Dec
27
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Sweepstakes and Contests Defined

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Premium SMS and 900 numbers are frequently used for sweepstakes and contents like “Deal or No Deal”.

Sweepstakes and contests have long been a popular method of promotion for brands and products.  Sweepstakes and contests often use 900 number entry or entry via premium SMS.

Sweepstakes and contests are some of the most highly regulated of marketing tactics.  Furthermore, sweepstakes are regulated by a complex set of individual state laws that add to the complexity of the already existing national laws.

If you wish to promote a sweepstakes or contest via 900 number or premium SMS, we encourage you to obtain your own legal opinions.  The following information is supplied solely as a guideline and is not intended to offer legal advice.

Consideration — Although the actual definition of consideration varies widely from state to state, consideration generally means that a willing participant is required to make a purchase or pay for access to be eligible to enter a game.  By using a 900 number or premium SMS, there is an inherent consideration involved.

Sweepstakes — A sweepstakes is a legal game that includes a prize and a game of chance.  No consideration is permitted in a legal sweepstakes.

Contest — A contest is a promotional mechanism that includes a prize and is a game of skill.  Consideration is permitted in a contest, but there can be no element of chance at any point in a contest.

Lottery — A lottery is a game that includes a prize, a game of chance, and a consideration.  Federal legislation and State laws govern all lotteries for promotional purposes.  Therefore, you are not able to run a lottery.

So, you may be wondering, how come I see some sweepstakes that do charge people to enter?  That may very well be the case, but it is likely that the sweepstakes is offering some “Alternative Form of Free Entry.”  In other words, if you wish to run a sweepstakes via a 900 number or premium SMS, like Deal or No Deal did, you need also provide a completely free form of entry whereby the free entrants receive the same opportunity to win the prize as those who have paid for the entry.

Again, if you wish to run any type of sweepstakes or contest, you should not take the content herewith as legal advice, as we are not attorneys.  You should consult your own attorney and get the necessary opinion letters prior to running your program.

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