With the rise of TikTok, Instagram, and other influential social media platforms, businesses are constantly learning new and exciting ways to market their products and services. One proven niche marketing strategy is having a sweepstake or contest that teaches potential customers about your business.
Planning one of these promotional events requires knowledge of Tennessee contest and sweepstakes laws. Becoming familiar with the laws and regulations governing your enterprise ensures you avoid fines or jail time. Avoid violating a federal or state law with your niche marketing campaign by familiarizing yourself with the legalities of sweepstakes, contests, and lotteries.
Federal Rules and Campaign Definitions
Before examining Tennessee Contest and Sweepstakes Laws, there are some essential federal laws to learn. The focal point of national regulations is to avoid illegal lotteries or gambling. However, the definition of these events is all to do with the core gaming principles.
Lotteries and gambling essentially function the same way. Within both, there are elements of chance, consideration, and prize. While chance limits your odds of winning, consideration is what you invest in gambling or entering the lottery.
Sweepstakes laws define consideration as anything of value, monetary or otherwise, required to consider a participant. In gambling and lotteries, money is the consideration, and chance is the game’s design. Legal sweepstakes and contests may employ only two out of three game components.
Consideration typically yields a contest based on skills or talents. These are the talent shows and bake-offs you might see at a promotional event for a local business. Sweepstakes must include only elements of chance and a prize.
Refer to the breakdowns below to quickly garner the definition of these three promotional campaigns.
- Legal contest: consideration and prize
- Legal sweepstakes: chance and prize
- Illegal lottery or gambling: consideration, chance, and prize
It’s also crucial to mention that it’s illegal for sweepstakes to require the purchase of a product or service for entry. Advertising this in publicity releases is also against the law. These violations would add the consideration component, making it illegal.
Other federal laws include:
- Only legal residents can partake in prize promotions
- Pay taxes on prizes over the value of $600
- Winners in the above category receive a 1099 form from their contest’s sponsor
- The contest’s rules must identify the dollar value of the prize
- Guns used as a prize require distribution and registration from a licensed firearms dealer
Governing and Regulating Bodies
Along with understanding the federal laws regulating contests and sweepstakes, a few national bodies are responsible for upholding these regulations. Companies in violation of any of these federal or state laws will deal with the following federal organizations:
- Federal Trade Commission (FTC)
- Federal Communications Commission (FCC)
- United States Postal Services (USPS)
- United States Department of Justice (DOJ)
Breaking these laws can have severe consequences for your business or the individuals involved, so review the state legislation listed below.
Tennessee Specific Laws
Along with national regulations, Tennessee Contest and Sweepstakes Laws also govern promotional competitions. Sponsors may not ask winners to sign away publicity rights in perpetuity.
Sponsors must submit prize disclosures to the state if a contest or sweepstakes for a sales campaign requires contestants to purchase a product, visit a store, attend a sales presentation, contact a salesperson, or incur a financial obligation of any kind. Additionally, sponsors must obtain written consent for using a winner’s name for promotional advertising or campaigns.
Create Your Promotion with National Sweepstakes Company
For more information on Tennessee Contest and Sweepstakes Laws or to plan your contest, call National Sweepstakes Company, LLC at 888-744-3217 today!