Giveaways that are run on Twitch are subject to the same laws as giveaways (which vary from state to state in the United States). We’ve talked about the differences between giveaways (aka sweepstakes) and contests before and what can define a giveaway.
So, are giveaways on Twitch legal?
If all of the normal giveaway rules are followed, then the giveaway itself may be fine. But for the giveaway to be an acceptable sweepstakes in most jurisdictions, there are a few key considerations:
- No purchase can be required.
- If a sweepstakes or giveaway is requiring an entity to be subscribed to a channel, it is not legal. Subscriptions to a channel require payment, for example.
- If a sweepstakes requires bits to be donated on Twitch, it is likely an illegal lottery. Bits are also a form of payment.
- No talent or skill can be required.
- If there’s skill involved, it’s a contest and not a giveaway and there are different laws relating to contests in different states.
- No applicants can be shown special favor.
- Adjusting the “luck” or increasing odds for different types of users defeats the requirement of randomness in a sweepstakes. This is true even if the streamer uses a set formula for “adjusting” luck (eg, subscribers get 2x entries). Every entry should be given “equal dignity.”
- No illegal goods can be involved in a giveaway.
- Even a legal good may not be allowed in a giveaway.
- Many states regulate the use of alcohol, gasoline, tobacco and other items depending on the state. It’s important to consult a lawyer on the nature of goods being given away.
- There have to be clear and visible rules for the giveaway.
- Running a giveaway without terms and conditions is a really, really, really bad idea.
- The coordinator of the giveaway is responsible for prizes.
- Even if a sponsor falls out or goods aren’t being delivered on time to whomever is organizing the giveaway, the coordinator is responsible to keep their agreement and must reward the winner on the time stated in the description with the promised winnings.
Giveaways as taxable income
It’s also worth noting that any giveaway or sweepstakes with a prize valued over $600 USD requires a 1099 to be issued for the winner – it’s considered taxable income. Whether a person is making $600 on a job or getting $600 worth of goods in a contest, it doesn’t make any difference to the IRS. It’s taxable.
And even then, things can still vary by state. For example, in Rhode Island, any promotion that takes place within a store (or has a retail connection) must register with the state if they’re offering a total prize pool valued over $500. In Texas, there are rules for sweepstakes with prizes over $50,000 in value. In Florida and New York, there are rules for sweepstakes with over $5,000 in value. It really varies.
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Looking for an example of a giveaway? Check out this sweepstakes we ran in 2019 as an example of what a sweepstakes might look like (but remember, every sweepstakes is different and you can’t just use these rules for yours!)