Sweepstakes, lotteries, and prize drawings in the USA
Last Update: 14.07.2025
Conducting lotteries, sweepstakes, and promotional drawings in the United States requires not only creativity but also a deep understanding of legal nuances. Gofaizen & Sherle’s experts help companies safely and legally run these kinds of promotions, guiding clients through every step—from structuring the campaign and drafting the official rules to ensuring everything complies with federal and state laws. Our legal support ensures compliance and minimizes your risk exposure, providing full transparency at every stage.
In recent years, there has been a rapid growth in the popularity of promotional campaigns such as sweepstakes, contests, and lotteries in the United States. They are used by major brands, marketing agencies, e-commerce companies, and even government and non-profit organizations, from the NCAA to public libraries. The popularity of these mechanisms is explained not only by high audience engagement, the ability to quickly promote products and collect contact details, but also by the development of alternative gaming formats such as “sweepstakes casinos,” which allow players to legally win real prizes without placing cash bets. The growing interest in these mechanisms can also be explained by the following factors:
- The digitization of consumer habits;
- The expansion of targeting capabilities;
- The desire for legal gamification of marketing.
All this makes sweepstakes and raffles not just a temporary trend, but a sustainable direction in marketing. Well-organized promotional campaigns can be a powerful engagement tool, provided they are created and implemented in full compliance with the law.
Despite their outward similarities, there are key legal differences between sweepstakes, lotteries, and contests:
A sweepstakes is a drawing in which the winner is determined at random, and participation must be free.
A contest involves the evaluation of skills or abilities, such as in photography or cooking competitions.
A lottery in the classic sense includes three elements:
- a prize of value;
- chance;
- a contribution or purchase to participate.
In the US, only state lotteries are permitted, and if all three elements are present, the promotion may be considered an illegal private lottery. To avoid breaking the law, it is important to exclude at least one of these components, most often the participant’s payment.
Legal literacy in organizing such promotions is extremely important to ensure the legality and effectiveness of campaigns. Failure to comply with the law can result in fines, litigation, and damage to reputation. In addition to federal requirements (from the FTC, FCC, and other agencies), each state has its regulations, ranging from the need to register and insure prizes to restrictions on the nature of winnings. Therefore, companies are increasingly turning to lawyers specializing in marketing campaign law to ensure full compliance and reduce risks.
Types of raffles and contests
Raffles and contests are an integral part of marketing campaigns in the US and around the world. Despite their general similarities, each type of raffle has its own characteristics, from the rules of participation to legal nuances. To navigate this variety of formats, it is important to understand the key differences between the main types of such promotions. Below are the main types used in the US, along with their characteristics.
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Sweepstakes
A sweepstake is a classic raffle format in which the winner is selected at random from among the participants. As a rule, participation does not require payment or purchase, and everyone has an equal chance of winning.
Features of sweepstakes:
Various participation formats
Can be held online, offline, or in a combination of formats (e.g., via a registration form and postal entries).
Random selection of the winner
Participants fill out a registration form (online or by mail), after which the winner is selected at random. No purchase is necessary.
The result depends solely on luck
Winning does not depend on knowledge, skills, or effort — all participants have an equal chance of winning.
Marketing objective
The main objective is to collect contacts, draw attention to the brand, and stimulate sales.
Regulatory framework
Subject to legal requirements (e.g., the Deceptive Mail Prevention and Enforcement Act in the US).
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Raffle
A raffle is a lottery where participants purchase tickets to participate, and the winner is selected at random. Unlike a sweepstake, participation is usually paid.
Features of a raffle:
Paid participation
Participants purchase a ticket, and the purchase entitles them to participate in the drawing.
Fixed number of tickets
Organizers often limit the number of tickets sold in advance, which affects the odds of winning.
Often used for charity
These raffles are popular among non-profit organizations — the funds raised go to social projects.
Regulated as gambling
Conducting a raffle requires a gambling license, as the draw is conducted on a paid basis.
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Prize Draw
Prize Draw is a broad term that is often used as a synonym for sweepstakes, but it can include both random draws and draws with additional conditions.
