Legal Issues with Online Contests

Attracting traffic to your website is a daily challenge. Holding contests or giveaways often seems like a good idea. You need to take legal issues into account before pursuing this strategy.

Real World vs. Weblottery, contest

Laws created prior to the creation of the Internet are usually a bad fit for the virtual world. This is particularly the case with contest law. The states and federal government all have laws that apply to contests, giveaways, and sweepstakes. The reason is these types of events have historically been ripe for abuse by scam artists. While the web certainly has its share of scammers, most of these laws are a poor fit for the nature of the web.

Chance

Running a game of chance online is going to get you into trouble from a legal perspective. State governments make a good bit of money on lotteries, and they aren’t about to let anyone else in on the racket. What is a game of chance? It is any contest where chance, not skill, determines the winner. If people can participate in your contest so long as they provide their email address, there is a valid question as to whether you are holding an illegal lottery.

Skills

Ah, so the answer is to incorporate skill into the contest? Not really. There is a risk you could get caught up in gambling laws. Yes, you read that correctly. Gambling laws come with very strict penalties, so one has to be careful in these situations.

Eyes On The Prize

Finally, one has to give thought to the contest prizes. Do you have permission from the company manufacturing the item to use it? The company might not want people to associate it with your site or contest.

Consider Apple products. iProducts appear to be the product of choice in contests these days. If you are running a site with subject matters such as evading paying taxes, promoting porn, impeaching some politician or what have you, Apple is probably going to object. The company could sue you for everything from trademark and copyright infringement to breach of license.

Answer?

So, can you use one of these contests or not? The answer is yes, but one has to work carefully through a minefield of state and federal laws and regulations to avoid liability. To do this, you need to spend significant fees on a lawyer to set up the program. The lawyer should specialize in this field [I do not] as they need to be familiar with the laws of all 50 states and the federal government as well as stay on top of any changes to those laws. Anything less and you risk massive fines and potential criminal prosecution.

Richard A. Chapo, Esq.

The content on this website is intended to be educational and is not specific legal advice for your situation. The information is not updated. This site and blog constitutes a communication, solicitation and advertisement pursuant to relevant rules of professional conduct and professional codes in California.