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Updated Feb 02, 2024

Not Just a Game: Legal Considerations for Social Media Contests and Sweepstakes

Contests and sweepstakes can improve customer engagement and create leads, but doing it right is essential.

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Jennifer Dublino, Senior Writer & Expert on Business Operations
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People love contests, with the twin motivators of fun and prizes. So it’s only natural that businesses use social media marketing tactics like running contests and sweepstakes to attract and engage potential customers. However, it’s crucial to be mindful of the legal considerations involved with social media contests and giveaways, so you don’t unwittingly run afoul of the law. 

We’ll explain the laws surrounding social media games and contests and share tips for running social media giveaways that bring positive attention to your brand. 

Social media game types  

Before incorporating contests and sweepstakes into your marketing plan, understanding various game types is crucial: 

  • Lotteries: Lotteries are defined by having prizes, consideration (payment) and a “chance” to win. For example, someone would buy a ticket hoping to win millions in a state-run lottery. You can’t run an actual lottery as a social media game. These events are regulated heavily and reserved for state governments. (More on lotteries below.)
  • Sweepstakes: Like lotteries, sweepstakes are games in which people enter to win a prize. Winners are chosen randomly. Unlike lotteries, sweepstakes participants can enter for free.
  • Contests: Unlike lotteries and sweepstakes ― games of chance ― a contest awards prizes based on skill or merit, such as art contests, cookoffs or trivia contests. Because the element of chance is eliminated, companies can require consideration for entry into a contest (although some state laws prohibit this). However, even though entry requirements are somewhat relaxed when prizes are earned, not awarded, contests must also be administered within the confines of the law.
TipBottom line
To create a contest that makes your brand go viral, offer a prize that excites your target audience, incentivize sharing the contest and use strategic partnerships to enlarge the contest's scope.

Laws governing social media contests and sweepstakes

Social media games can help increase buzz around your brand or product launch, generate sales leads and increase sales. However, business owners and marketing managers must familiarize themselves with the rules and regulations surrounding them. 

1. Ensure you don’t run an illegal lottery. 

Lotteries are games reserved for state governments to raise money for public initiatives like education. They’re considered a type of gambling. As such, they’re regulated heavily to help rein in gambling addictions and the devastating societal issues they cause. 

For these reasons, nongovernmental entities, including private businesses, can’t hold lotteries. To avoid an illegal lottery and run a legal contest or sweepstakes, a company generally must eliminate one of the three lottery elements (prize, consideration and chance). For example, a lawful sweepstakes typically will involve a chance to win a prize but doesn’t require consideration to enter.  

2. Give people a free alternative way to enter the sweepstakes or contest. 

Many companies want to run sweepstakes for their current customers, so they give away an entry ticket with a purchase. However, since money is exchanged, there is consideration, which causes a problem. A popular way to circumvent the problem is giving people a free alternative way to enter with no purchase required.

Under most state laws, creating a free entry alternative makes the sweepstakes legal. For example, McDonald’s can give away its McDonald’s Monopoly tickets to paying customers ― consideration ― because it also offers an alternative free method to enter the sweepstakes.  

3. Make your sweepstakes or contest easy to enter.

Money isn’t the only form of consideration. For example, say a customer must put excessive effort into entering the sweepstakes. In this case, the work and time they put into the submission can turn into consideration and convert the sweepstakes into an illegal lottery. Time is money, after all. Make entering your sweepstakes easy to avoid running into this problem.

4. Be upfront about your sweepstakes or contest prizes and rules.

When it comes to contests and sweepstakes, businesses must clearly: 

  • Explain what the prizes are
  • Announce the opening and closing dates for entries
  • Disclose how winners will be selected
  • Announce when prizes will be given out 
  • Contact all winners 
  • Actually give winners the prizes they are promised

All of these steps (except for the awarding of prizes) must be set up when the game is initially launched and the information must be available during the contest’s entire duration.

