Do you know the laws and rules that regulate sweepstakes and contests in the U.S.? See below for insight into the various laws that apply by state.
Laws and Rules for Sweepstakes in North Carolina
First, it helps to understand the difference between a sweepstakes, contest and lottery. In a sweepstakes, winners are chosen randomly from all participants. In a contest, the winners’ entries are usually judged and are based on a skill or criteria. In a lottery, winners are chosen at random, but in order to enter, the participant must pay. A payment is called a consideration. Only states can hold lotteries, so all private lotteries are illegal.
To avoid being classified as an illegal lottery in any state, your promotion can only have 2 of these 3 elements: prize, chance and consideration. Keep in mind, consideration can mean anything of value, including a fee or even a significant effort (i.e., time spent shooting/submitting a photo, etc.)
Here are possible combinations:
Prize + consideration + chance = illegal lottery or gambling
Prize + consideration = legal contest (in most jurisdictions)
Prize + chance = legal sweepstakes
All sweepstakes in the United States must meet the following regulations:
No purchase necessary. You can enter the sweepstakes without buying a product or service.
Winners are required to pay taxes on prizes they win.
Sweepstakes are regulated nationally and by state by the following organizations:
Federal Trade Commission (FTC)
Federal Communications Commission (FCC)
United States Postal Service (USPS)
United States Department of Justice (DOJ)
State Specific Sweepstakes & Contest Laws
Besides federal considerations, every state has its own specifics laws regarding sweepstakes and contests.
The state of North Carolina forbids electronic machines and devices for sweepstakes.
Contests: are allowed as long as the sponsor awards the prize based on skill and not chance.
Sweepstakes: are allowed as long as the sponsor awards the prize based on chance.
Prize Promotion Laws- North Carolina Consumer Protection and Prize Promotion Laws
If a company represents that a person has won a prize, the company must provide the prize to the winner without obligation. Prizes must be provided within 10 days of making the representation.
In North Carolina, a sponsor cannot tell every participant that they are a winner if the sponsor gives the same prize to more than 10% of all considered for receiving the prize.
If a company offers a prize in conjunction with a sales promotion, the company must present written disclosures that are clearly and conspicuously placed next to the prize description.
In North Carolina, disclosures apply to all sweepstakes or contests offered as part of a sales promotion.
Excluded from disclosure requirements in NC, are contests in which consumers can compete for a prize by entering via mail, phone, or at a local retail store and are not required to listen to a sales presentation.
Legal Review Criteria: Dominant Factor Doctrine when assessing whether or not chance determines the outcome of a promotion.
Note: the information above is for informational purposes only and should not be construed as legal advice. Sweepstakes and Contest promotional laws change and the above may not reflect the must current laws.