If you want your business to run a sweepstakes or contest you must be careful to structure the promotion so it is not characterized as a lottery under state and federal law, as lotteries are illegal unless sponsored by government entities. Some states, such as Florida, New York, and Rhode Island have registration requirements if the total amount of prizes exceeds a certain amount. And there are a number of issues you should address in the official rules you publish with the sweepstakes or contest.
In Texas, businesses that want to run a sweepstakes or contest must comply with both state and federal regulations to ensure their promotion is not considered an illegal lottery. Texas law defines a lottery as a game with three elements: prize, chance, and consideration (entry fee or purchase). To avoid being classified as a lottery, at least one of these elements must be removed. Typically, businesses eliminate the consideration element by allowing free entry. Sweepstakes must provide clear terms and conditions, including eligibility criteria, entry methods, prize descriptions, and selection of winners. While Texas does not have the same registration requirements for sweepstakes as states like Florida, New York, and Rhode Island, businesses must still adhere to the Deceptive Trade Practices Act (DTPA) to avoid misleading practices. Additionally, federal laws, such as the Federal Trade Commission (FTC) regulations, require transparency in advertising and prohibit unfair or deceptive acts in sweepstakes and contests. It is advisable for businesses to consult with an attorney to ensure compliance with all relevant laws when structuring a sweepstakes or contest.
