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 Iowa requires that, if one must attend or be asked to participate in a sales presentation in order to claim a prize, the sales presentation shall not begin until the sponsor informs the person of the prize that has been awarded and the person is awarded a prize.
Additionally, Iowa requires “Sellers of Travel” registration if the promotion prize includes travel.
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Disclaimer: This information is not complete and only aims to display the most prominent state-specific deviation from Federal laws.