Navigating Legal Compliance for Sweepstakes and Online Gaming

With the rise of online sweepstakes, many companies use them to attract customers, but legal pitfalls abound. Sweepstakes must comply with state laws, which define an illegal lottery as involving a prize, chance, and consideration. To make a sweepstakes legal, companies must eliminate either chance or consideration. Skill contests can replace chance, and offering a no-purchase necessary entry method (AMOE) can eliminate consideration.

Esports tournaments, while popular, must avoid being classified as gambling, and federal laws prohibit betting on contests. Companies should ensure skill contests remain free of chance elements.

False advertising and deceptive practices can lead to legal trouble, as seen in the Coinbase Dogecoin Sweepstakes case. Sweepstakes rules must clearly state terms and conditions, including no purchase necessary, eligibility, entry instructions, odds, important dates, selection details, and prize information.

Social media promotions need to follow platform-specific rules and disclose any promotional relationships. Charitable raffles have additional legal requirements, often needing IRS exemptions and state registrations.

Despite complexities, sweepstakes and raffles are effective marketing tools. Consulting experienced legal counsel is essential to navigate this evolving landscape and ensure compliance.