I'm going to run a contest on my site....That's ok, right?

To answer that question, I'm going to give you the most lawyerly answer I know… It depends.

Before you start screaming at me, understand that there are a lot of factors that affect whether or not you'll have legal hurdles to clear before you run your game. In order to understand them, you'll need to have both a clear idea of the game that you're planning to run and the law surrounding contest law.

I think that many people believe that you can just run a contest for whatever prizes you want, whenever you want, with no knowledge that failure to run a promotion properly can be, in a worst case scenario, a crime (granted, a misdemeanor, but a crime nonetheless).

All sweepstakes (or games of chance) are governed by both federal and state statutes prohibiting illegal lotteries. Lotteries are generally prohibited except when run by the government. A lottery is defined as a promotion that contains three elements: (1) Prize; (2) Chance; and (3) Consideration.

So, how do you avoid the problem. Well, you have to eliminate one of the elements. Let's assume that no one's going to eliminate the prize (because who's going to enter a promotion with no prize?), so you need eliminate one of the other two elements. Games of skill (which would eliminate the chance element) are possible, but they tend to be difficult to get as many entrants. Examples of games of skill include things like essay contests or spelling bees (some states even require that the judge making the selection is one that is specialized in the field).

There are many different tests and factors for determining whether a game is a game of chance or game of skill, but suffice it to say that most games will fall under the game of chance umbrella. If you're looking to give away a prize for an entry on your website, you're definitely running a game of chance.

So, your last option is to eliminate consideration (aka the entry fee). I can see your mind going right now. You're thinking, "Well, ok. I wasn't going to charge any money for entry anyway. Done!" Back the truck up, buddy.

The definition of consideration is very broad. It has been held that consideration was given where people had to fill out a complicated form or send a self addressed stamped envelope to enter a contest.

How can you eliminate the consideration element then? Well, the easiest way is to ask only for the barest information that you need in order to award prizes (i.e., name and email address). If you're planning on using the information you gain for marketing purposes, I would strongly recommend that you give registrants the option to opt in to receive information from you and to make sure that it is clear that the opt in is not necessary in order to enter or to win the prizes.

If you're doing a promotion through the mail, you will also have to offer an alternative method of entry that is free for the entrant, but I assume that this crowd is thinking mostly of online contests.

Piece of cake, right? Well, not exactly. There's a couple of other things that you have to worry about.

First, if your combined prize value totals $500 or more, you may have some registrations to do. Rhode Island requires registration for promotions that have prizes totaling over $500; Florida and New York require registration and bonding for promotions with prizes totaling over $5,000. These registrations and bonding can be quite expensive. I would advise avoiding these prize limits if at all possible.

Second, you need to make sure that you have contest rules that protect you from liability and comply with all applicable laws. A sampling of the items (but certainly not all of them) that should be in your contest rules include:

- Odds of winning;
- Methods of entry;
- Number of entries per household or per person;
- Eligibility requirements (cannot be open to persons under the age of 18, residency, etc.);
- Description of prizes;
- Duration of the contest; and
- Void where prohibited clause.

I hope that this answers some of your questions about online contests and helps you to keep yourself out of illegal lottery territory with your next contest...