Do you know why sweepstakes are free to enter?
When you read sweepstakes rules, you'll see these terms come up regularly: "No purchase necessary" or "No purchase necessary to enter or win".
This seems strange when the goal of a giveaway is to increase business for the company that's sponsoring it. Wouldn't it be more effective for companies to only give away prizes to people who buy their products?
It's true that most companies hope that their giveaways will drive sales. But in the United States, you can't make entering contingent on giving money to the sponsoring company — it's illegal.
You'll also see a related disclaimer in sweepstakes rules: "A purchase will not affect your chances of winning."
That means that companies cannot let people enter and then disqualify them if they don't buy something, and they can't give better odds to people who do buy their products.
What Does Consideration in Sweepstakes Mean?
Making a purchase to enter a giveaway is known as "consideration."
What does consideration mean?
In sweepstakes terms, consideration is simply exchanging something of value for a prize, or for a chance of winning a prize. In the United States, sweepstakes that award prizes by chance cannot require any consideration or they will be in violation of the law.
In the United States, only the government can run lotteries and some states prohibit them altogether. So in order for sweepstakes to be legal, they cannot meet the definition of a lottery.
The definition of a lottery is:
A randomly-drawn giveaway with a chance to win a prize that has monetary value and has an element of consideration.
At least one of those three characteristics must not be present for sweepstakes to be legal. The most common element to eliminate is consideration.
Consideration isn't just a matter of money exchanging hands; anything that financially profits the sponsoring company counts.
So a sweepstakes sponsor cannot force entrants to purchase a product to enter sweepstakes, but they also can't require that entrants fill out an extensive and time-consuming survey or that they listen to a sales presentation to claim a prize.
Now that might sound clear, but there are plenty of gray areas about what qualifies or doesn't qualify as consideration when you are entering sweepstakes.
For example, some giveaways make it mandatory for entrants to opt in to receive their newsletters to enter their sweepstakes. Does that count as consideration? Having a larger email list is a benefit to the sponsor, but it might not directly translate into profit.
The question would have to be brought before a court of law to get a definitive answer. But many companies make signing up for a newsletter optional, to stay on the safe side.
Have You Seen Sweepstakes Where You Need to Make a Purchase to Enter?
So if sweepstakes can't require a purchase to enter or to win, why is it legal to run giveaways where entrants have to look under a cap of a soda bottle to enter? Or those where you have to show a receipt proving you've purchased certain products before you can enter? Isn't that consideration.
However, it is legal — in most jurisdictions — to let people enter with a purchase if there is also a way to get the same number of entries without making a purchase. These are called alternate entry methods (AMOEs).
So if a beverage company is holding an under-the-cap giveaway, read the rules and you'll find that you can use the alternate entry method to enter for free by mail, with a telephone call, or another method.
Alternate entry methods can also give you more chances to win, more easily. It's a good idea to always read the sweepstakes rules to find out if you can boost your odds of winning.
Note that the requirement is that no purchase must be necessary to enter AND that a purchase can't affect your chances of winning. That means that entrants have to be able to get the same number of maximum entries through non-purchase entry methods as through entry methods that require a purchase.
What About Sweepstakes Where You Need to Be a Paid Member to Enter?
Sometimes companies like Verizon or Sirius XM hold giveaways where you have to be a paying member to enter. Why doesn't that violate the no purchase necessary law?
If you read the rules, you'll find that they're using another loophole: they'll say that you have to have been a member before the giveaway began.
Most jurisdictions accept that paying money to join wasn't a requirement to enter or win since the payment had to have been made before the chance to win existed.
What About Internet Access? Does That Count as a Purchase?
Consideration doesn't even have to be paid directly to the company sponsoring a giveaway. If sweepstakes require entrants to do anything costing money, they risk violating the no purchase entry sweepstakes laws.
But what about the methods used to enter sweepstakes? While a stamp and envelope for mail-in sweepstakes don't count as consideration, what about buying a computer and signing up for internet access? Will hosting sweepstakes online get companies in trouble?
The short answer is—maybe. Because laws vary by state and can change over time, it's hard to give a more concrete answer. In the article, Don't Gamble with Internet Sweepstakes, the National Law Review writes:
There has been some concern that requiring a computer and/or Internet access to enter a sweepstakes could be deemed consideration. However, as long as consumers are not specifically induced to purchase Internet access and/or a computer for the purpose of participating in a promotion, Internet sweepstakes are not likely to be deemed an illegal lottery on that basis alone.
Meanwhile, Dale Joerling of Thompson Coburn writes:
Is getting online 'consideration'?Another consideration quandary pops up when deciding whether it constitutes consideration to require a person to go on to the Internet to enter a sweepstakes. Many argue the Internet is so ubiquitous and accessible that requiring someone to enter online can't be considered consideration. Others argue equally forcibly that only about 70 percent of Americans have Internet access at home, so not everybody can enter an online sweepstakes or play a game free of charge. They also argue that while most U.S. residents are familiar with use of the Internet, some still may not be comfortable registering for a sweepstakes online.
To be safe, sweepstakes sponsors use a few different methods ensure that their giveaways are legal. For example, some use an alternate entry method, as described above. Others state in the rules that, in order to be eligible to enter, entrants must have a computer and internet service before the beginning of the giveaway begins. And others suggest free ways to get online, such as using free computers at libraries.
Why Can Contests Charge Money to Enter?
If selling entries into sweepstakes, or requiring a purchase to enter, is illegal, why do some creative contests charge fees to enter and win?
To find the answer, go back to the three elements of an illegal lottery: consideration, a prize with monetary value, and a random drawing for the winner.
Contests, by their nature, don't draw winners at random. They use a judging system to select the winning entries, so they don't have the three elements required to be an illegal lottery.
Canadian sweepstakes law generally prohibits giveaways where the winners are chosen purely by luck. That's why Canadian sweepstakes have skill-testing questions for their winners.
Many contests are free to enter, meaning that they avoid two out of three of the elements of an illegal lottery. But if the winner is selected by judges (or another skill-based manner), a no purchase necessary entry method isn't mandatory.
So Who Enforces No Purchase Necessary Laws?
It doesn't do much good to say that legal sweepstakes can't require a purchase if the law isn't enforced. There are a few different governmental agencies in the United States who are responsible for ensuring that sweepstakes really aren't pay-to-play:
- The FCC: The Federal Communications Commission is responsible for advertising that takes place online or on the internet. The FCC can get involved in giveaways that are available on or which are advertised through these methods. You can read what the FCC has to say about sweepstakes and lotteries here: Broadcast Contests, Lotteries, and Solicitation of Funds.
- The FTC: The Federal Trade Commission is responsible for protecting consumers and promoting fair competition. This includes making sure that sweepstakes entrants aren't told, or tricked into believing, that they must make purchases to win. The FTC also has specific rules regarding sweepstakes that must be followed. You can read more about the FTC's involvement with giveaways here: Advertising FAQ's: A Guide for Small Business.
- The USPS: Mail-in sweepstakes and sweepstakes that are advertised through the mail also fall under the jurisdiction of the United States Postal Service. Read more about what the USPS has to say about no purchase necessary to enter rules here: Publication 546 - A Consumer's Guide to Sweepstakes and Lotteries.
- Your State's Attorney General: Aside from federal regulations, states also have requirements about how sweepstakes are handled. You can find more information and also report violations by visiting your local attorney general's website.
If you find a giveaway that is in violation of the no purchase necessary sweepstakes law, you can report it to the appropriate agencies.