The Legal Side of Sweepstakes: What Every Brand Needs to Know

The Legal Side of Sweepstakes: What Every Brand Needs to Know

“It’s just a giveaway. What could go wrong?” You’d be surprised. A fun marketing initiative can quickly become a legal headache.

Behind every good sweepstakes is a legal minefield—one that many brands don’t recognize until it’s too late. From accidentally creating an illegal lottery to getting hit with consumer complaints or regulatory action, the risks are real. But with the right structure, sweepstakes can still be an engaging (and compliant) way to promote your brand.

Here’s what your team should know before launching your next promotion.

1. Don’t Accidentally Create an Illegal Lottery

In most states, a lottery is defined as having three elements: prize, chance, and consideration. Private businesses can’t legally run a lottery—so your sweepstakes must eliminate one of those components. Because almost every giveaway involves a prize and random chance, the key is removing consideration.

What counts as consideration? Not just money—time, effort, or data can also count, depending on the state. That’s why many sweepstakes offer a “free alternative method of entry”—like mailing in a postcard or submitting a quick form online.

2. Treat All Entrants Equally

Even if you allow both paid and free entries, those who take the free route must have equal odds of winning. This is known as the “equal dignity” rule.

Let’s say customers can enter online with a purchase or by mailing in a card. The odds must be substantially similar, and the winner must be chosen at random from the full pool—regardless of how they entered.

3. Be Clear and Conspicuous

Don’t bury the rules. Make sure they’re written in plain English and easy to find. At a minimum, your sweepstakes should disclose:

• “No purchase necessary”(prominently)
• How and when to enter
• Who is eligible (and where it's void)
• What the prizes are and their value
• How winners will be chosen and notified
• The odds of winning
• Who’s responsible for taxes
• How to request a list of winners
  

If any of this information is vague, hidden in fine print, or omitted, you’re inviting both scrutiny and complaints.

4. Register If You Need To

Some states require registration and bonding for large-prize promotions. If your sweepstakes prize pool exceeds $5,000, you may need to register in New York and Florida. Rhode Island requires registration for in-store sweepstakes exceeding $500 in value.

Failure to register where required can invalidate the sweepstakes—or worse, lead to enforcement action.

5. Learn from Brands That Got It Wrong

Even major companies have made mistakes with sweepstakes that led to public backlash and legal trouble. Here are two cautionary tales:

Activision: “Call of Duty” Contest Confusion

In 2012, Activision launched a sweepstakes for Call of Duty: Black Ops II with $1 million in prizes. But players quickly discovered that certain states were excluded—and others were disqualified due to vague eligibility terms. What followed was consumer outrage, negative press, and forced course correction.

The Takeaway: Clearly state who is eligible—and apply rules consistently.

AirAsia: “Free Flights” with Hidden Fees

AirAsia once promoted a giveaway offering “free flights,” only for participants to learn that taxes, fuel charges, and other fees still applied. Regulators criticized the airline for misleading advertising, and consumers felt duped.

The Takeaway: If your prize isn’t truly free, your disclosure needs to say so—loudly and clearly.

Make Sure Marketing and Legal Teams are Aligned

Too often, legal is brought in after a promotion has already launched, or when something goes wrong. But the best outcomes happen when marketing and legal teams work together from the start.

Marketing’s job is to generate excitement. Legal’s job is to keep the campaign compliant. Neither can succeed alone.

So before your next promotion goes live, make it a collaborative process. You’ll avoid missteps, protect your brand, and give your audience a better experience.

Want to Run a Giveaway on Social Media?

Sweepstakes promoted through platforms like Instagram, TikTok, or Facebook come with an additional layer of complexity—including platform-specific rules and disclosure requirements. We'll cover that in more detail in a follow-up article.

For now, just know: the same legal principles apply, but the execution requires extra care.

What to Do Next

If your team is planning a giveaway, keep this checklist handy:

• Avoid requiring payment, effort, or data without a free alternative
• Treat all entry methods equally
• Write rules that are clear, complete, and accessible
• Register if your prize value crosses the required thresholds
• Stick to your rules—no mid-game changes
• Bring legal into the room before you hit “launch”
  

Sweepstakes can be a powerful tool, but they’re surrounded by legal landmines. If you need a partner to help you navigate the rules and avoid the risks, we’re here to help.