Legal Contest: What Needs To Be Understood To Have a Legal Promotion.

So you want to run a contest or sweepstake on social media? Pretty much all brands that you know do some sort of contest via their social media channels but the most important question to ask is how do they go about it? Something to take into consideration is what can turn a sweepstake or contest illegal and what defines it to be legal.

When running a contest or sweepstake it’s important to make sure that it complies with applicable laws or it can determine that the promotion is an illegal lottery. There are three factors that can make a promotion an illegal lottery and they are prize, chance, and consideration (providing something of value in order to enhance the chance to win a prize). If this occurs and your promotion is deemed to be an illegal lottery then it could subject your company or business to regulatory action, such as civil and criminal exposure.

In order for your business to avoid this, it is best to eliminate factors of consideration and chance because it can get very complex.

Addressing Chance

Many promotions involve chance. A prime example of this is entering a sweepstakes because that requires chance because the winner is picked at random. This might be compared to something like an essay contest where it might require excellent writing skills to be judged to win. However there are times where skill and chance combine together and that’s typically found in card games such as poker.

There are three tests that states help determine whether or not games that use skill and chance are legal. You have the predominant factor test; the material element test; and the any-chance test. It is important to know these tests because an element of an illegal lottery is chance. The most common test that is used by the states is the predominant factor test. This test helps analyze and helps determine if the predominant factor in the game is chance or skill. Secondly, the material element test tries to determine if chance is a material element in a game. Lastly, the any-chance test determines that any game with any bit of element of chance are considered games of chance and this test is the least commonly used out of the three by the states.

Does entrance require consideration?

The best way to go about things is using consideration. Consideration is defined by thinking about it like that it is something you are not legally required to do. Let me give you a scenario to think about, there is a social media sweepstake that is posted and all it requires from you is to like and share the post to win a prize. The big question to figure out is if this hits a level of “doing something you are not legally required to do” or “consideration”. The lines are blurry as far as  consideration goes especially with requiring “doing something you’re not legally required to do”. Luckily, there are ways to avoid any consideration issues.

heart and zero neon light signage
Photo by Prateek Katyal on

Be careful in developing your rules

When it comes to sweepstakes or contests, wording is very important, any small bit of detail can be twisted in the wrong way if not worded correctly. As mentioned before you have to remove one out of the three elements in order for your promotion to not be considered an illegal lottery. Unfortunately, consideration is usually the element that is removed because prize and chance can’t usually be removed. A way to go about it with your sweepstakes is to make sure you remove the consideration factor and how you do that is to add an option in the terms and conditions. How this works is that it’s an “alternative method of entry” (AMOE). AMOEs help get rid of any bit of consideration with any sweepstakes and that’s why you see the commercials or fine print that say “no purchase necessary to enter”. These AMOEs technically require the participant to do something they are not legally required to do, because the courts consider this to be minimal to be constituted as consideration. So as long as you give participants an alternative method of entry that will cancel out consideration and thus you have a legal sweepstake.

However, with contests removing any bit of consideration is difficult. Contests have a prize and consideration element to it and so in order to make the contest legal you have to get rid of the chance factor. Something you have to put into consideration is where you host a contest and put into consideration the three tests that the states use to determine skill or chance. No matter what the biggest thing to have in the back of your head is you need concrete, clear, and objective criteria in how a winner is selected. This is what separates a sweepstake and contest and keeps you and your company from having issues and headaches.

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