Wherever you live, the chances that you’ll have stumbled across a form of sweepstake are incredibly high. You will likely have even entered a sweepstakes contest at some point, and the lucky readers out there may have even won once or twice.
Whether it’s liking a social media post for the chance to win a mystery box from your favorite brand or scanning the QR code on a can of soda to enter the draw for a free holiday, sweepstakes are found everywhere nowadays, with global brands using them as a key promotional tool in their marketing campaigns.
However, behind these seemingly straightforward contests lies a set of complex legal foundations where the line between harmless competition and illegal gambling becomes somewhat blurred. Because of this, sweepstakes laws from state to state can differ wildly. What is it that makes these contests such a contentious issue across the nation?
What are sweepstakes?
Simply, any type of promotional contest where participants have the chance to win prizes without having to make a purchase can be defined as a sweepstake. Importantly, these competitions are based purely on luck, with no skill involved in determining the winner. In some ways, sweepstakes can be seen a structurally similar to lotteries, where people put their name in the hat for the chance to win. The key difference here, however, is that with lotteries, participants must pay to enter – with sweepstakes, no purchase is necessary.
This is the vital component of sweepstakes that stops it from being a form of gambling, and it is for this reason that the sweepstake casinos found by Casino.org, for example, are not considered gambling under federal laws. Another famous example, however, highlights where sweepstakes laws begin to get a little tricky. The McDonald’s Monopoly Game, which is defined as a sweepstakes contest, takes place every year and is played by millions across the country through purchasing meals.
On the face of it, the requirement to purchase a meal appears to go against the ‘no purchase necessary’ requirement of a sweepstake contest, but by offering an alternative free method of entry in the fine print of its legal documentation, McDonald’s can satisfy laws on what constitutes a sweepstake. This shows where the uncertainty in sweepstake regulations can emerge, especially when considering the push and pull of federal and state control in the US.
Federal vs state control
At the federal level, sweepstakes are legal so long as they comply with the basic consumer protection guidelines laid out in the legislation. This loose definition, coupled with the sovereignty that each state possesses to govern within its borders, creates the opportunity for sweepstake contests to be defined in a myriad of different ways. Because of this, the legal standing from one state to another begins to get confusing.
Ultimately, this confusion stems from how different states define gambling. An activity is usually considered a form of gambling if it is comprised of a prize (to be won), a chance to win this prize, and the consideration of a form of payment for the chance to win the prize. The final point here, the ‘consideration’, is what is interpreted differently across state borders. For many states, the ‘no purchase necessary’ element of sweepstakes is adequate to remove this final element, hence making the contests legal.
However, not all states view this element in the same way. In some states, ‘consideration’ is seen not just as a monetary payment, but as giving something of value for the chance to win. This could be something as simple as standing in line or sharing a social media post. In this circumstance, a sweepstake may then be considered as a form of illegal gambling.
Different interpretations between states
The Sunshine State of Florida possesses some of the strictest laws when it comes to sweepstakes contests. Here, if you set up a sweepstake with prizes exceeding a value of $5000, then you must officially register the competition with the state. This encompasses an extensive amount of paperwork that must include every detail of the competition, from the contest rules to the list of prizes.
Furthermore, you must also provide a financial guarantee that equates to the total value of the prizes offered. Known as a surety bond, this is done for consumer protection, making sure that any prizes offered are awarded at the end of the contest. Similarly, New York also enforces registration and bonding for sweepstakes for prizes totaling more than $5000, while Rhode Island does so for prize pools as low as $500.
Elsewhere, states like California and Texas are far more lenient with their sweepstakes laws. Here, no registration or bonding is required, while the definition of the ‘consideration’ element is more relaxed. This means that sweepstakes can be set up with little state interference so long as the basic conditions of a non-gambling competition are met.
Understanding these differences
The context behind why sweepstake laws vary so much from state to state is a complex issue, with several different factors having an influence. Firstly, it is well established that some states have long held more conservative views than others about activities like sweepstakes and forms of gambling.
In essence, the stricter sweepstakes laws in states like Florida merely reflect broader attitudes towards these activities. Furthermore, some states have far more stringent consumer protection laws in place, which inevitably impact the ability for companies and brands to set up sweepstakes there. Take New York, for example, which looks set to expand what are already some of the toughest consumer protection laws in the country.
Ultimately, the wild variation of sweepstakes laws across the US comes down to the different interpretations of what it means to gamble. Sweepstakes sit in an awkward space, somewhere within these subtle differences in opinion, and this is what causes states to regulate them so differently. Next time you enter a competition and you notice certain states are excluded, now you know why.
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