Do you know the laws and rules that regulate sweepstakes and contests in the U.S.? See below for insight into the various laws that apply by state.
Laws and Rules for Sweepstakes in South Dakota
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:
No purchase necessary. You can enter the sweepstakes without buying a product or service.
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.
No purchase can be necessary in the state of South Dakota. A solicitor or sponsor can’t accept payment from an individual or winner in any form.
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- South Dakota Codified Laws
South Dakota Supreme Court defined a game of chance as “a contest wherein chance predominates over skill”.
South Dakota prize promotion law focuses on the requirements for Prize Notices. These notices must be provided to the participant prior to entering the sweepstakes or contest.
South Dakota has specific requirements for the placement, font and wording of the prize notice and prohibits any actions that may deceive the recipient of the prize notice.
If a sponsor tells a person that they have won a prize the sponsor cannot require any type of payment as a condition to receiving the prize before giving the person a written prize notice.
In South Dakota, you must give the prize to the person attending the sales presentation before the sales presentation starts.
Exemptions to providing a Prize Notice in South Dakota:
a. If winners are not selected by chance or any element of chance.
b. If the recipient can evaluate any products or services purchased for at least 7 days and can obtain a complete refund or cancel within 30 days.
c. If the recipient can keep the prize offered in the promotion without further obligation.
d. If the recipient is not required to pay for the item offered in the promotion or has to attend any sales talk.
South Dakota Cannabis or Marijuana Sweepstakes or Contest Laws
Cannabis or any product containing cannabis, such as food or drinks are not allowed as prizes.
Purchases of any related products can't be required for entry.
Make sure that your sweepstakes is only open to entrants age 21 or older with proof of age.
Any ads must have a disclaimer about the state's legal age for marijuana products, if any.
Similar to the tobacco and vaping industries, brands cannot use any type of marketing that can be construed as trying to appeal to children (characters, mascots, games, etc.)
Don't advertise your brand or giveaway in public (or private) places where children may be present, including billboards, buses/vehicles, television, and radio.
Don't use Facebook, Google, or any other advertising or marketing channel that specifically prohibits promotions involving illegal drugs to promote your giveaway.
Do not allow mail-in entries as this could be considered as interstate commerce.
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.