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How this guide was prepared. Last updated October 2026. It draws on Brandmovers' experience designing and running sweepstakes, instant win games and UGC promotions. It also draws on primary sources: state statutes and filing instructions, FTC guidance and rules, IRS instructions and IAPP's privacy law tracking, each checked at its source. |
Promotions compliance means structuring a sweepstakes, contest, instant win game or UGC promotion so it is not an illegal lottery, publishing complete official rules, registering where states require it, disclosing incentivized posts, protecting entrant data and reporting prizes for tax.
Most promotion problems come from a handful of avoidable mistakes. A sweepstakes where buying improves the odds is an illegal lottery. A social promotion that rewards posts without disclosure misleads the people who see them. A UGC campaign that reuses entries without clear rights invites copyright claims. And a prize program that uses an outdated tax threshold files the wrong forms. This guide covers the lottery test, the main promotion types, official rules, state registration in New York, Florida and Rhode Island, FTC disclosure for social and UGC promotions, entrant data, Canadian entrants, UGC rights, prize fulfillment and tax, and a pre-launch calendar.
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A promotion is an illegal lottery when it combines three elements: a prize, selection by chance and consideration, usually a required purchase or payment. Remove any one and it is not a lottery, although state registration and disclosure rules can still apply.
Sweepstakes stay legal by removing consideration. They offer a free alternative method of entry (AMOE) with the same chance of winning as a purchase-based entry, so no one has to buy anything to take part. As the FTC's consumer guidance puts it, "it's illegal to ask you to pay or buy something to enter or to increase your odds of winning." The AMOE must be a real alternative: requirements so burdensome that they discourage non-buyers from entering can undermine it.
Consideration can be more than money. Demanding significant time or effort, such as attending a sales presentation or producing substantial content mainly for the sponsor's benefit, can raise the same concern in some states. Where the line falls depends on the design and the state.
Purchase-linked sweepstakes are common and legal when the AMOE is built in. Brandmovers ran DiGiorno's Chaotic Good 'Stakes, a purchase-linked sweepstakes with receipt upload, which drew 140K+ total entries (disclosed by Brandmovers). The receipt validation guide covers how receipt-based entry works.
Sweepstakes and instant win games pick winners by chance and need a free way to enter; contests pick winners by skill and are judged against published criteria.
Sweepstakes can also run inside loyalty programs. For Essentia Water, Brandmovers ran a sweepstakes overlay on the existing Essentia Nation Rewards program, which runs on BLOYL™, Brandmovers' loyalty platform. When points or purchases earn entries, the same AMOE and rules requirements apply.
Official rules must include every material term an entrant would need before deciding to enter, because they operate as the contract between the sponsor and each entrant and ambiguous terms tend to be read against the sponsor.
Publish the rules before entry opens and link them from every promotional placement. At a minimum, cover:
If the promotion is mailed, federal law (39 U.S.C. 3001) requires the mailing, rules and entry form to state that no purchase is necessary and that a purchase will not improve the chances of winning, and the rules to state the estimated odds of winning each prize, along with the sponsor's name and an address.
New York, Florida and Rhode Island require registration for certain games of chance, and New York and Florida also require a bond or trust account for prizes over $5,000.
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State |
Trigger |
Timing and security |
Other requirements |
|---|---|---|---|
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New York (GBL 369-e) |
Games of chance where the "total announced value of the prizes offered is in excess of five thousand dollars" |
File with the Secretary of State "at least thirty days prior to the commencement"; a trust account "with a balance sufficient to pay or purchase the total value of prizes offered" or a bond "in an amount equal to the total value of all prizes offered"; $100 filing fee |
Within 90 days after the end, file a list of winners of each prize worth more than $25; keep records for six months |
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Florida (Stat. 849.094) |
"Total announced value of the prizes offered is greater than $5,000" |
File with the Department of Agriculture and Consumer Services at least 7 days before the start; bond or trust account |
$100 filing fee; rules posted and referenced in advertising (a website, toll-free number or mailing address may be given); a certified list of winners of prizes over $25 within 60 days after winners are determined |
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Rhode Island (RIGL 11-50-1) |
Games of chance offered by a retail establishment with prizes "in excess of five hundred dollars" |
File a statement with the Secretary of State, including the rules and the proportionate opportunity of winning; $150 filing fee |
The Secretary of State's filing instructions say "any game offered to Rhode Island Residents MUST register," and that a winners list must be kept for at least one year |
The Rhode Island statute refers to retail establishments, but the Secretary of State's instructions read it as covering any game offered to Rhode Island residents, including games run from other states. National promotions with more than $500 in prizes should plan for Rhode Island registration.
