Sweepstakes & prize drawings: 3 elements that constitute a lottery

roulette tableA prize drawing or sweepstakes is a great marketing tool to promote your brand, but you’ll want to make sure it is a legal contest and not an illegal lottery. There are three elements that constitute a lottery: prize, chance and consideration.

  1. Prize – This is anything of value given away in the promotion. For example, a car dealer may give away a free vacation.
  2. Chance – Determine if your promotion has the element of chance, as in a random drawing in which luck is the deciding factor.
  3. Consideration – This is what the customer must do to participate. This could be purchasing a product, attending a sales presentation or even driving to the store.

If all three of the above elements are present, then one of the elements needs to be removed to make it legal, according to state and federal laws. This is why you often see “no purchase necessary” in sweepstakes promotions. By eliminating consideration (purchasing a product), this leaves just two elements—prize and chance—so it becomes a legal contest.

With proper planning and execution, sweepstakes or prize drawings can be a great experience for the both the brand and the customer. If you are not trained and experienced in marketing, you may want to consider hiring an advertising agency to design and execute your program.

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