My blog post Sore Loser or Savvy Entrant raised a wide variety of opinions and questions. First I want to address the legal difference between a sweepstakes, a contest and a lottery.
It’s easier to define sweepstakes and contests by starting with their more familiar grandfather: the lottery. A lottery is any game that consists of three elements. These three elements are chance (luck), the entry fee (sometimes referred to as the “consideration”), and the prize. The first element—luck—is introduced by the very fact that you’re competing against thousands of other people by predicting several numbers that will be chosen at random. The entry fee is generally the price of the ticket itself. Most lottery tickets cost one dollar. And the prizes are usually money.
What differentiates a sweepstakes or contest from a lottery is that one of these three elements has been removed. In a sweepstakes, that element is the entry fee. In other words, the game is still a game of chance, and there are still prizes to be won (although not necessarily cash prizes), but you don’t have to pay to enter.
Contests retain the entry fee but remove the luck as a determining factor. The entry fee is usually in the form of purchasing one or more of the company’s products. For example, a contest often requires you to send in a proof of purchase or label. Obviously, you cannot obtain these items without buying the product. It doesn’t matter whether you personally bought it or one of your friends purchased it. The luck is removed by adding an element of skill. Whereas sweepstakes are determined through random drawings, contests require the participants to perform in some way. A contest may ask you to write a song or create a rhythm, or explain why you use a product. A panel of judges determines which contestant has demonstrated the most skill.
How to Win Lotteries, Sweepstakes and Contests in the 21st Century by Steve Ledoux. Copyright ©2004 Santa Monica Press LLC. Used by permission of Santa Monica Press LLC, 800-784-9553, www.santamonicapress.com.
Charging an entrance fee to an essay contest to win a prize isn’t illegal. It’s a contest. The only thing the owners of the Center Lovell Inn did was to not run it properly. That is why they ran into legal issues. It’s because a contest of that type must be licensed by the state and they didn’t get a license.
And depending on where you live, depends on what side of the law you are on. In Maine it is illegal and in Virgina it is not.
She checked with state officials, who concurred that it is a contest of skill, not a game of chance. As such, it is not subject to the rules that a raffle or lottery would be.
In Alabama they cleared it with a lawyer first.
This essay contest in Connecticut has official rules.
This isn’t a new or unique way to ‘sell’ a property, but it is an unusual one that can be fraught with pitfalls if the host isn’t careful.
Have you every paid to enter an essay contest?