Features of Prize Draw:
Random selection
As in sweepstakes, the winner is selected at random.
No purchase
Conducted without mandatory participation in a purchase in order not to violate anti-gambling laws.
Additional conditions for participation
May require a specific action to participate (e.g., subscribing to a newsletter, filling out a form).
Simple participation mechanism
Usually involves filling out a form or subscribing once.
Marketing goal
More often used as part of brand marketing campaigns.
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Skill Contest
A Skill Contest is a competition in which participants must demonstrate a skill, and the winner is determined based on the quality of their performance.
Features of a Skill Contest:
Winning depends on skills
The winner is the participant who demonstrates the best result according to the specified criteria (skill, creativity, knowledge, etc.).
Judging or voting
The results are determined by a jury or user voting, not by random selection.
Skill contest
These can be photo contests, essays, videos, quizzes, or logic games. Such contests can be used for educational or creative purposes and often require the submission of content that is evaluated for quality and relevance to the topic.
May circumvent gambling regulations
Skill contests are not considered lotteries because they do not involve an element of chance.
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Instant Win Sweepstakes
Instant Win Sweepstakes are a type of sweepstakes in which the participant immediately finds out whether they have won or not.
Features of Instant Win Sweepstakes:
Immediate result
The participant immediately finds out whether they have won or not, right after registration or participation (for example, via a scratch card or online interface).
Distribution of prizes throughout the promotion
Prizes are not awarded at the end of the campaign, but throughout the entire participation period, often with a flexible probability of winning.
Incentive for immediate action
Thanks to instant rewards, this format increases engagement and motivates users to return.
Marketing goal
Used to encourage repeat visits to the site. Particularly effective for short-term campaigns promoting new products or time-limited events.
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Viral / “Tell a Friend” Sweepstakes
This is a sweepstake or instant win format supplemented with a referral element.
Features of Viral / “Tell a Friend” Sweepstakes:
“Invite a friend” mechanism.
Participants receive additional chances to win by inviting friends.
Integration with social media
The sweepstakes is often conducted via Facebook, Twitter, messengers, or email.
Increased audience reach
Allows you to organically expand your reach through user engagement.
Can be combined with other types
This element can be integrated as an addition to a standard or instant sweepstakes.
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Mobile Sweepstakes
Mobile sweepstakes are designed for participation via mobile devices and SMS. They are used in instant campaigns and at points of sale.
Features of Mobile Sweepstakes:
Access via mobile devices
Participation is via phone through SMS, an app, a mobile website, or a toll-free number.
Ease of engagement
Mobile mechanics allow you to attract attention while viewing an ad or in a store.
Technological flexibility
Includes MMS messaging, voice responses, codes on packaging, etc.
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Social Casinos and Sweepstakes Casinos (Social and pseudo-casinos)
Sweepstakes casino is a hybrid between an online casino and a promotional giveaway, structured to exploit legal loopholes in laws.
Features of Sweepstakes Casino:
Playing for virtual credits
Players do not bet real money, but chips that can be obtained for free or purchased.
Sweepstakes mechanics for circumventing bans
The winning mechanism is not formally based on bets, but on random draws among players. In some countries, such casinos use a sweepstakes model (for example, the purchase of a product includes the right to participate in a draw) to circumvent gambling regulations.
No direct cash winnings (but there are workarounds)
Unlike a regular casino, it is not possible to win money directly, but chips can sometimes be exchanged for gift cards or goods.
Legal format
Legally registered as a sweepstake, not a casino — used in US states where gambling is prohibited.
Regulatory gray area
Such platforms are controversial among regulators, as they appear similar to gambling but are not formally classified as such.
