Prize promotions fall into two categories: games of chance and contests of skill.
Chance promotions can take various forms, such as sweepstakes, where winners are determined by a random drawing, and “instant win” promotions, where winning game pieces are randomly seeded in the overall run of pieces. Whatever the form, they share one common element: winners are determined solely by chance. Chance promotions are subject to a host of state regulatory requirements, including registration, disclosure (including odds of winning), and in some state, escrow requirements. If combined with any form of payment or other consideration (even purchase requirements), chance promotions can become illegal lotteries, which may result in state enforcement action and/or civil damages.
Contests, on the other hand, are judged on the basis of skill. Properly-structured and implemented contests, therefore, generally are exempt from laws regulating chance promotions because the element of chance is absent.
Both contests and chance promotions are governed primarily by the laws of the contract, with the “official rules” serving as the parties’ agreement. Game and contest rules, therefore, should explicitly describe, among other things, methods of entry, limitations on number of entries (if applicable), methods of determining winners, eligibility (i.e., age, residence, and the exclusion of employees and the sponsor’s family members), commencement and expiration dates for accepting entries, limitation on the sponsor’s liability, disclaimer of liability for lost, late, and misdirected mail and for printing and typographical errors on game pieces.
We can assist you in developing and executing your prize promotion, from drafting the rules, to complying with regulatory requirements, to executing winner affidavits and releases.