Excluding New York, Florida or Rhode Island residents avoids those filings but removes their residents from the promotion, a trade-off to make deliberately rather than by default. When those audiences matter, build the filing deadlines and the bond or trust account into the launch plan.
When a promotion rewards people for posting, the FTC expects each post to disclose that the entrant received something of value, clearly enough that viewers notice and understand it.
Disclosing sweepstakes and contest posts. An entry is something of value, so a post made to enter is an endorsement with a material connection to the brand. The FTC's Endorsement Guides FAQ says that making the word "contest" or "sweepstakes" part of the hashtag, "e.g., #XZY_Contest or #XYZ_Sweepstakes," "should be enough," while "the word 'sweeps' probably isn't because it's likely that many people wouldn't understand what that means." It also recommends telling participants where to disclose, "(e.g., at the beginning of the post)." Write the required hashtag into the official rules and reserve the right to disqualify entries that omit it. Platform rules apply too: Meta's promotion policy requires entrants to release Meta and acknowledge that Meta does not sponsor the promotion, and bars promotions that require or incentivize participants to share, repost or tag others.
UGC incentives. Any prize, discount or entry offered for content makes the resulting posts incentivized. The FTC's rule on the use of consumer reviews and testimonials (16 CFR Part 465), announced August 14, 2024, published August 22, 2024 and effective October 21, 2024, prohibits practices including fake reviews and paying for reviews conditioned on a particular sentiment. When UGC is reused in paid advertising, keep the disclosure in the ad as well.
Penalties. The Endorsement Guides are guidance on how the FTC applies the law against deceptive practices. The FTC can seek civil penalties in specific circumstances, for example where a company knew the conduct was deceptive, such as after receiving the FTC's Notice of Penalty Offenses concerning endorsements, or where a rule or order applies. The maximum is $53,088 per violation, the level set in January 2025 and kept unchanged for 2026.
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Requirement |
Sweepstakes |
Contest |
Instant win |
UGC promotion |
|---|---|---|---|---|
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Lottery risk |
AMOE required; purchase cannot improve odds |
Purchase allowed in some states if judging is genuinely skill-based |
AMOE required; equal chance for non-purchasers |
AMOE required if selection involves chance |
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Official rules |
All material terms |
Plus judging criteria, weights and judges |
Plus seeding method, number of winning pieces and odds |
Plus rights grant, disclosure requirement and content standards |
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NY and FL registration |
If prizes exceed $5,000 and residents are eligible |
Generally not for genuine skill contests |
If prizes exceed $5,000 |
If chance-based and prizes exceed $5,000 |
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RI registration |
If prizes exceed $500 and RI residents can take part |
Generally not for genuine skill contests |
If prizes exceed $500 |
If chance-based and prizes exceed $500 |
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FTC disclosure |
If entry requires posting |
If entry or voting requires posting |
If entry requires posting |
Every incentivized post |
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Privacy |
Notice at collection; state privacy law |
Same |
Same |
Same, plus rights for submitted content |
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Tax |
1099-MISC once a winner's prizes for the year reach the threshold |
Same |
Same |
Same |
Promotion entry forms collect personal information, so entrants' state privacy laws apply, and the entry form must say how the data will be used, including any marketing use after the promotion.
