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 Texas prohibits automatic sweepstake entry based on purchase if the sweepstake has prizes valued at $50,000 or more.
Questions about laws and compliance? Get a free consultation, we’re happy to answer any questions you may have.
Get a FREE Consultation
Disclaimer: This information is not complete and only aims to display the most prominent state-specific deviation from Federal laws. It is for general reference purposes only and is not to be considered legal advice or opinion.