Lately, many people have been discussing the IHG Priceless Surprise sweepstakes. You can enter the IHG drawing just by mailing in an entry, without staying at any hotel. At first glance, that seems counterintuitive: why would a hotel group heavily promote the idea that you can earn sweepstakes entries by staying at its hotels, while also hiding a “back door” in the official rules that lets people enter without spending anything? From IHG’s perspective, offering a free way to enter appears to provide no benefit at all, so why do they still do it?
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Definition: Lottery
A promotion is generally defined as a lottery if it has the following three elements:Prize
The promotion ultimately awards a prize. This can include, but is not limited to, cash and other items of value. For example, even another chance to play can count as a prize.
Chance
This part is fairly straightforward: the main factor determining who receives the prize must be chance. Even if the game includes a small amount of player skill, it can still satisfy this element.
Consideration
For something to be a lottery, entering the game must require giving up something of value. Any valuable property can be treated as consideration for entry. Even paying just $0.25 for a card used in the game can satisfy the consideration element of a lottery (People v. Shira, CA App [62 Cal. App 3d 445]). There are, however, some exceptions. For example, if entering requires mailing in an entry, the cost of the stamp and the letter itself does not count as consideration under this element (Haskell v. Time, Inc [857 F. Supp. 1392]). In addition, making a phone call has also not been treated as valuable consideration (Pepsi Cola Bottling Co. of Luverne, Inc. v. Coca Cola Bottling Co., 534 So. 2d 295, 297 [Ala. 1988]).
Lotteries Are a Government Franchise
In almost every state, lotteries may be sold only by the government or by entities specifically authorized by the government; privately selling lottery tickets is generally a crime, as in the examples below. The definition of a lottery is almost the same from state to state, though there may be minor differences. A few states go further and prohibit lotteries entirely, including government-run lotteries.
- California: Cal. Pen. Code §319
- New York: N.Y. Const. art. I, §9, cl.1.
- New Jersey: N.J.S.A. 5:9-1
- Texas: Tex. Pen. C. Sec. 47.02
- And many more...
The Solution
If free entry were not allowed, the IHG promotion would satisfy all three elements of a lottery described above: it requires participants to spend money staying at IHG properties, and it awards prizes of meaningful value entirely at random. That would make it an illegal lottery.
CVS Got Hit by This Before
Back in 2006, CVS was prosecuted in New York over a promotion that offered sweepstakes entries with the purchase of certain CVS products, but did not provide a free method of entry. CVS eventually settled with the attorney general and was fined $152,000.
So how do companies avoid this problem? The answer is to remove at least one of the three elements of a lottery.
Option A: Allow Free Entry
This is the approach used by IHG Priceless Surprise. By allowing anyone to enter for free, the organizer removes the consideration element from the lottery analysis. Free sweepstakes are not prohibited in most states, which is why this structure complies with anti-lottery laws. This is also the path most promotional sweepstakes choose.
Naturally, companies do not really want large numbers of non-customers to enter, so under pressure from the law they add a discreet “No Purchase Necessary” notice and hope most people will ignore it. That way, the promotion still generates buzz and encourages spending. At the same time, they often make free entry intentionally inconvenient. For example, IHG strictly required entrants to handwrite their names and other personal information, and imposed very specific size requirements for the card. In my view, these rules are meant to discourage people from taking advantage of the free option as much as possible.
Importantly, they cannot discriminate against you just because you did not make a purchase, such as by lowering the odds for non-paying entrants. If that were allowed, companies could simply make the free-entry odds extremely low and effectively eliminate participation from non-customers. In general, the sweepstakes must work the same way regardless of whether you made a purchase.
Option B: Turn the Game Into a True Contest
If a promotion is based primarily on player skill, it can remove the chance element from the lottery analysis. For example, suppose a store promotion says that buying an item gives you one chance to play a claw machine game. Because claw machine play depends mainly on individual skill, it may avoid being treated as a disguised lottery. Another common approach is to require users to submit a video or photo they prepared themselves, and then post the entries online for voting to determine the winner.
Option C: Offer No Prize
Well, does that even count as a solution? If there is no prize, what kind of promotion is it supposed to be?
Analysis
Why doesn’t the U.S. have “win another bottle” promotions? Because that is a lottery. At its core, “win another bottle” means paying money for a chance to receive another bottle, which perfectly fits the definition of a lottery.
Takeaways
Because of legal restrictions, sweepstakes promotions in the United States and many other countries are heavily constrained. But that also creates opportunities for people who know how to use these promotions to their advantage. Take this IHG Priceless Surprise promotion, for example: it was almost like giving away money.
In the future, when you see a sweepstakes-style promotion that appears to require spending money, read the terms carefully. There is a good chance that the promotion also allows entry without a purchase. If the odds are reasonably favorable, entering these promotions for free can be very worthwhile. Of course, if the odds are one in tens of millions, then even free entry may not be worth the effort.
If you are part of a CSSA or are organizing an event and want to offer sweepstakes entries in exchange for donations, be careful. Each state has different rules for this kind of “lottery,” and the rules may also depend on the nature of the organization, whether it is for-profit or nonprofit. It is best to do your own research or consult legal counsel before running such a promotion. This article is not legal advice.
What do you think? Would you enter the IHG Priceless Surprise sweepstakes? Leave your thoughts in the comments.