Sweepstakes, Contests & Lotteries

Games of chance have been popular promotional devices for nearly 500 years. In the 1500s merchants in Italy used prizes by chance as a means of increasing business. But anti-gambling laws have restricted their use as a marketing tool. Over the past century games of chance have been severely limited by both state and federal laws. In recent years, however, sweepstakes and contests have become popular marketing tools. Generally, these games of chance are permitted, so long as they do not constitute "lotteries" or "gift enterprises."

Although restrictions vary somewhat from one jurisdiction to another, a lottery, gift enterprise or similar scheme exists when:

the distribution of a prize,
according to chance, and
for consideration.

So long as a sweepstake or contest does not involve all three of these elements, it normally will not run afoul of legal restrictions. Those three elements are frequently typically defined as follows:

Prize - Anything of value offered as inducement to participate.
Consideration - Consumers must pay some value (e.g., money, purchase of a product, etc.) ... usually substantial value. The mere act of tuning in a TV program or paying for postage is not an act of value.
Chance - This involves the happening of some subsequent event, incapable of ascertainment by means of known foresight or ingenuity. If skill or judgment are involved, such as betting on horse races, it is not a lottery.

Games of chance already have appeared on the Internet.