Bonus Entries—With Extra Chances to Win Comes Extra Risk
Recently, we’ve seen an uptick in questions about bonus entries, or additional chances to win a contest given to entrants who do something additional, like share the contest on social media or watch a short video. One popular scheme is to give entrants who donate money to a charity additional chances to win. Sounds like a win-win, right? Not so fast. Let’s start at the beginning.
Federal and state laws generally prohibit private lotteries, the definition of which involves three elements: prize, chance, and consideration. Eliminate one of those elements, and your illegal private lottery becomes a legal contest. Probably the element most commonly eliminated is “consideration,” or the money or time required to enter a contest. (Technically, a contest without consideration is a “sweepstakes,” but for simplicity’s sake we’ll just call it a contest.) That’s why you’ll see “NO PURCHASE REQUIRED TO ENTER OR WIN” specified in contest rules. That’s also why you’ll see free alternative methods of entry (like mailing in a 3×5 index card with your contact information) for contests that do have a payment requirement. For contests with both a paid and unpaid method of entry, federal and state laws generally prohibit giving entrants who pay to enter a better chance of winning than entrants who enter for free.
So, with that as background, let’s look at bonus entries. The problem with bonus entries, frequently enough, is that consideration—attached to a better chance to win—tends to creep back in. Want to give entrants who donate money to a charity extra chances to win? Now you’re giving folks who pay to enter (or, more precisely, who pay for additional entries) a better chance to win than folks who don’t take advantage of the bonus entry option. Does it matter that the money will be going to the charity rather than to the contest promoter directly? It’s risky, and the answer may vary based on state law. The better option is to limit bonus entries to activities not involving an element of consideration.
If this all sounds tricky, it is. Consulting contest counsel while still in the contest planning phase is always good idea. When it comes to contest compliance, don’t take extra chances.