An online giveaway is legal in the United States when it avoids being an illegal lottery, which means removing at least one of three elements: a prize, chance, or consideration. Most brands run a sweepstakes (prize awarded by chance, with free entry and a “no purchase necessary” alternate method of entry) or a skill contest (prize awarded on merit, not chance). Sponsors also need official rules, compliance with state registration and bonding laws in states like New York and Florida, the platform’s promotion rules, and FTC disclosure standards when entrants post about the brand.
Sweepstakes vs. Contest vs. Lottery
The legal label depends on which elements are present, not on what the sponsor calls the promotion.
- A lottery combines a prize, chance, and consideration. Private lotteries are generally prohibited under state law. In Michigan, for example, MCL 750.372 makes it a misdemeanor to set up or promote a lottery or “gift enterprise.”
- A sweepstakes keeps the prize and chance but removes consideration. Anyone can enter free, and winners are drawn at random.
- A contest keeps the prize and may involve an entry requirement, but removes chance. Winners are chosen by judges applying stated criteria, such as the strongest photo or recipe.
The riskiest element is consideration. Payment is the clearest form, but states differ on whether other things, such as a required purchase, significant time, or effort that benefits the sponsor, can count. The safest structure keeps free entry simple and equal.
“No Purchase Necessary” and the Alternate Method of Entry
If buying a product earns an entry, the purchase is consideration unless there is a free alternate method of entry (AMOE) that gives entrants the same chance to win. Common AMOEs include an online entry form or a mail-in entry. The official rules and the advertising should say plainly that no purchase is necessary and that a purchase does not improve the odds of winning.
Florida makes this explicit. Its game promotion statute, Fla. Stat. § 849.094, makes it unlawful for an operator to require “an entry fee, payment, or proof of purchase as a condition of entering a game promotion.” For sweepstakes sent through the mail, the federal Deceptive Mail Prevention and Enforcement Act (39 U.S.C. § 3001(k)) requires disclosures that no purchase is necessary and that a purchase will not improve an individual’s chances of winning, along with the rules, the odds, and prize details.
Michigan: Promotions vs. Raffles
Michigan’s lottery statute has an exception that matters to businesses. Under MCL 750.372(2), the prohibition does not apply to a lottery or gift enterprise “conducted by a person as a promotional activity that is clearly occasional and ancillary to the primary business of that person.” The exception excludes promotions where people pay money solely for the chance to win, or where entry comes from buying a product “for substantially more than its fair market value.”
That exception does not cover a raffle where people buy tickets for a chance to win. Raffles in Michigan are a separate, licensed activity for qualified organizations. See our guide to Michigan raffle laws for those rules.
Running a Skill Contest
A contest avoids lottery rules by removing chance, so the judging has to be real. The official rules should name the judging criteria and how each is weighted, identify who judges, and explain how ties are broken. Random drawings among “qualified” entries, or public voting that can be gamed, can reintroduce chance and undercut the skill structure. Because a true skill contest has no chance element, some sponsors charge an entry fee or require a purchase, but that choice should be reviewed state by state before launch. Contests built around user submissions also need rights language: who owns the photos, videos, or recipes entrants submit, and what license the sponsor receives to use them.
Who Can Enter
Online promotions reach everyone, but the rules decide who is eligible. Most U.S. sponsors limit entry to legal residents of the 50 states and the District of Columbia who are at least 18 (or the age of majority where they live), and exclude employees of the sponsor and its agencies. Opening a giveaway to entrants outside the United States brings in foreign law, which can differ sharply. “Void where prohibited” language helps, but it is not a substitute for deciding eligibility up front.
State Registration and Bonding: New York and Florida
Most states do not require sweepstakes registration, but two frequently affect national promotions. Both apply to games of chance, not pure skill contests.
New York. Under General Business Law § 369-e, a sponsor offering chance-based prizes totaling more than $5,000 in connection with the sale or promotion of consumer products or services must register with the New York Department of State at least 30 days before the promotion starts. According to the Department of State, the filing requires the official rules, a $100 fee, and a certificate of deposit or surety bond for the total prize amount, and a certification of winners is due within 90 days after the promotion ends.
Florida. Under Fla. Stat. § 849.094, the operator of a game promotion with total announced prizes greater than $5,000 must file the rules and prize list with the Florida Department of Agriculture and Consumer Services at least 7 days before the promotion begins, pay a $100 filing fee, and establish a trust account or obtain a surety bond for the full prize value. The operator must also file a certified list of winners of prizes worth more than $25 within 60 days after the winners are determined. The rules cannot be changed once filed.
Sponsors often exclude residents of particular states or cap prize values to avoid these requirements. Either approach should be decided before launch and reflected in the eligibility section of the official rules.
