Effective marketing has become critical with the rise of the internet and online marketplaces. Social media and online platforms add to already existing marketing methods and provide the opportunity for widespread initiatives like sweepstakes, giveaways, and contests.
When considering one of these niche marketing efforts for your business, it’s crucial to understand the Pennsylvania contest and sweepstakes laws. These regulations will govern how you create and shape your campaigns, ensuring that you stay within the purview of all state and federal laws. Since many of these rules aren’t well known, reviewing them before planning is essential.
Federal Rules and Campaign Components
Before understanding the state laws in Pennsylvania, it’s crucial to note national regulations. There are a few different promotional campaigns that each sound similar but have different definitions in the eyes of the law. These three classifications are sweepstakes, contests, and lotteries.
Most people know that only states can hold lotteries but don’t understand why. The government defines a lottery as a promotional event where the winners win randomly but don’t have to offer anything of value to participate. The key to this definition is the three components involved: chance, consideration, and prize.
Thus, chance, consideration, and prize are the key ingredients to creating a legal contest or sweepstakes and avoiding an illegal lottery. Unfamiliar to most, consideration is simply the thing of value, monetary or otherwise, required to participate in the event.
In most situations, consideration results in talent and skill-based contests or sweepstakes. For example, a talent show where the winner receives an all-expenses-paid cruise is a contest: consideration plus prize. Consider the breakdowns of the legal events below.
- Legal contest: consideration + prize
- Legal sweepstakes: chance + prize
- Illegal lottery or gambling: all three components (chance, consideration, and prize)
Note that it’s also illegal for sweepstakes to require the purchase of a product or service for entry. Hence, this promotional campaign is a pure chance for a prize without consideration.
Other federal laws include:
- Winners pay tax on prizes exceeding a value of $600
- Sponsors submit 1099 forms to winners in the above category
- The official rules of a contest must specify the value of the prize
- If using a firearm for an award, a licensed firearm dealer must distribute and register the gun
Governing and Regulating Bodies
The following regulating bodies are in charge of managing nationally and state-wide advertised sweepstakes and contests.
- Federal Communications Commission (FCC)
- Federal Trade Commission (FTC)
- United States Postal Services (USPS)
- United States Department of Justice (DOJ)
Violating the official rules and regulations for these promotional campaigns can result in significant fines or jail time.
Pennsylvania Specific Laws
Pennsylvania also has specific laws that all state contests or sweepstake promotions must follow. First, alcohol may not be a part of the prize for any sweepstakes or contest promotion.
Pennsylvania also limited the monetary value of prizes. No prize for a single-day competition or contest can exceed $1,000, and any award given through seven days or from a contest of that length cannot exceed $25,000.
Contests and sweepstakes are legal so long as the official rules support consideration and chance as their core components.
There are also laws about rule transparency and distribution. Telemarketing companies running contests, sweepstakes, or games must disclose the competition’s requirements whenever advertising to potential contestants or marketing winners. These companies must also provide the odds of winning and make clear that contests do not need to purchase anything to join the competition.
Create Your Promotion with National Sweepstakes Company
For more information about Pennsylvania Contest and Sweepstakes Laws, call National Sweepstakes Company LLC at (888) 744-3217 today!