Federal Sweepstakes and Contest Laws

In the United States, sweepstakes promotions are regulated by the Federal Trade Commission, the Federal Communications Commission, the United States Postal Service, and the United States Department of Justice. These organizations have come up with some nation-wide rules relating to sweepstakes and contests, like:

  • Winners are required to pay taxes on the prizes they win
  • Sponsors are required to issue a 1099 form to winners who receive a prize valued over $600
  • Firearms awarded as prizes must be transferred through a Federally Licensed Firearm Dealer

Additionally, the U.S. has strict laws barring private lotteries, so in order to be legal, sweepstakes and contests have to differentiate themselves from lotteries. A lottery is defined as a promotion that is offering prizes that have value, that has winners chosen at random, and that has an element of consideration. To avoid being classified as an illegal lottery in any state, at least one of these elements has to be missing.

The state of California bans the requirement of purchasing alcoholic beverages, forbids game labels on corks, bottle caps, labels, or other alcoholic beverage packaging, and disallows companies to require people visit a retail location that sells alcohol to complete an entry. So, if entry forms are offered at liquor stores, bars, and/or other licensed retail locations, there must be another way to get them.

Additionally, California prohibits awarding alcoholic beverages as the sole prize of a contest or sweepstakes, rather they must be an “incidental part of a prize package”.

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Disclaimer: This information is not complete and only aims to display the most prominent state-specific deviation from Federal laws.