An illegal lottery occurs when a contest, sweepstakes or other giveaway is not run correctly. Unless state-run, lotteries are illegal in all 50 states and are subject to criminal and regulatory penalties.
Promotions that are lotteries have all three of following elements present: prize, chance, and consideration.
In order for a sweepstakes to not be considered as an illegal lottery, it may not require consideration. Sweepstakes rules must state “no purchase necessary” and offer an alternate free method of entry, such as by mail-in entry.
A sweepstakes that requires a purchase or gives more entries to participants who made a purchase is an illegal lottery.
Contests may charge a fee but do not qualify as lotteries because they lack the element of chance. In a contest, the prize is awarded on the basis of the entrant’s skill.