One Florida Hooters restaurant found this out the hard way. In an effort to increase beer sales, the business ran a contest among its servers in which it promised the winner a new “Toyota.”  However, on prize day, the employee was blindfolded, escorted to the restaurant parking lot and given a “toy Yoda.”

Unsurprisingly, the winner was unhappy. The worker quit and filed suit against the company to get the promised Toyota, alleging breach of contract and fraudulent misrepresentation. The server won and Hooters purchased the employee a new Toyota. 

While this is an extreme example, it provides a cautionary tale demonstrating the importance of planning a contest before jumping in head-first with a giveaway.

Did You Know?Did you know
The most popular giveaway items for promotional products include branded food, stress balls, lip balm and reusable water bottles.

5. Follow state laws governing promotions. 

Complicating matters more is the fact that each state has its own set of laws governing promotions and each law is different.

For example, Florida, New York and Rhode Island require sweepstakes offering prizes over a specific value to be registered. Similar laws also apply to contests, especially if a purchase is required to enter. Arizona requires the company to register the contest with the attorney general’s office, including a sworn statement that no additional fee was added to the purchase price in connection to the contest.

Moreover, the official rules of the sweepstakes or contest must fully disclose information about the prize offerings, method of entry and selection of winners. These are samples of what may be required, so a company must always check the applicable state’s laws before engaging in a promotion.

TipBottom line
Hire a business lawyer if you have any questions about your promotional event's legality.

6. Abide by platform-specific rules for your contest or sweepstakes.

Online legal complexities are not your only consideration. Most social media platforms, including Facebook and Twitter, have specific guidelines in their terms of use that you must follow when conducting a promotion.

Typically, social platforms require acknowledgment that they don’t endorse, promote or administer the promotion. Specific platforms have their own rules, as well. For example: 

  • Facebook requires that all promotions be run through specific pages or apps, not on personal pages. 
  • Twitter requires contests to discourage participants from creating multiple accounts and posting the same tweets repeatedly.  

A business that ignores the rules or fails to abide by them could find its promotion suspended or, worse, its entire social media account deactivated.

If navigating various platform-specific rules sounds arduous, especially when running a promotion online is so easy ― that’s because it is. Despite low barriers to entry, the risks are real. However, while thoroughly vetting the legality of a contest or sweepstakes may seem costly, it’s usually worth it when you reap the rewards of increased online brand awareness.

FYIDid you know
Use your Instagram business account to hold social media contests to draw attention to your brand, add followers and gain customers.

Tips for hosting social media contests and sweepstakes

Online promotions are a digital marketing trend that shows no signs of slowing down. Consider the following social media contest best practices to make your online game successful. 

1. Determine the goal of your contest or sweepstakes.

Contests and sweepstakes can benefit your company in the following ways: 

  • Increase brand awareness
  • Generate more web traffic
  • Improve engagement with social followers and customers
  • Attract new social followers
  • Boost sales 
  • Inspire new product ideas 

Before creating your game, determine which of these goals is most important. Next, focus the game on achieving that goal. Here are some examples:

  • Contests that increase sales: For example, if you want to increase sales, consider running a contest asking current customers to send in videos of them using your product creatively. This user-generated content will show prospective customers your product’s versatility. These videos act as testimonials, leading to more conversions.
  • Contests that increase brand awareness: To increase brand awareness, consider running a sweepstakes that awards a prize related to your products and your target market’s needs. For example, a high-end travel company could hold a sweepstakes in which the prize is a seven-day stay at a villa in the Greek Isles with an on-site butler.
TipBottom line
Use a social media contest to run giveaways of excess inventory items. You'll recoup money while placing your products in customers' hands.

2. Narrow your target audience.

To get the most relevant entries, it helps to identify your target audience. What are their demographic and psychographic characteristics? How can you best reach them and what types of messages will appeal to them? For clues, go through your customer data and website analytics.

