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.)
Besides federal considerations, every state has its own specifics laws regarding sweepstakes and contests.
Pennsylvania restricts contest prizes. The total value of all prizes for a contest can’t be more than $1,000 and the total value of all prizes awarded in any 7-day period is limited to $25,000. Alcoholic beverages also can’t be part of a prize.
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- Pennsylvania Telemarketer Registration Act
Legal Review Criteria: Dominant Factor Doctrine 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.