Sweepstakes, in its simplest form, is a prize giveaway.
In the purest sense of the word, a sweepstakes has no second place and offers no consolation prizes. The word sweepstakes literally means one winner sweeps the stakes, or takes all of the prizes. However, many modern sweepstakes offer a variety of prizes for multiple winners.
The word sweepstakes has been used since at least the mid-15th century, although in its earliest context, sweepstakes referred to a game in which a single winner walked away with all of the stakes. Eventually, the word evolved into a common expression to describe activities, including a harsh life that offered little to nothing. Today, sweepstakes is mostly a legal term used to describe a prize giveaway.
Contests and lotteries are the two other forms of prize giveaways. In a contest, the winners are rewarded for a skill. In a lottery, participants must buy their way into the pool for a chance at the winnings. Non-government sanctioned lotteries are prohibited by law, and although charity raffles fall under this definition, they are typically overlooked by law enforcement. The winner of a sweepstakes is truly a random draw. Participants are not required to pay for entry or exhibit any type of skill.
A sweepstakes is typically a marketing tool used to build awareness of a product, company or service. Some companies require participants to register personal information in order to be entered into the sweepstakes, and then those companies use the information to build mailing lists or compile consumer information. The Michigan Attorney General warns that many companies sell personal information and registering for a sweepstakes can increase the amount of promotional material a person receives, which may, in turn, increase the odds of becoming a victim of sweepstakes' fraud.
A sweepstakes can provide an opportunity for two or more companies to reap its marketing benefits. One company might opt to run the sweepstakes, while another company sponsors it. For example, a professional sports franchise can promote the sweepstakes in order to build its fan base, while a fast-food chain provides the prizes in exchange for advertising on the sweepstakes' promotional material and during games. Companies may offer monetary rewards or prizes, such as the company's services or merchandise. Typically, a law firm that specializes in prize promotions needs to be consulted to ensure the sweepstakes adheres to federal and state laws.
Federal law requires all sweepstakes sponsors to include a no purchase necessary statement in the giveaway's official rules. Some companies may request that participants mail in proofs of purchase, which can lead people to believe they need to purchase an item to be eligible for the prize, but entries that are sent with proofs of purchase cannot be given a greater chance of winning than entries sent without proofs of purchase, according to the California Department of Consumer Affairs. The rules must clearly offer a non-purchase method for entering, such as sending in a handwritten postcard.
The sweepstakes rules must state the odds of winning. It is illegal for the company sponsoring the sweepstakes to misrepresent those odds. The odds are only an estimate, as the actual odds of winning will depend on the number of entries. Often, certain people are ineligible to win the prize. These people may include the company's employees and family members of employees. The company can also choose to enforce age and residency restrictions and the number of entries allowed per household. All restrictions, including those for claiming the prize, must be listed in the sweepstakes' rules, which cannot change after the sweepstakes has begun.
Some states, including Florida, Rhode Island and New York, require the sweepstakes to register if the prizes exceed a certain amount. New York and Florida laws require the sweepstakes sponsor to secure a bond in the amount of the prizes. The bond is not released until the state receives a list of the winners. Each state has its own laws regarding the disclosures of the sweepstakes that must be included in promotional materials.
Simply being knowledgeable about sweepstakes laws can prevent sweepstakes fraud, according the Federal Trade Commission. Anyone approached with a sweepstakes promotion, whether in person, by mail, phone or Internet, should be skeptical unless the sweepstakes has previously been proven reputable. The FTC recommends looking for the no purchase necessary statement, as well as searching the sweepstakes' fine print to make sure the winner is not required to pay shipping and handling or other monies to claim the prize.
Some fraudulent sweepstakes organizations provide a pay-for-call telephone number for participants to call for information. Legitimate sweepstakes will always use a toll-free number and provide the name and address of the sweepstakes' sponsor. Participants will never need to provide a credit card number or bank account information to be entered in the sweepstakes. Some fraudulent sweepstakes organizations may have complaints filed with the Better Business Bureau, although a lack of complaints does not mean the company is legitimate.