Although holding a sweepstakes sounds like a great idea to many brands and organizations, there are some inherent risks involved if one does not know the federal, state and local laws and regulations. There is written legislation in place regarding promotion law, but there is also a myriad of industry best practices that you’ll want to follow that aren’t necessarily written down anywhere. Therefore, before you even begin to draw up the rules, be sure that you do all of the necessary research to determine what obligations you must fulfill.
Keep in mind that official rules for a sweepstakes have a couple of primary goals: 1) create transparency to the public, and 2) limit liability for the sponsor. That said, your official rules will likely be broken down into many sections, a few of which include:
Just as a sponsor must “claim” their sweepstakes by being listed in the rules, it might also behoove the sponsor to stipulate any entity that is not ultimately responsible for the promotion, but might be involved in some manner. An example of this would be the social media platform on which the sweepstakes is being hosted. That’s why you will often see language like this in official rules and even at the bottom of entry forms: “This promotion is in no way sponsored, endorsed, or administered by <Insert Social Media Platform>.” Many social media platforms specifically require language disclaiming their affiliation with the sweepstakes and the sponsor. We encourage anyone running a sweepstakes to check the promotion guidelines of the applicable social media platform(s) for this information.
Another eligibility component to consider is the need to require entrants to have a valid Social Security number. First, this helps clarify that the entry pool is limited to legal residents of the U.S. (or Canada if you also require a valid Social Insurance Number in the eligibility section). This demonstrates that a sponsor has done its due diligence to abide by the promotion rules and laws of other countries. For instance, some countries require that the server collecting all entry data live on their soil. Other countries require that the random drawing take place within their borders or that the sponsor must have a physical place of business there. Second, requiring a Social Security number will become important later when verifying a winner includes obtaining their Social Security number to issue an IRS Form-1099 in the event the prize awarded is $600 or more.
To learn more about the writing of sweepstakes rules, be sure to read out next blog post.