Is your Giveaway Legal?

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As bloggers or entrepreneurs, one of the main goals and concerns is to attract an audience, generate traffic, and grow your email list. As such, you tend to get creative and come up with various methods of achieving this task.

One very effective method for growing your email list (if done right) is to do contests or giveaways. If you haven’t done one, I bet anything you’ve at least entered into one.

The organizer of the contest or giveaway puts together some prizes, and you can enter it by signing up for it with your email address. A lot of the time there will be some options for you to get more entries, such as share it on Facebook, tweet it, email it to a friend, and more.

Difference between giveaways, sweepstakes, lotteries

The terms “giveaway”, “sweepstake” and “lottery” are used interchangeably most of the time. However, it’s important to understand that they are not the same thing. There are some essential differences between those terms that have different legal requirements and formality.

Giveaways are sweepstakes. This is when the person enters their email address to sign up for the giveaway and the winner will be selected randomly.

Contests are a little different from sweepstakes in that the people who enter the contest will win based on some form of merit (e.g. best DIY website design, or best Pinterest pin graphics, etc.).

There is a third category that is referred to as lotteries. Lotteries have the prize component, entry component, and consideration. Consideration is a complex legal term that essentially can be anything of value. For example, requiring a purchase in order to enter the giveaway is a consideration. Here is a more detailed discussion of what is a consideration.

Requiring Facebook likes and shares is a consideration, etc. Lotteries fall under a completely separate category and will not be covered here as they are not relevant for your purposes as a blogger or online entrepreneur. Also, keep in mind that under state law, private lotteries are illegal. Word of advice-stay away from lotteries!

The Logistics of Doing Giveaways

There are many platforms out there that are specifically built for carrying out sweepstakes and contests. Some that come to mind are King Sumo, Rafflecopter, and so on.

These types of platforms make it very simple to organize a giveaway and give you a lot of freedom. However, as easy and simple these giveaways are to carry out, there are some legal regulations that you have to pay attention to do these right and be legally compliant.

Most countries in the world have specific guidelines and rules when it comes to having legally compliant sweepstakes and contests. If you’re outside of the United States, make sure to check your country’s rules and guidelines.

One thing to keep in mind is that there are both federal and state laws for sweepstakes and contests. If you allow entry into your sweepstake or contest nationally from any state, then you have to abide by both state and federal rules.

Mostly, state and federal rules are pretty identical, and there is no major difference between them. In a few states, however, for example, Florida, you have to create and file a list of the winners with the state. This is something that is different in the state law vs. the federal law for that state. Check your state regulations!

“No purchase necessary” rule for entering sweepstakes or giveaways

One of the most important rules for having legal sweepstakes is to have a “no purchase necessary” policy for entering them. So, for example, if you have a sweepstake where the people who purchased product X from you will automatically be entered into the sweepstake, you have to have an easy and accessible method for others to enter your sweepstake without making a purchase.

The method of entry for no purchase entries cannot be complicated so that people give up on it halfway. You have to make it fair and as easy to enter as with purchase.

Sweepstake and contest prizes and amounts

Your sweepstakes and contests obviously have prizes, otherwise, no one would bother entering. A lot of the time the prizes are not expensive but hold a value for the person entering it. This is especially the case when the person doing the giveaway wants to make sure only their target audience enters the giveaway.

However, sometimes the giveaway prize has a high price. If the price of the sweepstake prize is $600 or more, then there are tax implications because the IRS must be notified on a 1099 form.

Incidentally, if your prize is over $5000, then in certain states, such as New York and Florida, it’s required that you register and bond your sweepstakes for at least 30 days. Sweepstakes that are priced this high don’t happen very often unless a few bloggers collaborate together and join together on the same giveaway.

Remember, if you do a collaborative sweepstake with others, then you have to comply with both the federal law and every single state law where the sweepstakes are taking place.

You must have a sweepstakes rules page

When organizing a sweepstake or contest, you always have to have an official rules section or page. This page must be in a very apparent place, ideally immediately next to the “enter giveaway” button.

Your rules section or page must have all of the relevant information regarding the sweepstakes, such as:

1. How to enter the sweepstake (both free option and also if there is also an automatic option with purchase)
2. What the specific prize is going to be-must announce the value
3. The date the sweepstakes will begin
4. The date the sweepstakes will end
5. The date the winner(s) will be selected
6. How the winners will be selected (hint: must be random)
7. Specify who can enter your sweepstakes (most people choose to put an age limit, such as over 18, in order not to deal with any complications that come with being a child or non-adult)
8. Make sure to communicate with all the entrants and let them know who the winner is and that they won the prize

As the organizer of the sweepstakes, you have to follow through with your rules. You’re not allowed to change the duration of the sweepstake by

extending the end date. You’re not allowed to change the price unless it’s literally a matter of global catastrophe.

You must not require consideration-ask for something of value. If you’re a blogger or an online entrepreneur, then your email list and social media presence are very valuable to you. This means that liking your social media profiles or following you cannot be a requirement. It can be optional, but never a requirement.

One last rule for Legal Giveaways…

You’ve probably seen giveaways where they tell you that you can earn more entries if you do different things: following on social media, emailing a friend, clicking a button every day, sending Facebook messages to people, sharing and tweeting on different social platforms, etc.

Most likely, you’ve also noticed that each additional method of entry had a specific number of entries in front of it. For example, sending Facebook messages through messenger might earn you 3 additional entries, while tweeting about it might earn you 1 additional entry, and so on.

That is illegal.

You cannot have a different number of entries for different methods because you cannot give preferential treatment to one type of entry over the other.

The reasoning behind this is that all the people must have the same odds of winning the prize. For sweepstakes to be legal, the additional methods of entry must be the same for all methods. If you want to give 3 additional entries for sending a message with Messenger, then you have to give 3 additional entries for tweeting it or sharing it on Facebook.

Don’t give preference to one option over the other, even though you want to because one will work better for you than the others.

In other words, to have a legally compliant sweepstake or contest, you must follow the state and federal rules where applicable. Pay attention to your prize amounts, and whether or not they need to be disclosed on taxes. Have clear rules next to the entry button where you cover all the points mentioned above, and do not give preferential entries to one form over the other.

Conclusion

Giveaways are a popular form of growing the email list and growing social media presence for many entrepreneurs and bloggers. However, not everyone realizes that giveaways and sweepstakes come with a lot of rules and formalities that must be followed.

You have to abide by both state and federal rules If you collaborate with other people where more than one state is involved, then you must abide by all the states’ and federal laws.

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