How to run a promotion without running from the law

They’re fun, engaging and can help move the needle, but contests and sweepstakes can also open up your business to big legal risks. Here are some best practices to know before you launch your next promotion.

by Bilal Kaiser
updated May 11, 2023 ·  3min read

We’ve all seen them: “Enter for the chance to win a trip to the Bahamas!” or “Show us your best photo and win a TV!”

Sweepstakes and contests have been around for decades, and consumers love them. In fact, entire online communities are dedicated to tracking and sharing the best ones. A well-executed sweeps can be integrated into your various promotional levers, and with social media now a crucial part of any business’s marketing strategy, your campaign can have a much broader reach and help acquire new customers.

To start, here is how the two types of promotions differ:

A sweepstakes or giveaway is all about chance: after everyone has entered, a winner is chosen at random.

A contest is more than a random chance to win: each entrant has to demonstrate some sort of skill or talent, and judges pick a winner based on pre-set criteria.

Having clear objectives can help you choose the type of promotion that makes the most sense. For example, if reaching the largest number of people with a low barrier to entry is your primary goal, a sweepstakes would make more sense than a contest.

Once you’ve chosen the type of promotion and started prepping it for launch, ask yourself the following questions about legal issues surrounding such a campaign:

Data protection: Where will entrants’ personal information, such as names and addresses, be stored? Will the data be encrypted? If using a third-party platform to conduct the sweepstakes/contest, make sure you’re comfortable with the company’s data protection processes and consider asking for as little information from entrants as needed to limit risk.

There has been a recent wave of data breaches for retailers big and small, but one Portland-area radio station had its own such episode when data cartridges containing private information of more than 12,000 people were stolen from an employee’s car.

Privacy policy: Once you start collecting data, what are you going to do with it? Will it sit on a hard drive for a set period of time? Will your retail partners have access to such data? If you’re currently running a business with a website, you probably should have (or should immediately look into) a site privacy policy that covers data collection during promotions.

An extension of the policy could include serious implications that entrants and visitors should know about, such as those that deal with consumer rights. General Mills made headlines when it quietly changed its site policies to state that consumers who interacted with one of their brands online (such as by “liking” a Facebook page or downloading a coupon) would give up their rights to sue the company. The company quickly reversed those changes because of consumer protests, but it isn’t hard to imagine such clauses becoming more commonplace in the near future.

Legal compliance: Depending on the value of what you’re giving away, the location(s) in which the promotion is available, and overall entrant eligibility, there is a long list of issues to run through before you launch your campaign. For example, high-value prize packages require registration and bonding in some states. As a whole, some states don’t allow certain types of promotions to be conducted without additional legal language in the rules (if at all). And depending on the theme of your campaign, you could run into problems if you’re marketing to young people and not following very specific protocol.

A giveaway or contest can be a fun way to engage your fans and reach new customers—just make sure you cover your bases and think through potential legal risks. And of course, remember that the above list isn’t a deep dive into sweepstakes/contest-related questions, so consulting with your business attorney is an essential first step.

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Bilal Kaiser

About the Author

Bilal Kaiser

Bilal has been writing for LegalZoom since 2008. His areas of interest include entrepreneurship, small business marketin… Read more

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of the author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.