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Home Insider Blogs Nadeen Green's Blog Playing by the Rules – Contests, Sweepstakes and Lotteries!
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Jan 04
2010

Playing by the Rules – Contests, Sweepstakes and Lotteries!

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Posted by: Nadeen Green on Jan 4, 2010 06:07

Tagged in: Untagged 
 

No matter where and how you are advertising your community, be it in print, online, or through social media websites, you have many creative ideas about how to entice people to visit you and consider you for their new apartment home.  But do you know the differences between a contest, a sweepstakes and a lottery?  This is very important, since the first two are legal; but a lottery is not legal (only States have the power to run a lottery).  So you need to be careful that you do not run a promotion that can actually be criminal!

 

Let's look at the differences between a contest, a sweepstakes and a lottery.  There are 3 elements to consider:            chance.....consideration.....prize

 

Essentially, if you have 2 of these it is legal; if you have 3 of these it is NOT.

 

Consideration + Prize = Contest   (A contestant has to do something to win a prize, such as write the best essay or come up with the best slogan or best design; this is the "consideration" that is required of them).   In theory, though, there is no "chance" since the "best" entry will win (in other words, it is not random).

 

Chance + Prize = Sweepstakes (The entrant doesn't really have to do anything - give consideration - to win, but winning is based on chance, i.e. a random drawing.)  It has been held that sticking a stamp on an envelope is not enough to be called consideration, nor is filling out the entry form or using a piece of paper instead.  Even an online questionnaire with a limited number of required fields is most likely okay.  But you have to be careful not to require that people visit your community or perform in some other way (such as sign a lease) in order to qualify for the drawing, because then...

 

you have all 3 elements and this is BAD!

Because now there is a LOTTERY and this is illegal!

 

Chance (random drawing) + consideration (you are requiring of the prospect) + prize

IS A LOTTERY

 

This article was posted by Nadeen Green, Senior Counsel with For Rent Media Solutions®.  However, while Nadeen is the attorney for FRMS, she is not your attorney. So her information is not to be considered legal advice and both Nadeen and FRM strongly recommend that you consult with your own attorney as to any legal questions or problems you may have.  Nadeen's alter-ego is Fair Housing Lady, but she has just demonstrated that she knows more than just fair housing stuff.  Her next posting will be about the "mouse print" you must use when you conduct your sweepstakes.


Comments (6)Add Comment
304
written by Kate Good, January 13, 2010
Great post Nadeen. I appreciate the clarity on this point. I was wondering who prosecutes this and what are the penalties if it is found you are in violation of this law.

Thanks - Kate
3010
written by Nadeen Green, January 15, 2010
Usually it will be a State's Attorney General (or maybe a commission appointed by a governor) that rallies against a lottery in order to protect the consumer/public. While an AG can initiate without a complaint, most likely this happens when a consumer (perhaps someone who didn't win the prize) brings this to the AG's attention. The penalties will vary from state to state. This is why you see "no purchase necessary" all the time as to sweepstakes (purchase = consideration) and why Reader's Digest had to make it clear, years ago, that you had an equal chance of winning whether you did or did not buy magazines.
1195
written by David Kotowski, December 20, 2011
I refer back to this article a lot, especially when I'm talking to clients who are considering giveaways or a raffle as a leasing tool. I'm curious about how prizes given away by properties as an incentive to gain social networking followers would be considered. For example, a community that is giving away an iPad to the resident who gets the most people to Like their Facebook Page. In addition to being a violation of FB's terms of service, it seems like it could be considered an illegal lottery.
0
written by Nadeen, December 20, 2011
David, I am not going to address the FB violations, but can give some input on the other aspect of your comment. The lottery rules are based on consumer promotions (think the public), i.e. when a property reaches out to prospects. Besides being illegal, it is not smart to do a promotion that is a lottery, as in today's economic times folks are looking for ways to take issue with things and try to get some money. However, a resident-based promotion is not offered to the public, but rather to a closed, private group, so the lottery rules do not come in to play. That is also, BTW, why at trade shows vendors can do promotions that would/could be considered a lottery if that promotion was open to the public (such as having to visit lots of vendors booths and get a card stamped to enter a drawing for a trade show prize and "msut be present to win"). Hope this helps - and not that I have confused you!
1195
written by David Kotowski, December 20, 2011
Nadeen - That helped a lot. Thanks! I guess the gray area with resident giveaways can come when they're required to do something in order to enter the contest. Like telling residents that if they renew their lease they could win an iPad. Or does the open/closed group relationship apply regardless of any required consideration? I realize this is different than my comment about Facebook, but your response got me thinking... smilies/smiley.gif
0
written by Nadeen, December 21, 2011
Hello again! The "open v. closed" as to the "players" means that your example for residents is just fine. Because it is a "closed" group, you can say "Renew your lease for a chance to win a prize". But for an "open" group, such as prospects, you canNOT say "Lease an apartment for a chance to win a prize" since that "open" group is open to the consumer population that anti-lottery laws are designed to protect.
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