Social media contests are a great way to engage customers/users, find new customers/users, and collect useful marketing data. But sponsoring such promotional campaigns requires the inclusion of legal regulations and restrictions that can be confusing — or worse. Since one of your goals is to have fun with your customers and potential customers, the last thing you want to do is get in trouble with the law.

If you're thinking of hosting a social media contest or other kind of online giveaway, you'll want to make sure you're following the laws where you live, and the rules laid out by the platform you're hosting it on. You can read Facebook's rules here; Twitter's here; Instagram's here, and Pinterest's here. (For inspiration, you can also see the template we worked with our lawyer to create here.)

In this post, I'll explain some of the issues you need to be aware of before you host your next social media contest.

What's the difference between Sweepstakes, Contests and Lotteries?

First, it's essential to understand the differences between sweepstakes and contests (which are legal promotional campaigns), and private lotteries (which are illegal under state law).

A Sweepstakes is a campaign in which entrants can win a prize based on chance. No purchase, payment, or other consideration is permitted, and the winner is picked at random. The element of consideration must not exist in a Sweepstakes. Caution: consideration is anything of value the contestant must give up to participate, monetary or non-monetary, and can exist if the contestant must expend substantial time or effort that benefits the sponsor. For example, some states have determined that providing contact information is consideration if the information is to be used for marketing purposes.

A Contest is a campaign in which effort, skill, or merit, is required to enter to win a prize. For example, you may require people to upload a photo or video in order to enter. The winner is determined by voting or other judging criteria. The element of chance must not exist in a contest.

A Lottery requires purchase, payment, or other consideration (the contestant has to buy something, such as a ticket), chance, and a prize. Private lotteries are illegal under state law. Moreover, under federal law, it is illegal for U.S. citizens to even participate in a foreign lottery. Do not run a lottery.

Before you host your next campaign, familiarize yourself with best practices regarding writing regulations.

Best Practices

In the United States, Internet sweepstakes and contests focus on federal laws against online gambling. The following is a list of verbiage and other information that social media contest rules should include:

"No Purchase Necessary"

"Purchase does not enhance chance of winning"

"Void where prohibited"

Details regarding non-monetary consideration

The identity of the host/promoter

Entry procedures and beginning/ending dates, including time and time zone

Eligibility requirements

An explanation of all methods of entry

A clear description of the prize(s); certain states have stricter regulations (see examples at the end of this document)

Date winner(s) will be chosen and notified

Judging criteria must be clear and sponsor should be able to show how the winner was determined based on objective criteria

Method of selecting a winner (to avoid any appearance of impropriety, it is recommended that sponsors avoid conducting their own drawings or determining the winners of their own contests)

Publicity rights regarding use of Winner's information (Sponsor should obtain written consent from Entrant to ensure compliance with state laws)

Publicity rights regarding use of Participant's information (Sponsor should obtain written consent from Entrant to ensure compliance with state laws)

Liability limitations

Odds of winning

Physical address, not a PO Box

Contest/Sweepstakes sponsors must be careful about advertising prizes by using the brand name of a prize without the consent from the trademark owner in the title. For example, if you are giving away an Apple iPod, the contest name cannot say "Apple" or "iPod" unless Apple was a cosponsor of the promotion or gave consent in the contest title. However, they can list the item in the official rules as part of the prize list.

If the prize winner is subject to U.S. taxes, the host is required to send the winner a 1099 in January of the following year.

It is recommended that records for the promotional campaign should be maintained for 2 years.

State-by-State Exceptions

Many states in the U.S. individually regulate promotional campaigns, especially when prizes include alcohol, tobacco, or firearms. It is important to know that promotional campaigns are governed by the laws and regulations of the state in which the contestant lives. As you write your contest rules, take note that individual states have individual considerations. For instance, below you will find a list of some state-by-state examples.

IMPORTANT NOTE: This list of state examples is neither complete nor updated. It is recommended you obtain legal guidance from an experienced attorney before conducting a promotional campaign.

Colorado

– Prohibits purchase requirements even if the contest winners are selected based on skill.

Florida

– Prize worth $5,000 or more must be bonded and registered 7 days before sweepstakes begins. Must be able to provide a list of winners to anyone who requests it.

Maryland

– Prohibits purchase requirements even if the contest winners are selected based on skill.

Nebraska

– Prohibits purchase requirements even if the contest winners are selected based on skill.

New York

– Prize worth $5,000 or more must be bonded and registered 30 days before sweepstakes begins. Must be able to provide a list of winners to anyone who requests it.

North Dakota

– Prohibits purchase requirements even if the contest winners are selected based on skill.

Rhode Island

– Retail outlets offering a sweepstakes with prizes valuing more than $500 must register promotion with the state.

Tennessee

– Prohibits sweepstakes agencies and sponsors from requiring sweepstakes prize winners to submit to "in perpetuity" publicity releases.

Texas

– Special rules apply to sweepstakes with prizes more than $50,000 such as not automatically entering an individual in a sweepstakes because the individual has made a purchase

Vermont

– May not require people who request a list of sweepstakes winners to pay for postage for the response.

– Prohibits purchase requirements even if the contest winners are selected based on skill.

Virginia

– Cannot require a "player" to visit a location to enter due to this being a form of consideration that would convert an otherwise legal sweepstakes into a lottery.

Washington

– Prohibits "unfair or deceptive acts or practices in the conduct of any trade or commerce."

– Must provide disclaimers and material terms and conditions in sweepstakes offer.

As you can see, there are lots of legal issues to consider when hosting a social media contest or promotion. Familiarize yourself with them and save yourself a headache (or worse!).

Published on: Aug 7, 2015