Promotional giveaways and contests have become some of the most powerful engagement tools for creators and brands across social media. Their popularity stems from results that are difficult to ignore: giveaway posts can generate up to 64 times more comments and 3.5 times more likes than standard posts, and 91% of all posts with over 1,000 comments are giveaway-related. U.S. businesses invest roughly $17 billion annually in product giveaways, proving that well-executed promotions are not just a marketing trend but a proven strategy for audience growth and meaningful engagement.
While these promotions can supercharge community growth and sales, they also come with real legal obligations. Before launching a promotion, even as part of a brand deal, every creator should have a basic understanding of the information below:
How Promotions Are Categorized Under U.S. Law
Legally speaking, most promotional activities fall into three categories: (1) Lotteries, (2) Giveaways or sweepstakes, and (3) Contests.
Lotteries
When a promotion contains the following three elements, it will be deemed a “lottery” under US law: prize + chance + consideration. Private lotteries are illegal under both state and federal law, except where expressly authorized (such as state-run lotteries or licensed charitable raffles). Any promotion that includes payment or other consideration from participants for a chance to win a prize generally violates anti-gambling laws. However, in most U.S. jurisdictions, a legally permissible promotion can be structured by removing one of the three elements (typically eliminating “consideration” or “chance.”)
Giveaways / Sweepstakes
Giveaways (or sweepstakes) involve chance + prize, but no consideration. Example: entrants submit their names for free, and a winner is chosen at random and awarded a prize.
Some giveaways allow entry with proof of purchase, like a “cereal-box” promotion or a promotion where purchasers of a product are automatically entered to win something. To avoid being classified as an illegal lottery, these types of promotions must offer an “Alternative Method of Entry” (AMOE) that allows participants another way to enter the same promotion without having to make any kind of purchase on substantially equal terms.
Contests
Contests involve skill + prize, but no chance. Winners are determined based on skill, merit, or other objective criteria. Examples include fan-art contests or songwriting competitions judged by a panel under pre-established criteria.
It’s worth noting that even without an entry fee, requiring participants to create and submit content can still constitute “consideration.” Promotions involving any form of consideration are generally lawful only when chance plays no role in determining the outcome. Organizers should ensure that judging criteria are clearly defined, objective, and applied consistently, including in the event of a tie. In other words, no coin flips.
What About Raffles?
Many creators mistakenly believe that raffles are broadly legal, but that’s rarely the case. Under U.S. law, raffles are generally treated as lotteries, and most states permit them only for qualified nonprofit organizations, typically subject to strict licensing, reporting, and recordkeeping requirements. For-profit raffles are almost always prohibited.
If a creator plans to partner with a charity, they should ensure that the charity itself administers the raffle and that all applicable state requirements are satisfied before the promotion is launched.
Other Considerations
Registration, Bonding, and Filing Requirements
Certain states impose additional procedural obligations in connection with promotions. For example, both the states of New York and Florida require registration and a surety bond for sweepstakes with prize values over $5,000. Rhode Island requires registration for retail promotions where prizes exceed $500. Additionally, some states require filing a list of winners or retaining records for a specified period. Failure to comply with these requirements can result in civil penalties and, in some cases, voiding the promotion.
The IRS
For U.S. winners, prizes and awards are treated as taxable income. Sponsors must issue Form 1099-MISC when a winner’s total prize value from that sponsor in a calendar year is $600 or more, and should collect a completed W-9 before awarding the prize. (This threshold may change under federal law, so organizers should always confirm current IRS guidance before promotion launch.)
Platform Rules
When running a promotion on a social platform or using social accounts or channels in connection with a promotion, creators should review that platform’s terms of service and other relevant policies before launch. Each major platform has its own contest policies, which govern in addition to applicable laws. For example, Instagram and Facebook require a statement that the promotion is not sponsored, endorsed, or administered by the platform, and a release of the platform by each entrant. They require that these disclosures should appear in both the official rules and the promotional caption or landing page. YouTube imposes similar requirements and holds the channel owner responsible for compliance with applicable laws and its Official Rules. TikTok, X(Twitter), and Twitch also maintain rules governing promotions that are run on or in connection with their respective platforms.
