Giveaways are a popular way to grow an audience. Set one up wrong, though, and you could be running an illegal lottery.
In this guide
- A promotion with a prize, chance and a required payment is generally an illegal lottery.
- Sweepstakes stay legal by offering a free way to enter.
- Write official rules covering eligibility, dates, how to enter, the prize and how winners are chosen.
- New York and Florida require registration and bonding when total prizes exceed $5,000.
A giveaway feels informal, but U.S. law treats promotions with prizes seriously. The key is understanding three elements.
Prize, chance and consideration
A lottery combines:
- a prize,
- chance, where winners are picked at random, and
- consideration, meaning entrants must pay or buy something to enter.
Private lotteries are generally illegal. Legal promotions remove at least one element:
- Sweepstakes remove consideration. Winners are random, but anyone can enter for free. That’s why you see “No purchase necessary.”
- Contests remove chance. Winners are chosen on skill or merit, such as the best photo, judged by clear criteria.
Heads-up: “Buy any product to enter” with a random draw, and no free way to enter, is the classic illegal lottery. Always offer a free entry method with equal odds.
Write official rules
Post them where entrants can read them before entering. Include:
- who’s eligible: age, location, and whether employees can enter
- start and end dates and times, with the time zone
- how to enter, including the free method
- how and when winners are chosen and notified
- the prize, its approximate retail value and the number of winners
- the sponsor’s name and address
- the odds of winning, which depend on the number of entries
State rules
New York and Florida require sweepstakes sponsors to register and post a bond when the total value of prizes is more than $5,000. Other states have their own rules for certain promotions. For large giveaways, it’s worth asking a lawyer.
Platform rules
Each social platform has its own rules for promotions, and they apply on top of the law. Check the current version before you launch, and make clear that the platform doesn’t sponsor your giveaway.
Partners and creators
If creators help promote the giveaway, they should disclose their relationship with you: see disclosing paid posts. And to judge whether the giveaway was worth it, track the results with the approach in measuring what works.
FAQ
Is "like and share to enter" allowed?
Whether it’s allowed depends on each platform’s promotion rules, which change from time to time. Read the current rules for the platform before you launch.
Do winners owe tax on prizes?
Prizes are generally taxable income for the winner, and larger prizes can come with tax reporting duties for the sponsor. Check with a tax professional for big-ticket prizes.
Can I limit entry to my state?
Yes, as long as the official rules say so clearly. Some sponsors exclude certain states to avoid their registration rules.
General information for U.S. businesses, not legal advice. Platform features and rules change often, so check the FTC’s guidance and each platform’s current policies before you act.
