Companies are becoming increasingly innovative in promoting and conducting contests and sweepstakes via social media sites such as Facebook, Twitter, Pinterest, and Instagram. However, companies engaging in social media contests or sweepstakes must ensure that their promotions are in compliance with federal and states laws as well as the specific platform guidelines, and be particularly careful not to inadvertently organize their promotions as an illegal lottery. Avoiding the creation of an illegal lottery is one of the biggest challenges of organizing a social media promotion.
Lotteries are promotions where prizes are awarded on the basis of chance to participants who pay or give something of value to play. Specifically, lotteries have three elements: (1) consideration; (2) chance; and (3) prize. Because lotteries are highly regulated and can only be legally operated by the states themselves, any promotion that consists of these three elements is per se illegal. For example, a purported “sweepstakes” which requires participants to share a company’s Facebook fan page or retweet a company’s message to others an unreasonable number of times for entry into a random drawing to win a prize could be construed as an illegal lottery because it consists of all three elements. The requirement to share or retweet a certain number of times could arguably be considered non-monetary consideration, whereas the opportunity to be entered into a random drawing to win a prize could plausibly cover the chance and prize elements.
To avoid being classified as an illegal lottery, one of the three elements must be eliminated. Naturally, the “prize” element cannot be removed. Therefore, legal compliance means eliminating either consideration or chance. However, since prizes and chance are central to sweepstakes where the winners are randomly drawn, companies should not require consideration (whether monetary or non-monetary). Accordingly, a legal sweepstakes should not require participants to pay or exert significant effort (i.e., high volume tweeting or sharing) for eligibility or entry, or purchase a product or service to improve their odds of winning.