Social media sweepstakes and contests are a popular way for businesses to engage with their audience and promote their products or services. However, it is important to be aware of the legal implications of running a social media sweepstakes or contest before launching one.
In the United States, sweepstakes and contests are regulated by a variety of laws, including state and federal consumer protection laws, gambling laws, and tax laws. Businesses that fail to comply with these laws can face serious consequences, such as fines, lawsuits, and even criminal charges.
Here are some of the key legal considerations for running a social media sweepstakes or contest:
- Avoid creating an illegal lottery. A lottery is defined as a gambling activity where participants pay to enter for a chance to win a prize. Social media sweepstakes and contests can be considered illegal lotteries if they meet all three of the following elements:
To avoid creating an illegal lottery, businesses should make sure that their social media sweepstakes and contests do not require entrants to pay anything to enter. Businesses can also offer an alternative method of entry (AMOE) that does not require entrants to take any action that could be considered consideration, such as following the business on social media or liking or sharing a post.
- Comply with state and federal consumer protection laws. State and federal consumer protection laws prohibit businesses from engaging in deceptive or unfair trade practices. When running a social media sweepstakes or contest, businesses must make sure that their official rules are clear and concise, and that they do not mislead entrants about the terms of the promotion.
- Comply with gambling laws. Gambling laws vary from state to state, but most states have laws that restrict or prohibit gambling activities. Businesses should check the gambling laws in the states where they are operating to make sure that their social media sweepstakes and contests comply with the law.
- Comply with tax laws. The Internal Revenue Service (IRS) considers sweepstakes and contest prizes to be taxable income. Businesses are responsible for withholding and remitting taxes on prizes valued at $600 or more.
In addition to the legal considerations listed above, businesses should also be aware of the social media platform guidelines that apply to running sweepstakes and contests. Most social media platforms have specific rules that businesses must follow when running promotions on their platforms. For example, Facebook requires that all promotions be run through specific pages or apps, not on personal pages.
By understanding the legal and social media platform requirements for running sweepstakes and contests, businesses can avoid legal pitfalls and run successful promotions that engage their audience and promote their products or services.
Here are some additional tips for running a legal social media sweepstakes or contest:
- Have an attorney review your official rules before launching your promotion. This will help to ensure that your official rules comply with all applicable laws and regulations.
- Post your official rules on your website and social media pages. This will make it easy for entrants to find the information they need about the promotion.
- Randomly select winners and announce them publicly. This will help to ensure that your promotion is fair and transparent.
- Notify winners promptly and provide them with instructions on how to claim their prizes.
- Comply with all tax laws applicable to prize winnings.
By following these tips, businesses can run legal and successful social media sweepstakes and contests that benefit their businesses and their audiences.