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Basic Federal Sweepstakes Laws & State + Skill Game Laws




The Federal Trade Commission (FTC) enforces laws related to sweepstakes and contests in the United States. Some of the key federal laws related to sweepstakes include:

  1. Deception Statutes: These laws prohibit businesses from making false or misleading statements about a sweepstakes or contest.

  2. Mail Fraud Statutes: These laws prohibit the use of the mail to defraud consumers in connection with a sweepstakes or contest.

  3. CAN-SPAM Act: This law regulates commercial email, including emails promoting sweepstakes and contests.

  4. Telemarketing Sales Rule: This law regulates telemarketing calls related to sweepstakes and contests.

  5. Children's Online Privacy Protection Act: This law regulates the collection of personal information from children under the age of 13 in connection with sweepstakes and contests.

  6. The Prize Promotion Safety Act: This law regulates the conduct of prize promotions, including sweepstakes and contests, to protect consumers from fraud, deception, and other unfair practices.

It is important to note that these are federal laws and states may have their own laws and regulations related to sweepstakes and contests.


Please read up on our other articles about legal compliance here on our blog, or check out our Legal Guide here is a list of federal laws you may need to apply to your rewards store or online program before you get started with sweepstakes or distributing sweepstakes prizes.


  1. Registering As a Money Service Business with FINCEN TO REGISTER AS A MONEY SERVICE BUSINESS : https://www.fincen.gov/index.php/node/7501 To Learn More go to https://www.redluckrewards.com/fincen-msb

  2. AML KYC Compliance. Anti Money Laundering and Knowing Your Client are ethical requirements for those in the securities industry and who are dealing with customers during opening and maintaining of accounts. Firms must comply with the Bank Secrecy Act and its implementing regulations ("AML rules"). The purpose of the AML rules is to help detect and report suspicious activity including the predicate offenses to money laundering and terrorist financing, such as securities fraud and market manipulation.

FINRA reviews a firm’s compliance with AML rules under FINRA Rule 3310, which sets forth minimum standards for a firm’s written AML compliance program. The basic tenets of an AML compliance program under FINRA 3310 include the following. Learn more at https://www.redluckrewards.com/aml-compliance


3. Following No Purchase Necessary Laws is a requirement around every business industry. No Purchase Necessary Laws Around the World

No Purchase Necessary Laws essentially prevent chance-based prize promotions from asking people to provide payment to enter, unless a free entry alternative is readily available.

While this is key information, it is important to remember that No Purchase Necessary Laws don't apply in every country, and what is actually considered 'payment' can vary quite substantially.

To help you find the No Purchase Necessary Laws that apply to your promotion, we're going to take you through some country-specific laws.

If you're running an international promotion it's generally a good idea to comply with the laws and regulations of each country your promotion can be entered from.

Learn More info about No Purchase Necessary Laws at https://www.redluckrewards.com/no-purchase-necessary-laws


4. Following State Laws is a requirement before operating sweepstakes.

Laws and Rules for Sweepstakes in Each State

First, it helps to understand the difference between a sweepstakes, contest and lottery. In a sweepstakes, winners are chosen randomly from all participants. In a contest, the winners’ entries are usually judged and are based on a skill or criteria. In a lottery, winners are chosen at random, but in order to enter, the participant must pay. A payment is called a consideration. Only states can hold lotteries, so all private lotteries are illegal.

To avoid being classified as an illegal lottery in any state, your promotion can only have 2 of these 3 elements: prize, chance and consideration. Keep in mind, consideration can mean anything of value, including a fee or even a significant effort (i.e., time spent shooting/submitting a photo, etc.)

Here are possible combinations:
  • Prize + consideration + chance = illegal lottery or gambling

  • Prize + consideration = legal contest (in most jurisdictions)

  • Prize + chance = legal sweepstakes

All sweepstakes in the United States must meet the following regulations:
  1. No purchase necessary. You can enter the sweepstakes without buying a product or service.

  2. Winners are required to pay taxes on prizes they win.

Text to Win Sweepstakes Compliance
  • Text to Win sweepstakes are legal in all 50 states including the District of Columbia.

  • All call-to-action statements (i.e., Text SWEEPKEY WORD to 65047 for a chance to win [prize description]) should follow with “Text message and data rates may apply.” disclaimer.

  • Sweepstakes and Contest Abbreviated Rules statements should be included in all printed and digital marketing materials.

  • The Sweepstakes or Contest Entry Page (page where participants enter contact information) should contain the following statement:

    • “You are providing signature, consent and agreement to receive marketing text (SMS) messages from the sponsor of this promotion. Message and data rates may apply. Reply STOP to end at any time. 4msgs/mo. max. Text HELP for help. Privacy Policy (url). Terms of Use (url).


Official Rules (url).

States determine if the promotion is a sweepstakes or a contest by either the:

Material Test Element: when reviewing if chance or skill prevails in a promotion combining elements of both, this test determines the promotion as a chance based promotion if chance is an essential or important (i.e., material) component in the selection of a winner, even if chance does not dominate the selection of the winner as in the Dominant Factor Doctrine used by other states.



Dominant Factor Doctrine: when reviewing if chance or skill prevails in a promotion combining elements of both, this test designates the promotion as a chance-based promotion if chance dominates the selection of the winner, even though skill or judgment may effect winner selection to some measure.

Sweepstakes are regulated nationally and by state by the following organizations:
  • Federal Trade Commission (FTC)

  • Federal Communications Commission (FCC)

  • United States Postal Service (USPS)

  • United States Department of Justice (DOJ)

State Specific Sweepstakes & Contest Laws

Besides federal considerations, every state has its own specifics laws regarding sweepstakes and contests.


For More info about State Laws for Sweepstakes go to https://www.redluckrewards.com/state-laws

5. Following Skill Gaming Laws is a requirement before operating sweepstakes or contest/competition games.


Skill based gaming law and regulation


Together with a new set of games of skill landing in casinos worldwide lawyers are working overtime. All with one question in their mind; “How can we add paid games of skill legally in casinos?“. Meanwhile thinking; “Players need a chance, the Random Number Generator needs to part and player-skills can influence the game…”

Skill based games are fundamentally different than the traditional casino games of chance. The definition of games of chance consist of three elements;

  1. participants can win cash money or a prize;

  2. to be able to participate and win the player needs to pay an ‘entrance/participation’ fee;

  3. the outcome of the game is always determined on the basis of chance

Traditional casino games are for 99% based on chance. There are strict regulations for gambling since the early 1900’s. New type of games require new legislation. When combining skill and chance a whole new concept is born. Legal specialist all over the world are writing new skill gaming legislation together with Gaming Authorities.

The USA, United Kingdom and common gambling jurisdictions like Alderney, Gibraltar and the Canadian Kahnawake were leading and since early 2016 skill based gaming law is in place in many countries, So you can enjoy skill based gambling too!


For more info on Skill Based Gaming Laws go to https://www.redluckrewards.com/skill-gaming-laws


Follow Federal & State Legal Requirements and Regulations. Please always consult with a real legal advisor and/or licensed attorney. This is simply a guideline to get you started in the right direction.


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