FTC Endorsement Guidelines
Standard advertising laws, including the FTC’s broad prohibition on deceptive or misleading statements, apply fully to giveaways and contests. Creators who run promotions in partnership with a brand must also comply with the FTC Endorsement Guides, which require clear and conspicuous disclosure of any material connection between the creator and the sponsor. Disclosures should appear “above the fold” (that is, before a “see more” break) and use plain, unambiguous hashtags such as #ad, #sponsored, #contest, or #sweepstakes so that viewers immediately understand the promotional nature of the content.
A Handy Checklist for U.S. Promotions
An organizer typically needs the following to run a compliant giveaway or contest offered to U.S. residents:
- Official Rules. Every promotion should have tailored Official Rules. The Official Rules serve as a contract between the promotion organizer and entrants. At a minimum, they should include:
- Sponsor name and address
- Eligibility and geographic scope
- Start/end dates and entry methods
- “No purchase necessary” and AMOE (for chance-based promotions)
- Entry limits, judging or drawing method, and odds of winning
- Prize descriptions and approximate retail value (ARV)
- Winner notification and verification process
- Publicity, IP grants, and liability limitations
- Governing law and “void where prohibited” clause
Official Rules must not change after launch.
- Limited Eligibility. Entry into the promotion should generally be limited to individuals who have reached the age of majority in their jurisdiction and who reside in states where the promotion is permissible. Because the age of majority varies by state, set a conservative minimum (e.g., 18 years old) and state it clearly.
- AMOE. If the structure of the promotion involves selecting the winner randomly or by any element of chance, entry cannot require payment, purchase, or excessive time/effort, unless there’s a free, substantially equivalent “AMOE” (another method of entry).
- Registration, bonding, special filings, etc. State requirements such as registration, bonding, or winner filings should be confirmed before launch.
- Tax Paperwork. If the prize is worth $600 or more, a W-9 should be collected from and a Form 1099-MISC issued to the winner.
- Privacy and Data Handling. Promotion organizers should clearly disclose what personal data will be collected from entrants, how that data will be used, and how long it will be retained. Where applicable, they must also be able to honor data subject rights requests under relevant privacy laws, such as the CCPA/CPRA in California or the GDPR in the European Union.
- Content and IP Rights. If the promotion involves user-generated content, organizers must obtain an appropriate license or assignment of rights sufficient for the intended use. If submissions involve images, videos or media in which an identifiable person appears, the organizer should secure an appropriate appearance release.
- Restricted Prize Types. Additional regulations may apply to promotions involving alcohol, tobacco, cannabis, firearms, travel, or gift cards. Organizers should confirm applicable restrictions before launch.
- Platform Terms Compliance. Organizers should confirm that their promotion complies with the terms and policies of each associated platform.
A Word About International Promotions
Creators should understand that running “worldwide” promotions is rarely plug-and-play. Promotions need to comply with the laws of each jurisdiction in which its entrants reside. Almost all jurisdictions have laws regulating promotions and these laws can vary dramatically.
For example, Italy classifies most giveaways and contests as regulated prize events and requires organizers to appoint a local representative, file a notice with authorities, provide a bond equal to the prize value, translate official rules into Italian, conduct drawings before a notary and donate unclaimed prizes to charity.
Mexico requires promotion organizers to obtain authorization from its Federal Consumer Protection Agency (PROFECO) and translate all promotional materials into Spanish. It also requires government oversight of prize draws and delivery when prize value exceeds certain thresholds.
Given the administrative and legal costs of compliance in multiple jurisdictions, it may make more sense to exclude certain countries or to run separate local promotions with the support of local legal counsel.
Conclusion
Running a giveaway or contest can be a great way for creators to connect with their audience and grow their communities, but it’s essential to do so thoughtfully and with a complete understanding of how to comply with applicable laws and platform requirements.
For assistance navigating promotion compliance, from counsel on promotion structure and specific state and federal requirements to drafting official rules, our team at Odin Law can help.
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