What is the Difference Between Sweepstakes and Giveaways?

Sweepstakes and giveaways are popular promotion methods used by companies in the USA and around the world to engage with customers. But while these terms are often used interchangeably, they have distinct legal definitions and implications. So nowadays, as the sweepstakes casino boom is taking place, it’s important to understand the difference. And find out why the casinos choose the sweepstakes model.

What Are Sweepstakes?

A sweepstake is a promotional drawing in which prizes are given away to participants selected by chance. The key element of a sweepstake is that the winner is chosen randomly, and the participants don’t need to pay to enter.

Each country has its own laws regarding sweepstakes. But according to the US laws, they should meet several legal requirements:

1. No Purchase Necessary

Sweepstakes must not require a purchase or any form of consideration for entry. This is mandated by the Federal Trade Commission (FTC) to ensure fairness and to prevent the sweepstake from being classified as a lottery, which is heavily regulated.

2. Official Rules

Sweepstake promotions must have clear and concise official rules. These rules typically include eligibility requirements, entry methods, start and end dates, prize descriptions, and how winners are selected and notified.

3. State Regulations

While federal laws govern the general conduct of sweepstakes, individual states may have additional regulations. For example, New York and Florida require registration and bonding if the total prize value exceeds a certain amount.

4. Disclosure

Sweepstakes must disclose any material terms, such as odds of winning, in a clear and conspicuous manner. This is often done through the official rules or promotional materials.

What Are Giveaways?

A giveaway, often referred to as a "contest", is a promotional event where the prize is awarded based on some form of skill or criteria rather than chance. Examples include essay contests, photo competitions, and trivia quizzes.

Again, each country has its own rules regarding giveaways. But the US laws require them to meet several legal requirements:

1. Skill-Based Criteria

The primary distinction of a giveaway is that a skill-based criteria is required to determine the winner. Participants are judged on their merit, creativity, or some skill set in the contest rules.

2. Official Rules

Similar to sweepstakes, giveaways must have official rules that outline the contest details, including eligibility, how to enter, judging criteria, prizes, and notification of winners.

3. Consideration

While giveaways can sometimes require a purchase or entry fee (consideration), they must be careful to avoid being classified as illegal lotteries. To prevent this, organizers often provide an alternative method of entry or AMOE, that does not require a purchase.

4. Judging Process

The judging process for a giveaway must be transparent and based on the criteria outlined in the official rules. This ensures that the contest is fair and not left to chance.

Key Differences Between Sweepstakes and Giveaways

1. Method of Winning:

   • Sweepstakes: Winners are chosen randomly.

   • Giveaways: Winners are chosen based on skill or criteria.

2. Entry Requirements:

1. Sweepstakes: Must not require a purchase or any form of consideration.

2. Giveaways: May require a purchase or entry fee but often include an AMOE.

3. Legal Framework:

1. Sweepstakes: In the US are governed by both federal and state laws ensuring no purchase is necessary and fairness in selection.

2. Giveaways: In the US must adhere to rules ensuring skill-based judgment and avoid being categorized as a lottery.