Below is a comparison table of the main types of promotional formats:
| Format | Payment for participation | The randomness of winning | Skills required | Regulated as gambling | Purpose | Example of use |
|---|---|---|---|---|---|---|
| Sweepstakes | no | yes | no | no | Attracting attention, lead generation | Subscribe to the newsletter for a chance to win a prize |
| Raffle | yes | yes | no | depends on jurisdiction/state | Fundraising, charity | Buy a ticket for $1 — enter the draw |
| Prize Draw | no | yes | no | no | Motivation to act, brand promotion | Enter the draw by simply leaving a comment |
| Skill Contest | no | no | yes | no | Demonstration of skills, content creation | Contest for the best photo or slogan |
| Instant Win Sweepstakes | no | yes | no | no | Maintaining interest, stimulating sales | The prize is awarded immediately after the conditions are met. |
| Viral Sweepstakes | no | yes | no | no | Viral potential, reach expansion | Increase your chances by inviting friends |
| Mobile Sweepstakes | no | yes | no | no | Interactivity, mobile engagement | Draw via mobile app or SMS |
| Social/Sweepstakes Casino | yes/no | yes | no | depends on jurisdiction/state | Entertainment, monetization | Sweepstakes Casinos games with prizes without real bets |
The table will help you quickly assess the key features of each type, from legal restrictions to objectives.
Why Choose Each Type of Promotion?
The choice of promotion format directly affects its reach, audience engagement, and legal security. The most popular options in the US are sweepstakes and lotteries.
Sweepstakes / Prize Draws — An excellent choice for mass reach, attracting potential customers, and increasing brand awareness, without the need for gambling licenses. However, they require careful legal consideration to avoid violating lottery laws.
Raffles — Most effective for charitable organizations. They allow you to raise funds and retain audience attention. However, they are subject to strict rules, mandatory licensing, and restrictions on prizes and geography.
Gofaizen & Sherle lawyers are ready to help you choose the best format for you and organize a turnkey promotional event.
Requirements for conducting sweepstakes in the USA
Prize pool
Participants must be given a chance to win a prize — cash, goods, or other items of value. The presence of a reward distinguishes sweepstakes from simple marketing activities.
Randomness of winning
Winners must be determined solely by chance, without any evaluation of skill. This is important so that the sweepstakes does not qualify as a contest.
Free participation (AMOE)
The organizer must provide participants with the opportunity to participate free of charge — without purchase, donation, or any other form of payment. If participation is linked to commercial activity, an alternative method of entry must be provided.
Clear time frame
The start and end dates of the draw must be specified in advance. This protects both participants and organizers from disputes about the validity of participation.
Public announcement of results
The organizer must specify the date or period when the results will be summarized and the winners announced. This ensures the transparency of the draw and trust in the brand.
Delivery of prizes
The organizer is responsible for ensuring that all prizes are awarded to the winners. Failure to do so may result in legal sanctions and loss of reputation.
Transparent rules of participation
The rules must be clearly stated and available to participants before the start of the contest. They include a description of the prizes, eligibility criteria, entry methods, and other key details.
Compliance with specific state laws
Some states (e.g., New York and Florida) require mandatory registration of sweepstakes with prize pools above a certain threshold. In addition, different states may have unique restrictions, including bans on certain promotional methods.
Privacy policy and data protection
If the sweepstakes involves the collection of personal data, the organizer must provide participants with information about the purposes for which it will be used and ensure compliance with privacy laws such as CAN-SPAM and CCPA.
Aspects of developing and marketing raffles and promotions
Managing raffles and promotions in the US is a complex process that involves both legal and marketing requirements. To launch a successful campaign, companies must not only comply with federal and state laws but also develop a sound marketing strategy and administrative support. Key aspects to consider:
Legal regulation and compliance.
The main requirement is a clear distinction between a legal contest and an illegal lottery. To avoid breaking the law, the drawing must not qualify as gambling. To do this, at least one of the three elements must be excluded: prize, chance, or consideration for participation.
What to consider:
- Develop clear rules for the promotion (Official Rules) that specify who can participate (age, residence, exceptions), the promotion period (start and end dates), a description of the prizes, their value and quantity, the procedure for selecting winners, and details on how to participate for free.
- Check whether the promotion needs to be registered in certain states (New York, Florida, Rhode Island – registration is mandatory if prizes are worth more than $5,000);
- Ensure transparency — avoid vague wording and small print in advertising.
- Check compliance with federal laws.
- Ensure compliance with consumer privacy protection when collecting personal data.