What Official Rules Should Include
Official rules are the contract between the sponsor and entrants, and they are the first thing a regulator will read. At a minimum, they should cover:
- The sponsor’s name and address
- Eligibility, including age, residency, and excluded states or employees
- Start and end dates, with time zone
- How to enter, including the free alternate method of entry
- How and when winners are selected, and the odds of winning or how odds are determined
- Each prize, its approximate retail value, and any conditions
- How winners are notified and how long they have to respond
- Limitations of liability, publicity consent, privacy practices, and dispute terms
- The platform release and acknowledgement discussed below, if the promotion runs on social media
The advertising and the rules must match. Section 5 of the FTC Act (15 U.S.C. § 45) prohibits deceptive practices, and misstating prizes, odds, or eligibility is a common enforcement theory.
Instagram and Facebook Promotion Rules
Platforms add contractual rules beyond the law. Instagram’s promotion guidelines require the sponsor to handle official rules, offer terms, eligibility, and regulatory compliance. Every promotion must include “a complete release of Instagram by each entrant” and an acknowledgement that the promotion is not sponsored, endorsed, administered by, or associated with Instagram. Instagram also prohibits encouraging users to inaccurately tag content, such as asking people to tag themselves in photos they are not in.
Meta’s Pages, Groups and Events Policies contain the same release and acknowledgement requirement for Facebook promotions. They also bar using personal timelines and friend connections to administer promotions, so mechanics like “share on your timeline to enter” or “tag your friends in this post to enter” are not permitted. Meta revises these policies, so check the current version before each campaign.
FTC Disclosure for Social Media Giveaways
When entrants earn a chance to win by posting about a brand, those posts are endorsements. The FTC’s Endorsement Guides (16 C.F.R. Part 255, revised in 2023) require clear disclosure of a material connection between an endorser and the brand, and the chance to win a prize is that kind of connection.
In its published Q&A on the Endorsement Guides, the FTC says a branded hashtag alone (like #XYZ_Rocks) is not enough, while making “contest” or “sweepstakes” part of the hashtag, such as #XYZ_Contest or #XYZ_Sweepstakes, should be. The FTC also says “#sweeps” probably will not work, because many people would not understand it. Influencers who promote a giveaway for compensation have their own disclosure obligations; see our guide to FTC rules for influencers.
Taxes on Prizes
Prizes are taxable income to the winner, and sponsors have reporting duties. The IRS instructions for Form 1099-MISC direct payers to report prizes and awards that are not for services in Box 3. For payments made in 2026, the reporting threshold is $2,000, up from the long-standing $600 threshold, following the One Big Beautiful Bill Act, with inflation adjustments after 2026. Sponsors should collect tax information from winners of reportable prizes before awarding them and state in the rules that winners are responsible for taxes.
Getting Your Giveaway Right
A compliant promotion starts with the right structure, then adds rules, eligibility decisions, state filings, platform terms, and disclosure instructions for entrants. Our e-commerce compliance checklist and advertising compliance checklist cover related obligations, and Revision Legal’s e-commerce attorneys draft official rules and review promotions before launch.
Frequently Asked Questions
What are the three elements of an illegal lottery?
An illegal lottery combines a prize, chance, and consideration, meaning something of value the entrant must give to play. A legal sweepstakes removes consideration by offering free entry. A legal skill contest removes chance by judging entries on stated criteria. The label the sponsor uses does not matter; the elements do.
What does “no purchase necessary” mean?
It means entrants can take part without buying anything, through a free alternate method of entry such as an online form or mail-in entry. The free route should give the same chance of winning as any purchase-linked entry. The rules and ads should state that no purchase is necessary and that buying does not improve the odds.
Which states require sweepstakes registration?
New York and Florida are the two states that most often affect national promotions. Each requires registration and a bond or trust account for chance-based promotions with total prizes over $5,000: 30 days before launch in New York and 7 days before launch in Florida. Check current state rules before every campaign.
Can I require people to like, share, or tag friends to enter on social media?
Platform rules limit this. Meta’s policies bar using personal timelines and friend connections to administer promotions, such as “share on your timeline to enter” or “tag your friends to enter.” Instagram prohibits encouraging inaccurate tagging. Posts made to enter should also carry a clear disclosure like #BrandName_Sweepstakes under FTC guidance.
Do I have to issue a 1099 for a giveaway prize?
Possibly. Prizes and awards not for services are reported in Box 3 of Form 1099-MISC. For payments made in 2026, the reporting threshold is $2,000, up from $600 in earlier years. Collect tax information from winners of reportable prizes before awarding them, and tell winners in the rules that taxes are their responsibility.
