Many businesses are using sweepstakes in their marketing efforts. While sweepstakes are a unique and creative way to engage potential customers, sweepstakes are subject to many local, state, and federal laws and regulations. Running a sweepstakes without a thorough understanding of the legal implications can leave a business exposed to civil law suits, criminal prosecutions, and unwelcome media attention.

Most business owners understand that one of the key requirements of offering a valid sweepstakes is that entry into the sweepstakes can be made without consideration. This means that there can be absolutely nothing of value exchanged in return for entry into the sweepstakes; entry must be free. This can cause confusion for business owners because understanding what constitutes consideration from a legal perspective is not necessarily intuitive. Courts have determined that requiring entrants to do anything they might not otherwise do, requiring entrants to go out of their way, or requiring entrants to provide information (even if benign) can constitute consideration, especially if the entrant’s actions benefit the business in some way. The following examples of consideration help illustrate what this definition means in practice:

• A free entry form that is unduly burdensome (i.e. a form that takes hours to complete).
• Requiring participants to make a purchase to enter the sweepstakes or to receive an awarded prize. 
• Requiring participants to use their loyalty points to enter the sweepstakes or to receive an awarded prize.
• Requiring participants to provide valuable information (like demographic information, employment status, employer, etc.) to enter the sweepstakes.  

Businesses can stay on the safe side of the consideration issue by ensuring that every entrant has the chance to enter the sweepstakes for no consideration. For example, a business can ask an entrant to provide valuable information on its entry form, but cannot require it. That is, an alternate method of entry which does not require consideration must be available (and easily accessible) to every entrant. Of course, the participants providing consideration and the participants providing no consideration must have an equal chance of winning the prize.

Keep in mind that consideration is just one small facet of sweepstakes and contest law. If your business is considering a promotional sweepstakes, contact a lawyer to ensure compliance with local, state, and federal laws.