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Building business with contests 

Contests are great business builders.. Customers love to win prizes and they love to win contests! Contests also provide a platform for sponsor/media cross promotions for additional exposure.

General Contest information: Always check state and local laws for rules on contests, sweepstakes and lotteries. Have your attorney review all rules. The following is not legal advice but general information. Consult your attorney before using.


  1. What constitutes a lottery?  A good place to start is with the FCC. Also check your state and local laws., as these vary widely.  In Colorado,  there are at three elements that are present in a lottery:   (a) prize, (b) chance and (c) consideration.

  2. Prize:  did the person win something (no matter what the value)?

  3. Chance:  did the person win by luck or chance (drawing etc.)?

  4. Consideration: did the person pay to enter or have to complete a laborious task? (Consideration is not always calculated in dollars. For example, consideration could be having to drive a long distance to register.)

  5. In Colorado, if skill is involved in the contest, it is not a lottery. For example, a basketball shoot out is not a lottery. Individual states have rules regarding lotteries. These can be found at your secretary of state's office.

  6. Can an organization host a contest that is a lottery - check local state and laws. The answer is often yes, but unless they comply with both federal and state regulations, the lottery may not be promoted via newspaper, radio or TV.

  7. Trade Show booth drawings: Once again check local /state laws. Often an organization can host a drawing. Admission to the event may not count as consideration unless the money from the admission is flowing directly to or indirectly to the promoter of the lottery.

  8. Examples: Your organization hosts a carnival. Admission is $1, paid to your business. You have a trip drawing at your booth or one of your sponsor's booths - this is illegal. Another example: your organization has a booth at a trade show, but you are not he sponsor of the show and you do not benefit from admission fee. You can hold a drawing, but cannot advertise it outside the show.

Be sure you comply with federal, state and local laws regarding contest rules.  In Colorado, we provide rules for all contests which clearly outline all details on the prize, its value and how the prize is won. We also give any eligibility requirements. Contest rules may be posted on the registration box, be available where contestants register, and be available by mail/email.

Tip:  No Purchase Necessary! This  will increase your entries

  • Remember to have all prize winners bring proof of identification.  In Colorado, we ask winners to  sign an IRS 1099 form if the prize is over $500 and sign a liability release. NEVER give a prize to a minor. Have the parent or legal guardian claim the prize for the minor, and sign the release and tax forms.

  • Many states require a business to have a raffle or sweepstakes license.

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