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  1. #1
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    Legalities of giving away prizes to members
    I have a site where the member pays a 1time fee for a service on my website. I would like to give away prizes totally over $5,000, this would be done randomly.
    I want to limit this to Canada and the US only.

    I am meeting with my lawyer soon, but as I wait I am trying to gather as much info as possible.

    Thanks for your thoughts,
    Ryan

  2. #2
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    I think you have to check with individual state laws, like for example for contests I understand states like Washington are a problem.

  3. #3
    Member Chocolate_Chicken's Avatar
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    Definitely iron it out with a lawyer. In many states, if somebody has to make a purchase in order to be eligible to win something, it is considered a lottery - usually illegal.

  4. #4
    Moderator MichaelColey's Avatar
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    Definitely talk to a lawyer. You may need to exclude some states, register in some states, and meet other requirements in other states. The requirements are pretty stringent, especially if you're talking about over $5000 in total prizes.

    I've thought about doing that several times in the past, but every time I start looking into the requirements, I talk myself out of it.
    Michael Coley
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  5. #5
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    We used to run contests giving away travel packages at my last company. If memory serves we were not allowed to run the contest ourselves and always contracted the contest to a third-pary. They mainly handled hosting the sign-up page, the database and drawing. This reduced our liability and ensured a fair drawing. They'll also work out which states/countries the drawing is legal in.

    I'll go through some old files to see if I can locate the companies we used. Or, you can always read the t&c's of any other contest for companies. The cost was fairly inexpensive as I recall.

    Christian
    Last edited by KhakiMan; December 10th, 2005 at 11:20 PM. Reason: remembered another point

  6. #6
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    well keep in mind the user has paid me a small fee in exchange for a service on my website. I want to randomly give away a prize to someone who is a member of the site, like a car.

  7. #7
    ABW Ambassador Paul_Ward's Avatar
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    If a lottery is a problem, have it as a stupidly simple competition such as:


    What colour is snow?

    A/ white
    B/ black
    C/ green

  8. #8
    Moderator MichaelColey's Avatar
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    Quote Originally Posted by rclark
    well keep in mind the user has paid me a small fee in exchange for a service on my website. I want to randomly give away a prize to someone who is a member of the site, like a car.
    And that's where you run into problems. Since you're requiring something in order to win, lots of state regulations apply. And not just in your state, but in the state of everyone who can participate. Definitely talk to a lawyer.

    It doesn't necessarily have to be administrated by a third party, but a third party that specializes in this kind of stuff would be familiar with all the laws and requirements.
    Michael Coley
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  9. #9
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    Thanks everyone for taking the time to reply !

    -Ryan

  10. #10
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    Ok. I can make the prize giveaway free for everyone, but everytime someone uses my service they get an extra vote cast in their name.


    What are your thoughts on this.

  11. #11
    Moderator MichaelColey's Avatar
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    I'm not really sure. It would be best to talk with a lawyer about how best to do it.

    I always try to picture how Publisher's Clearing House does things when I'm thinking about sweepstakes, because they're one of the biggest sweepstakes out there. If they're doing it a certain way, there's a reason. And with them, you don't get an extra entry for buying something.

    On the other hand, the McDonalds Monopoly promotion (another of the largest sweepstakes) does give you an extra entry for buying things. You can enter via mail or by buying certain products.
    Michael Coley
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  12. #12
    Plazan Merchant Neil's Avatar
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    just a thought:
    can you not word it so that it reads.
    free draw to registered members.

    we give away free creams on our forum.
    but you dont have to buy anything,
    so thats another story.
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  13. #13
    Moderator MichaelColey's Avatar
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    No matter how you word it, you still have to comply with state laws in every state and country that you're accepting entries from.

    I just did a little searching. You might find some of these links helpful:

    http://www.fredlaw.com/articles/mark..._0310_srb.html
    http://www.entrepreneur.com/article/...307794,00.html
    http://www.the-dma.org/guidelines/sw...dosdonts.shtml
    http://www.wcsr.com/default.asp?id=114&objId=44

    Another tidbit I caught on one of the sites was that a few states requirement bonds if the combined prize value is over $500 (RI) or $5000 (FL and NY).
    Michael Coley
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  14. #14
    ABW Ambassador DesignerWiz's Avatar
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    I'll chime in with what I know about contests and "making the prize giveaway free for everyone, but everytime someone uses the service they get an extra vote cast in their name" ... that would be 100% illegal. You cannot give anyone any added benefit by either an action, or purchase in a lottery pick/drawing in MANY U.S States.

    The laws of individual States can be a nightmare depending on eactly what the T&C's are, as well as the type of prize, and the actual dollar amount value of the prizes in some States. There are also requirements on allowing submissions by mail, as well as how you must post odds of winning, and how to inform entrees of the actual winner(s) of the contests/drawings.

    Our site did run contests in the past, but we no longer do. The laws are so thick in this area that it just isn't worth it for me. I would STRONGLY sugggest legal council with an attorney, as well as an outside 3rd party contest agent manager to handle the legal requirements.

    Best-o-luck!
    Ray Thomas
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  15. #15
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    Thanks again everyone for your input. It is VERY appreciated !

    -Ryan

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