Sweepstake and Contest Laws

Laws and Rules for Sweepstakes in Iowa

First, it helps to understand the difference between a sweepstakes, contest and lottery. In a sweepstakes, winners are chosen randomly from all participants. In a contest, the winners’ entries are usually judged and are based on a skill or criteria. In a lottery, winners are chosen at random, but in order to enter, the participant must pay. A payment is called a consideration. Only states can hold lotteries, so all private lotteries are illegal.

To avoid being classified as an illegal lottery in any state, your promotion can only have 2 of these 3 elements: prize, chance and consideration. Keep in mind, consideration can mean anything of value, including a fee or even a significant effort (i.e., time spent shooting/submitting a photo, etc.)

Here are possible combinations:

• Prize + consideration + chance = illegal lottery or gambling
• Prize + consideration = legal contest (in most jurisdictions)
• Prize + chance = legal sweepstakes

All sweepstakes in the United States must meet the following regulations:

1. No purchase necessary. You can enter the sweepstakes without buying a product or service.
2. Winners are required to pay taxes on prizes they win.

Sweepstakes are regulated nationally and by state by the following organizations:

• Federal Trade Commission (FTC)
• Federal Communications Commission (FCC)
• United States Postal Service (USPS)
• United States Department of Justice (DOJ)

State Specific Sweepstakes & Contest Laws

Besides federal considerations, every state has its own specifics laws regarding sweepstakes and contests.

Iowa (IA)

Iowa also has rules about seminars and sales presentations. They’re allowed as part of claiming a sweepstakes prize, but the presentation can’t begin until the sponsor tells the participant of the prize and actually awards it. Another requirement is a 'Sellers of Travel' registration if the prize includes travel.

Contests: are allowed as long as the sponsor awards the prize based on skill and not chance.

Sweepstakes: are allowed as long as the sponsor awards the prize based on chance.

Prize Promotion Laws - Iowa Prizes and Gifts Laws

• Contest may not be held at a school or amusement concession and the contest may not utilize a gambling device.
• A sponsor of a prize may not ask a person to buy merchandise, pay or donate money as a condition of awarding a prize or as a condition of allowing the person to receive, use or compete for a prize.
• A sponsor of a prize cannot charge money to provide information about a prize unless the sponsor first gives a person a written disclosure statement. 
• Iowa Prize Promotion Law lists specific information that must be included in the prize disclosure notice and prohibits certain practices that may mislead participants or consumers.

Legal Review Criteria: Material Element Test when assessing whether or not chance determines the outcome of a promotion.

Note: the information above is for informational purposes only and should not be construed as legal advice. Sweepstakes and Contest promotional laws change and the above may not reflect the must current laws.