Professional liability insurance and cyber insurance are often used to ensure legal security. If the campaign is international, it must be adapted to the laws of other countries, including translation of the rules and notarization.
Administration and implementation.
Organizing a lottery involves not only legal verification but also a full cycle of administrative support. This includes creating a campaign concept, selecting communication channels, providing support in digital media, preparing and distributing advertising materials, collecting data, verifying winners, and purchasing and delivering prizes. Proper administration minimizes the risk of complaints and violations.
What to consider:
- Define and document the mechanics of participation — via website, social media, email, historical activations, etc..
- Organize the process of collecting and processing applications.
- Appoint a person or company responsible for selecting winners (especially if there are a large number of applications).
- Keep documentation for several years in case of an audit (e.g., proof of fair random selection).
- Prepare alternative entry methods (e.g., participation by mail).
- Ensure that the prize is legally awarded (e.g., by having the winner sign a declaration).
Lotteries and sweepstakes in the US are not just promotional tools, but legally and technically complex projects that require in-depth expertise. Successful promotional events in the US require the coordinated work of lawyers, marketers, and administrative staff.
Gofaizen & Sherle’s specialists will help you organize lotteries and promotions in the US in compliance with all legal requirements and regulations. They will develop transparent rules, ensure proper administration and documentation, and help you avoid risks associated with federal and state regulations. In addition, the team will support you in developing an effective marketing strategy to attract an audience and successfully promote the product.
Find out more information about the Sweepstakes, lotteries, and prize drawings in the USA
Legal Landscape & Regulation in the USA
In the United States, the regulation of promotional campaigns is carried out at two levels: federal and state, which makes compliance with legislation particularly important for companies planning to hold such events.
Federal regulation
At the federal level, regulation is carried out by several agencies: the Federal Trade Commission (FTC), the Federal Communications Commission (FCC), the United States Postal Service (USPS), and the United States Department of Justice. These agencies enforce laws such as:
- Mail Fraud Statute;
- Wire Fraud Statute;
- FTC Act.
Key requirements at the federal level include:
- Prohibition of “consideration” for sweepstakes.
Sweepstakes cannot require a purchase, payment, or substantial effort to participate. This is a mandatory requirement for a promotion not to be considered a lottery, which is prohibited for individuals and companies in the United States. For example, if participation requires the purchase of a product, the promotion will be considered illegal.
- Official rules requirement.
Each promotion must be accompanied by official rules that specify:
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- a complete description of the prizes and their estimated retail value (ARV);
- eligibility criteria (age, place of residence, etc.);
- ways to participate without payment (“alternative means of participation”);
- The timing of the promotion.
- The procedure for selecting winners.
- Tax regulations.
Prizes worth $600 or more are considered taxable income. In this case, the organizers are required to:
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- Notify the IRS and the winner by providing a 1099-MISC form;
- Indicate the amount of the prize and request the winner’s Social Security number.
- Special conditions for the transfer of prizes, such as firearms.
If firearms are involved in the drawing, they must be transferred through a licensed federal firearms dealer (FFL) and subsequently registered to the winner.
State laws and key exceptions
Although federal law provides basic protection, each state has its own rules, which can vary significantly. Some of them establish requirements for:
- registration and security for sweepstakes with prizes above a certain threshold;
- age restrictions on participants;
- additional reporting and financial requirements.
For example, New York, Florida, and Rhode Island require mandatory registration of sweepstakes with prizes worth $5,000 or more (in Rhode Island, $500 or more if the drawing is held in retail stores). These jurisdictions may also require a bond in an amount equal to the value of the prize pool. In all these cases, registration must be completed before the start of the promotion, usually 7–30 days in advance, and a final report with the names of the winners must be submitted after its completion.
In addition, some states have restrictions on the use of alcohol as a prize and other special requirements.
Below is a brief overview of the regulation of promotional events in selected states:
New York
In New York State, promotional campaigns with prizes worth $5,000 or more are subject to mandatory registration and insurance. This must be done at least 30 days before the start of the draw. These requirements are intended to increase transparency and protect the rights of participants, especially in cases where significant sums or valuable prizes are at stake.