3. Choose the right social media platform.

Based on your target customer analysis, one or several social media platforms will emerge as the best place to launch and run your contest. For example, if you target older professionals, consider using LinkedIn or Facebook. If your brand targets Gen Zers or millennials, Snapchat, Instagram or TikTok may be a better choice. 

4. Decide what type of promotional game you want to run.

Do you want to run a sweepstakes or a contest? Your goal will help inform your decision. Here are some characteristics of each to help you determine the best game for your brand: 

  • Sweepstakes: Sweepstakes tend to be more general. They attract a wider audience because they’re free. They also take some effort to participate in. Sweepstakes are suitable for increasing brand awareness, gaining social followers and boosting web traffic.
  • Contests: Consider a contest if you want to address people further down in your sales funnel, such as social media followers, prospects and current customers. A contest will help you focus on increasing engagement and sales within those groups. 

You must also consider your budget and secondary goals. For example, a photo or video contest showing people using your product will increase sales and create user-generated content for future marketing campaigns.

5. Choose your prize and game rules.

Rules will help you keep the game fair for all entrants and protect you from people trying to work the system. Your rules will spell out the length of the contest or sweepstakes, its opening and closing dates and the prize award day.

The prize should be something related to your brand. It must be compelling enough to motivate people to enter the game. When it comes to sweepstakes, the prize must be impressive enough to create buzz and publicity that will increase the time your sweepstakes is actively discussed, boosting your digital marketing return on investment

6. Actively promote your game.

Even if you hold a social media game, be sure to promote it through other channels. Consider an email marketing campaign, influencer marketing with social media stars, in-store signage and website promotions. 

Additionally, consider offering incentives for people to refer others to your game, such as discounts or additional entries. The more people who discover your game, the more consumers are likely to hear about your company and products, visit your website, follow you on social media and, ultimately, buy from you.

FYIDid you know
To get influencers to market your game or contest, find influencers popular in your niche, build a relationship with them and create exclusive content for them to promote.

7. Make the most of your winner announcement.

The announcement of your contest or sweepstakes winner should not be a private affair where you contact the winner directly. In addition to contacting the winner to let them know they won, use this fun news to increase engagement on social media platforms and your website. Send the news via email and craft a press release. If possible, capture photos and videos of the winner receiving or using the prize. This material will keep the excitement going and extend the life of your promotion. 

Did You Know?Did you know
Contests are an excellent tactic to draw attention when you're rebranding your business.

8. Analyze game KPIs and feedback.

The only way to know if your contest or sweepstakes was successful is by crunching the numbers through a marketing analysis. Did you achieve your primary and secondary goals? Did you realize other positive benefits from the game’s promotion? 

In addition to key performance indicators (KPIs) like website traffic, new social followers and revenue increases, analyzing customer feedback is essential. Gather the following survey data:  

  • Did participants have fun? 
  • How do they perceive your brand now? 
  • Did they feel the contest was fair? 
  • What ideas do they have to improve future contests or sweepstakes? 

These answers will help you enact changes to make your next contest or sweepstakes even more successful.

Daliah Saper contributed to this article.

author image
Jennifer Dublino, Senior Writer & Expert on Business Operations
Jennifer Dublino is an experienced entrepreneur and astute marketing strategist. With over three decades of industry experience, she has been a guiding force for many businesses, offering invaluable expertise in market research, strategic planning, budget allocation, lead generation and beyond. Earlier in her career, Dublino established, nurtured and successfully sold her own marketing firm. Dublino, who has a bachelor's degree in business administration and an MBA in marketing and finance, also served as the chief operating officer of the Scent Marketing Institute, showcasing her ability to navigate diverse sectors within the marketing landscape. Over the years, Dublino has amassed a comprehensive understanding of business operations across a wide array of areas, ranging from credit card processing to compensation management. Her insights and expertise have earned her recognition, with her contributions quoted in reputable publications such as Reuters, Adweek, AdAge and others.
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