Promotional contests and sweepstakes are an increasingly popular marketing tool – and for good reason. They provide a cost-effective way to generate publicity and notoriety for a brand or product line.
However, when designing a sweepstakes it is important to be mindful of the total prize amount, because prizes above certain cash (or cash equivalent) thresholds may trigger specific sweepstakes registration and bonding requirements in three states: Florida, New York and Rhode Island.
There are specific requirements for operating a contest or sweepstakes in certain states and provinces when the element of chance, prizes and the sale of products or services are present. This is something that is often overlooked by companies who are not familiar with running game promotions, but government regulations and stiff penalties apply when the requirements are not met.
The purpose of registering and creating a bond for a promotion is to protect consumers against fraud or failure to on a company’s part to fulfill prizing due to lack of resources or other reasons. This is why there are not only registration and bonding requirements, but in most cases a list of winners is required to be filed after awarding the prizes.
If the total value of prizes (ARV) for the duration of a promotion exceeds $5,000, contest administrators are required to register and bond their contest or sweepstakes with state authorities. The Secretary of State requires contest administrators to file official rules and details outlining their promotion 30 days prior to the launch. A filing fee also applies and a trust account or surety bond must be obtained in the amount equal to the total prize value offered.
Florida carries the same requirements as New York however, contest administrators file to the Department of Agriculture and Consumer services. The only difference is that the registration and bond must be filed at least 7 days before the start of the promotion. Like New York, a filing fee also applies and a trust account or surety bond must be obtained in the amount equal to the total prize value offered.
Rhode Island statute requirements are slightly different. Contest administrators must file an application and official rules with the Secretary of State along with a filing fee. There is no trust account or surety bond requirement. Registration is only required if the game promotion is conducted in a retail establishment with prizes exceeding $500.
In Arizona, if your contest is a game of skill and requires you to make a purchase in order to enter, administrators are required to complete a registration form that outlines the contest details and submit it to the Arizona Attorney General. They must also submit a sworn statement under oath that no addition has been added to the determined purchase price for the product in affiliation with the contest. Within 10 days of awarding all prizes, the names and addresses of the winners must also be submitted.
In Canada, those who decide to run a contest in the province of Quebec must abide by the regulatory laws of the Régie des alcools, des courses et des jeux (Régie). If the contest prize value is greater than $100, administrators are required to submit contest details to the Régie. There is a registration requirement to the Régie if the total prize value exceeds $2,000. The official rules and contest details must be filed at least 10 days before the start of a contest. A 10% fee of the total prize value is imposed when the contest is open to residents from Quebec only. This fee becomes 3% when the contest is open to contestants from Canada only including Quebec. Lastly, 0.5% is enforced when the contest is open to any group of contestants including Quebec. When the contest closes the list of winners must also be submitted and include the final total value of the prizes awarded. (This value can be a lower amount depending on the type of contest – i.e. if some of the prizes were not actually won from an instant win contest).
You may notice that some game promotions exclude these states and provinces from participating. That is because many companies would rather avoid the fees and hassle that comes with it. However, from our experience, because Quebec, New York and Florida customers are so often prohibited from playing in national promotions, customers in these areas are often the hungriest for these types of promotions, which can turn into big benefits and sales returns.
For more information, learn what kind of prizing to giveaway in a contest or sweepstakes, and how to ensure your contest or sweepstakes is legal. Or, read up on registration and bonding requirements, contest and sweepstakes prize fulfillment, or other contest and sweepstakes marketing services.
Still want more? Check out the following blogs focused on contest marketing: