter. Just anyone shows up gets name put in hat and randomly picked. Does anyone know if thats legal, or do we need a license for sweepstakes? THANK YOU IN ADVANCE.
Mike, thank you for writing this article and I also want to thank all others who commented or asked questions to further clarify the subject matter. This article/blog has been one of the most useful pieces of information I have come across on the web. Cheers!
Hi Mike,
My question is on this one. They are showing a contest with an essay selection (chosen for the writing I believe, and not a random draw). But they do require a purchase of a book before entering. Is this right?
https://www.nomadicmatt.com/travel-blogs/travel-the-world-giveaway/
Who enforces this?
There are a LOT of businesses that do this and other than CVS – I have never heard of anyone getting busted for “illegal lotteries”
Hi. Mike
I hope you can answer my question.
I have recently seen some small businesses do a give away where they add to the “prize bucket” with the more money they make/money milestone they reach.
example. when i reach $100 i will add a basketball uniform, $200 I will add a basketball, $300 i will add in a bicycle helmet, $400 I will add in a bicycle
and so on
if you spend $25 you get 1 entry, if you join my newsletter/follow my group you get 2 entries.
I am thinking it is an illegal lottery because they are required to buy something. So would doing just the milestone part be ok if it’s a free entry?
I hope that made sense.
thank you!
Hi @Austin – Sorry for the late reply.
The best answer I can give you is talk to a lawyer with experience in this area as you are talking an business with real money on the line and thus legal fees would be money well spent.
Hope this helps.
-Mike
Hi @Earl Scheuer, Sorry for the late reply.
I’m not sure. You might be okay if you allow only one entry per person and not have it be based on the amount they give since basically the reason for the law is they don’t want to enable you to facilitate legal gambling.
Of course it would be chance based so that still might not be good enough.
Maybe you can find a lawyer who could help you probono?
-Mike
Hi @Switch – Sorry for the late reply.
Giving a free ticket for every X amount of dollars would certainly violate the intent of the law which is to not allow you to facilitate gambling. But if you offer a way to get a ticket for free like via a SASE then you should be okay (if you understand IANAL and can’t give legal advice!)
-Mike
Hi @Buca
Its my understanding that any incentive to spend more would violate the intent of the law.
-Mike
Hi @ann,
Not sure I fully understood your scenario but if they didn’t charge for entries then I don’t think there is any problem with a giveaway.
-Mike
@Dave – Thanks for the kind words.
Hi Elvez:
Based on my reading it appears what they are offering would be considered legal since it is a game of skill, not of chance. From the “Judging” section:
Of course IANAL so I can’t say for sure…
-Mike
Hi @PMOJADO –
States Attorney Generals and The Federal Trade Commission are two such enforcement agencies. Some related links:
Hope this helps.
-Mike
Hi @Nancy:
As far as I understand (recognizing IANAL) the growth in prizes is not a problem but the requirement to pay for an entry is a problem and likely constitutes an illegal lottery.
Following them on Facebook or joining a newsletter would likely be okay though as no money changes hands.
Hope this helps.
-Mike
You made a few fine points there. I did a search on the topic and found the majority of folks will have the same opinion with your blog.
transitus-used-machines.com http://www.transitus-used-machines.com/en/cat/manufacturer/plastic-injection-molding-machines-krauss-maffei.html
Mike…
What is considered a skill? Drinking a 12 oz. beer under 20 seconds? Is a “skill” defined or can it be just doing something better than most in the group?
Thank you