After the promotion ends, the organizer is required to provide a list of winners, including their full names and addresses. This requirement makes promotions in New York more public and regulated compared to other states, where registration or disclosure of winners may not be mandatory.
Montana
In Montana, the regulation of promotional campaigns takes a particularly strict approach to the concept of chance. Here, “any chance” in an advertising game can result in it being classified as an illegal lottery. State courts carefully analyze the presence of even the slightest element of chance in the mechanics of a promotional campaign.
This means that even games that are primarily skill-based but contain any element of chance may be found to violate the law. This interpretation makes contests and sweepstakes legally risky in Montana, as most games involve some degree of chance.
Texas
In Texas, particular attention is paid to preventing unfair incentives to purchase through participation in lotteries. State law expressly prohibits the automatic entry of participants in sweepstakes based on the fact of purchase, provided that the total value of the prizes exceeds $50,000.
This restriction is intended to eliminate the element of coercion or “forced participation” in a promotion, which could be equated to an illegal lottery. Thus, promoters in Texas must be particularly careful in designing the entry mechanism so that it does not depend on purchasing activity.
Legal services related to the promotion of sweepstakes
Legal support for lotteries and contests in the US requires a deep understanding of federal and state regulations, as well as the specifics of advertising law and promotional rules. Our experts provide comprehensive services, from campaign design to implementation and support, ensuring legal security and compliance at every stage of the promotion.
Our services include:
Analysis and preparation
We conduct a thorough analysis of the advertising campaign concept to identify and eliminate potential legal risks before launch. We check whether the campaign is a legitimate contest or falls under the category of an illegal lottery, taking into account federal and local laws, as well as social media platform rules. If any issues are identified, we offer effective alternatives and solutions to avoid violations.
Rules
We develop official rules for promotions — a legally binding document that governs the relationship between the organizer and participants. Our experience allows us to create and adapt forms and provisions, taking into account the specifics of each contest, which ensures transparency and protection of the client’s interests.
Registration and security
We submit applications for registration and collateral registration where required by state law, using reliable partner resources to expedite and streamline the process. Such registration ensures the legitimacy of the promotion and minimizes the risk of rejection by regulatory authorities.
Review of advertising materials
We conduct legal reviews of texts and visual materials used in advertising on all platforms, from print media to online channels and social networks. This helps ensure compliance with advertising laws and protects your brand from legal and reputational risks.
Execution and support
We provide support during and after the promotion — we draw up affidavits, obtain permissions from winners, monitor the submission of lists, and maintain reporting. We are ready to quickly adapt documentation to changing conditions and requirements.
Confidentiality and regulatory compliance
We pay special attention to confidentiality issues, especially when collecting and processing personal data of participants in online promotions and social networks, ensuring compliance with data protection laws and minimizing risks for the client.
Global promotions
We advise on international promotions, taking into account differences in legislation between countries, the need to translate rules, register with local authorities, and comply with restrictions on prize values and promotion methods to ensure global legal compliance.
Conclusion
Running promotions in the US requires strict compliance with both federal and local laws. Legal errors can result in serious penalties, especially in states with additional requirements, such as New York and Florida. Companies that do not have their own legal and marketing expertise can engage Gofaizen & Sherle professionals to prepare rules, register, and administer the sweepstakes. This will help avoid legal risks and effectively achieve marketing goals.
FAQ about Sweepstakes, lotteries, and prize drawings in the USA
Are sweepstakes considered gambling?
Sweepstakes are not considered gambling if participation is free and the winner is determined by chance.
Do I have to pay taxes on my sweepstakes winnings?
Yes. Prizes worth $600 or more are taxable: the organizer sends a 1099-MISC form, and the winner indicates the amount on their tax return and pays the tax.
Is it possible to conduct sweepstakes on social media?
Yes. Sweepstakes on social media are permitted if there are official rules, free participation, and compliance with platform and legal requirements.
What is the difference between a skills-based competition and a raffle?
In a skill contest, the winner is determined by the quality of the task (judged by a panel or voted on). A lottery is a random selection from among paid tickets.