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 Kentucky, businesses that wish to run sweepstakes or contests must comply with both state and federal regulations to ensure that their promotions are not considered illegal lotteries. An illegal lottery includes three elements: prize, chance, and consideration (entry fee or purchase requirement). To avoid being classified as a lottery, most sweepstakes remove the consideration element by allowing free entry. Kentucky does not have specific registration requirements for sweepstakes or contests like Florida, New York, and Rhode Island do, but businesses must still follow general consumer protection laws. Official rules for the promotion should be clearly published and address eligibility, entry procedures, prize descriptions, odds of winning, and how winners will be selected and notified. Additionally, businesses should be aware of the federal Deceptive Mail Prevention and Enforcement Act, which governs sweepstakes through the mail, and the Federal Trade Commission's guidelines on advertising and online promotions.