Sweepstake and Contest Laws

Laws and Rules for Sweepstakes in Texas

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.

Texas (TX)

If you’re giving away a prize worth more than $50,000 in Texas, you can’t give automatic entries with each purchase.

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 - Texas Contest and Gift Giveaway Act

• If a sweepstakes sponsor is using direct mail to offer the promotion and the prizes offered are valued at $50,000 or more, the sponsor may accept entries via mail, but the sponsor cannot use the mailing address of the participants for any other purpose than documenting the entry for drawing.
• Texas restricts sweepstakes sponsors to conducting only one promotion that uses the mail in every 30-day period.
• If a company offers a gift or prize as incentive to attend a sales presentation, the company must provide in writing the details about the sales presentation and the prize.
• If a company offers a gift or prize as incentive to attend a sales presentation, the company must maintain records about solicitations, prizes, winners or recipients and make those records available to anyone, including the Texas Attorney General.
• The requirements above do not apply to promotions that take place at trade shows or business conferences as long as the participants are all attendees of the events.

Prize Promotion Laws - Texas Business and Commerce Code - Telemarketing

• If running a telemarketing sales campaign and a prize or gift is offered, the sponsor must provide disclosures about the offer and prize. The sponsor is also required to register the telemarketing promotion with the Texas Secretary of State office.

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.

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