If your business is thinking about offering online sweepstakes for marketing and to drive business, you will need an experienced Sweepstakes Law Firm to help. Internet sweepstakes are fun and exciting, but because the “internet goes everywhere,” your business will have to comply with the federal laws and the laws in every State that govern online advertising and “give-away” promotions. Here is a non-exhaustive list of other legal concerns:
- Conforming to various online platform/social media specific guidelines, rules, and regulations — these are in addition to government regulations
- Drafting clearly understood and legally sound rules/structure for the sweepstakes
- Helping with legal aspects of preparing/creating an online platform/website (if needed) including executing details on the domain name, administration, and registration
- Avoiding trademark, copyright, patent, and other IP infringement
- Assistance with compliance with consumer privacy laws including the Online Child Protection Act
- Help with cybersecurity compliance
- Advice on obtaining liability insurance and/or demonstrating “financial responsibility” (as required under federal laws)
- If desired, negotiating and drafting influencer, talent, and spokesperson agreements
- Reviewing and drafting third-party contracts — with third-party vendors, for example
- Reviewing surety bonding requirements and agreements
- Reviewing and negotiating other types of contracts
- Offering dispute resolution (where possible) and litigation services (if necessary)
As just one example, the size of the award/prize being offered makes a difference in compliance. For example, the IRS will require a 1099 form to be filed if the prize is greater than $600 and federal law prohibits any prize greater than $1 million without preapproval from the relevant federal agency like the Federal Trade Commission.
All of the foregoing are legal concerns whether your business is considering a sweepstakes, a contest, or a raffle/lottery. But, importantly, these three are LEGALLY different and distinct with differing federal and State regulations. For example, raffles/lotteries are illegal in California unless run by a not-for-profit organization registered with the California Attorney General’s Office to conduct raffles, and only if at least 90% of the gross receipts from the raffle are used for charitable purposes. See here.
What is the difference? In simple terms, a sweepstakes is a marketing/promotion device with two elements: a prize and chance. Note that the “chance” element must be truly random. By contrast, a lottery or raffle has three elements: a prize, chance, and some value paid — like money — by the entrant. Again, the “chance” element must be truly random and the “value paid” can be many different things like a required purchase or completing a detailed and time-consuming entry form. In some States, “value paid” can exist where the lottery/raffle operator receives some substantial benefit/value from the use of the information provided by the entrant.
As can be seen, what your business may think is a “sweepstakes” may legally be a “lottery/raffle” which will implicate compliance with federal and State rules and regulations. Finally, a contest has three elements: a prize, a judge (or “win conditions”), and some sort of application of skill by the entrants. Sometimes, a contest requires some value paid. Again, contests have a different and distinct regulatory framework.
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