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Pick a category
Prize-giving activities for businesses in the U.S. generally fall into one of two categories: sweepstakes and contests.
A sweepstakes is won by luck; everyone has an equal chance to be the winner simply by entering.
But a contest requires some skill, like solving a puzzle.
Generally a sweepstakes will open you to less liability, but if you choose a contest, make sure it’s clear what you need to do to win.
No purchase necessary
Most states define lotteries as a game with a prize where the winner is chosen by luck and you have to pay to play. Need a license to run a lottery.
Lotteries are very tightly regulated and unless you’re working with a lawyer, you don’t want to attempt one.
Stay out of it by allowing people to enter without purchase. Or at least a free entry option.
It’s also good to avoid contests that require Facebook “likes” to enter as that could be seen as a “cost.” Just ask people to leave their name and maybe a comment on your blog or Facebook page.
Avoid certain prizes
Some things are more tightly regulated than others and prizes that include tobacco, firearms, alcohol, or items valued at over $600 will get more scrutiny.
You can avoid that by simply offering other prizes.
Set the rules
A major area of liability comes from entrants who challenge the contest if they don’t win.
Make sure the rules are clear on how a winner is chosen, describe the prize, eligibility for entry, and the details of the contest.
Then post it somewhere people can find it.
Notify winners by email, not social media.
Facebook and Twitter are a good way to promote a contest or sweepstakes that you’re running, but many social media companies want to avoid liability too, as such, each platform has their own rules and terms about giveaways.
Even if it’s not expressly banned by the terms of service, it’s best to keep social media out of it when contacting winners. Use email, etc.