I am curious and may choose a sweepstakes as a business model. If you are a lawyer in the US, can you tell me what definitely is not legal to do in a Sweepstakes? I want to validate a business concept.
I appreciate your sincere input...and am willing to work with experienced attorneys in this field.
What is not legal in a sweepstakes? Lawyers or experienced answers only, please.?
Sweepstakes are generally regulated as private lotteries. Many states have a ban on private lotteries because it's classified as gambling. But, sweepstakes operators get around that law by eliminating one of the definitions of lottery, which is payment for the chance to win something. That's why you always see on contests on TV that there's "no purchase necessary." Do people actually send for the free game piece instead of entering the contest by buying the product? I guess some do. But it doesn't matter legally as long as the option is offered.
Check with your local laws to find out specifically how sweepstakes/lotteries are regulated.
Reply:Holy cow, this is such a broad question! And the answer will vary from state to state. You need to be more specific.
Reply:An illegal private lottery has three elements:
* Consideration - the sponsor profits from the entries.
* Chance - the winner is chosen at random
* Prize - the prize has monetary worth.
If you can eliminate at least one of the three elements, it is no longer an illegal private lottery. For example, in a writing contest, the winner is chosen based on specific criteria (good story, adherence to the assigned theme, etc.), and not by chance. Since the second element is removed, it is possible to have a prize worth money AND consideration. That is why you can legally charge people to enter contests of skill.
A sweepstakes, however, is generally chosen at random and has a prize that is worth something. That means that your company cannot directly profit from the entries. This does not only mean that you can't charge to enter, but also that you cannot profit in other ways. For example, if a proof of purchase is required, you MUST provide an alternate method of entry so that no one has to buy your products to enter. Some people have even gone so far as to say that requiring people enter by internet falls under consideration, since it excludes people who do not pay for an internet connection (which I think is ridiculous, but some sponsors do say that entrants must have had their internet connection before the start of the sweepstakes, or they provide an alternate method of entry).
This is also why most sweepstakes give entrants the chance to opt out of receiving marketing emails, since forcing entrants to join a mailing list could fall under consideration.
Aside from this, some states also have restrictions on how sweepstakes can be run. For example, some don't allow liquor companies to hold sweepstakes (which is why most sweepstakes held by alcoholic beverage retailers are void in states like Utah, California, and Tenessee), while others require bonding if the prize is over a specific value (like NY, RI, and until recently, Florida).
This should give you an idea about your business, but for specifics, you should talk to a lawyer directly. An internet search for Sweepstakes Lawyers should help you find people that can help you.
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