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 California, businesses that want to run sweepstakes or contests must comply with both state and federal regulations to ensure their promotions are not considered illegal lotteries. An illegal lottery includes three elements: prize, chance, and consideration (entry fee or purchase). To avoid being classified as a lottery, most sweepstakes remove the consideration element by allowing free entry. California law requires that sweepstakes promotions provide clear and conspicuous disclosure of the rules, terms, and conditions of the promotion, including no purchase necessary statements, eligibility criteria, entry procedures, and prize descriptions. Additionally, businesses must not misrepresent the odds of winning or the nature of the prizes. While California does not have the same registration requirements as Florida, New York, or Rhode Island for sweepstakes with large prize amounts, businesses must still adhere to the California Business and Professions Code sections 17539-17539.55 which govern these promotions. It is crucial for businesses to publish official rules that address eligibility, entry methods, prize details, selection of winners, and how winners will be notified, among other aspects, to ensure compliance with the law.