IAPP counts 19 enacted comprehensive state privacy laws, with laws in Indiana, Kentucky and Rhode Island taking effect on January 1, 2026. Their details differ, but most require notice at or before collection, disclosure of how data is used and shared, and consumer rights to access, correct and delete. Link a privacy notice from the entry form, describe any plan to add entrants to marketing lists, and collect only the fields the promotion needs. Penalties and enforcement differ by state, so check the states where your entrants live. For text-to-enter promotions, the FCC's consumer guidance says "commercial texts require written consent," so a phone number submitted to enter is not permission for later marketing texts.
US promotions can accept Canadian entrants, but Canadian law has its own safeguards, so most US sponsors either limit eligibility to US residents or plan a separate Canadian version.
Canada's Criminal Code prohibits lottery schemes, and a skill-testing question, often alongside a no-purchase entry route, is the standard safeguard. The Competition Act requires fair disclosure of prizes and odds. Quebec ended its separate publicity-contest regime through legislation assented to on October 27, 2023. For entrants outside North America, limit eligibility or plan for each country's rules. The guide to loyalty compliance across US states and Canada covers the Canadian rules in more detail.
UGC rights should be granted explicitly in the official rules, because entrants own the copyright in what they submit unless they license or transfer it.
Match the rights to the use: "promotional purposes" is often too vague to cover paid media.
Sponsors must notify winners as the rules describe, collect eligibility paperwork, and report prizes to the IRS on Form 1099-MISC once a winner's prizes reach the reporting threshold.
Notification. Follow the method and timing in the rules, state the claim deadline, and describe how alternate winners are chosen. Departing from the published process creates contract risk.
Tax reporting. The IRS instructions for Form 1099-MISC list prizes and awards in box 3, including "amounts paid to a winner of a sweepstakes not involving a wager," at fair market value for merchandise. For tax years beginning after 2025, the reporting threshold is $2,000 (previously $600), and it may be adjusted for inflation beginning in 2027. Collect a Form W-9 with the affidavit of eligibility before releasing a prize that may be reportable, and total each winner's prizes across your promotions in the year. Payments to nonresident aliens are reported on Form 1042-S rather than Form 1099-MISC, and withholding may apply, so confirm treatment before accepting non-US entrants. Confirm treatment with a tax advisor, especially for unusual prizes or gaming-style mechanics.
This is general information, not legal advice.
A pre-launch calendar should work back from the start date so rules, registrations, bonds, disclosures and privacy notices are ready before entry opens.
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When |
Task |
|---|---|
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8 or more weeks before launch |
Choose the structure (sweepstakes, contest, instant win); design the AMOE; decide eligible states and countries |
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6 weeks before |
Draft official rules, privacy notice and UGC rights language; check against state rules |
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5 weeks before |
Arrange the bond or trust account for New York and Florida if prizes exceed $5,000 |
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At least 30 days before |
File the New York registration |
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Before launch |
File the Rhode Island statement if prizes exceed $500 and residents are eligible |
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At least 7 days before |
File the Florida registration |
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Launch |
Publish rules, disclosure instructions and entry-form privacy notice |
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After selection |
Notify winners per the rules; collect affidavits and W-9s |
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Within 60 days after winners are determined |
File Florida's certified winners list |
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Within 90 days after the end |
File New York's winners list; keep records as each state requires |
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January |
Issue Forms 1099-MISC for reportable prizes |
Compliance is what keeps a promotion usable. Structure every chance promotion with a real AMOE, publish complete rules, register in New York, Florida and Rhode Island when the triggers apply, require clear disclosure on incentivized posts, tell entrants how their data will be used, and apply the current tax thresholds. Build those steps into the launch calendar rather than discovering them after the promotion has started. If a regulator asked for your official rules, registration filings and disclosure instructions tomorrow, could you produce them in an hour?
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Running a sweepstakes, instant win game or UGC promotion? Brandmovers designs and runs promotions, with in-house legal support for rules and filings, and runs loyalty programs on BLOYL. Request a demo to talk it through with the Brandmovers team. |