Online Contests Legal Issues

Chris Barsness

Regulation of Online Contests and Competitions

If you promote your business online, including through social media, and you offer a way for people to win a contest or competition for free services or cash prizes, you need to be aware of state and federal regulations on lotteries, sweepstakes, and contests.

It is very common for fitness and personal trainers to post to social media with a contest to win up to $___ in prizes or free training services.  It could be a “6 week challenge” to see who gets the best results.

In California, the Business and Professions Code and Department of Consumer Affairs deal with set rules for operation of contests.  A “contest” is any game, puzzle, scheme, or plan which offers prospective participants the opportunity to receive or compete for gifts or prizes on the basis of skill and which are conditioned on the payment of something of value to participate. 

If you have contests or challenges, you should have written rules of the contest and make certain disclosures.

All contests (within California) must clearly and conspicuously disclose each of the following:

  • All the rules, regulations, terms, and conditions of the contest.
  • The maximum number of puzzles or games which may be necessary to complete the contest and determine winners.
  • The maximum amount of money, including postage and handling fees, which a participant may be asked to pay to win.
  • The date upon which the contest will terminate, and upon which all prizes will be awarded.
  • Whether future contests or tie-breakers, if any, will be significantly more difficult than the initial contest, and the method of determining prize-winners if a tie remains after completion of the last tie-breaker.
  • The nature of the contest and number of contestants or estimated number.
  • The exact nature and approximate value of any prizes must be disclosed clearly and conspicuously. 

You must avoid any misrepresentation and so clearly outlining terms and conditions or rules of the contest is critical. 

Also, if a contest involves paying something of value and prizes are awarded only by chance, that can be considered a lottery and not a contest.  In California, lotteries are illegal unless run by the California State Lottery or done under an exemption. 

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