Federal & State Lottery Laws Explained

According to Federal Lottery Laws, it is illegal to operate a lottery through the mail or over the telephone. The “Standard Lottery Rule” is a legal baseline that defines an illegal lottery.

The 3 Elements of an Illegal Lottery – A sweepstakes crosses the line into an illegal lottery if it contains all three of the following:

Prize: Something of value is offered.
Chance: Winners are chosen randomly.
Consideration: Participants must pay money or expend significant effort (time/labor) to enter.

Most states follow this Standard Lottery Rule; and all 50 states and the District of Columbia have statutes that prohibit lotteries, except those that are state-run. To avoid being classified as an illegal lottery in any State, at least one of the elements noted above must be removed.

Remove Consideration: Provide a valid “Alternate Method of Entry” (AMOE). For example, offering a free mail-in method of entry so participants are not forced to buy a product to win. Removing Consideration creates a legal Sweepstakes.
Remove Chance: Make the winning based entirely on skill, such as submitting the best essay, taking the best photograph, or answering trivia correctly. Removing Chance creates a legal Contest.
Remove Prize: Require no payment and offer no prize of value.

Who enforces Lottery Laws?

1. Federal Level

United States Postal Service
- Deceptive Mail Prevention and Enforcement Act: Enforced by the U.S. Postal Service, this law protects consumers from misleading physical mail. It requires mailers to feature clear opt-out instructions, forbids using seals that imply a federal government endorsement, and regulates the use of simulated non-negotiable checks.
- When scam sweepstakes use the mail system to trick consumers (often sending fake “winning” checks or requiring a processing fee), the U.S. Postal Inspection Service (USPIS) steps in to investigate mail fraud.
Federal Trade Commission (“FTC”)
- Federal Trade Commission (FTC) Act: The FTC prevents “unfair or deceptive acts.” It mandates that brands clearly and conspicuously disclose material terms (e.g., odds of winning, start/end dates, and how to enter without a purchase). If a purchase is required, it must explicitly state that no purchase is necessary and provide an equal, free alternative method of entry (AMOE).
- Telemarketing and Consumer Fraud and Abuse Prevention Act: The Act, as amended, requires the Commission to promulgate regulations (a) defining and prohibiting deceptive telemarketing acts or practices; (b) prohibiting telemarketers from engaging in a pattern of unsolicited telephone calls that a reasonable consumer would consider coercive or an invasion of privacy; (c) restricting the hours of the day and night when unsolicited telephone calls may be made to consumers; and (d) requiring disclosure of the nature of the call at the start of an unsolicited call made to sell goods or services. Laws specifically related to Do-Not-Call and to charitable solicitations are listed separately.
Federal Communications Commission (“FCC”)
- Telephone Consumer Protection Act (TCPA): The FCC strictly limits unwanted robocalls and robo-texts. If a sweepstakes promoter contacts you via auto-dialer or pre-recorded message without your prior express consent, they are violating the TCPA.
United States Department of Justice (“DOJ”)
- The DOJ enforces the criminal aspects of sweepstakes and lottery laws, specifically prosecuting severe cases of mail and wire fraud. It partners with other federal and state agencies to regulate promotions and protect consumers.
- While the DOJ oversees criminal prosecution, overall sweepstakes laws are governed by a combination of federal and state regulations.

2. State Level

State Attorneys General (AGs) – Individual states strictly regulate contests and giveaways, particularly regarding registration, bonding, and prize disclosures (for example, laws requiring registration for aggregate prize values over a certain amount in states like New York and Florida).
Local District Attorneys (DAs) enforce sweepstakes laws by utilizing Consumer Protection Units to investigate deceptive practices, false advertising, and illegal gambling. They prosecute operators who fail to offer an Alternate Method of Entry (AMOE), charge entrance fees, or use sweepstakes as a front to evade state gambling and lottery regulations.

3. Federal Lottery Regulations

Federal laws strictly govern the framework, marketing, and conduct of these promotions:
- 18 U.S. Code Chapter 61 (Lotteries): This outlines criminal statutes prohibiting the mailing of lottery tickets, advertisements, or lists of prizes for unauthorized lotteries.
- 18 U.S. Code § 1301. Prohibits the transportation or carrying of lottery tickets in interstate commerce.
- 18 U.S. Code § 1302. Prohibits the mailing of gambling material (lottery tickets or actual gambling paraphernalia). The statute does not prohibit mailings that contain advertisements for gambling activity that is lawful where conducted (e.g., ads for licensed casinos).
- 18 U.S. Code § 1304. Prohibits the broadcasting of lottery information. (18 U.S. Code  1307 exempts from this prohibition advertisement for state-run lotteries in states where the lotteries are conducted.) Note that the law only prohibits the broadcast of “unlawful” gambling advertisements.
- 18 U.S. Code § 1306. Prohibits financial institutions from offering lotteries.
- 47 C.F.R. § 1211. Prohibits television or radio stations from broadcasting advertisements or transmitting information on illegal/unlawful lotteries.
- 47 C.F.R. § 213. Prohibits cable television system operators from broadcasting advertisements or transmitting information on illegal/unlawful lotteries.
- 39 U.S. Code § 3001 et seq. Declares materials containing false representations and lotteries to be non-mailable and strictly regulates Sweepstakes offered through the mail (see Deceptive Mail Prevention and Enforcement Act).
- 39 U.S. Code § 3005. Permits mailing of state-run lottery materials within the state.
- 26 U.S. Code § 5723(c) and 27 C.F.R.  275.71. Prohibits certificate coupons or other lottery devices from being placed on tobacco product packaging.

To ensure that you are running a compliant promotion that does not violate federal lottery laws, please, contact us at Marden-Kane.

Share:

Leave Nothing to Chance

Schedule a consultation with our team and let’s make things happen!

Contact us

Who We Are

Marden-Kane is one of the nation’s foremost promotional marketing service providers. For over 67 years, we’ve supported leading brands to create the best promotional experiences for their most valued customers.

Contact Info

Marden-Kane, Inc.
575 Underhill Blvd. Suite 222
Syosset, NY 11791-3416
expert@mardenkane.com
516-365-3999

join our Newsletter

First Name *

Last Name *

Email Address *

Company *

Select list(s) to subscribe toMarden-Kane Newsletter List

Yes, I would like to receive emails from Marden-Kane, Inc.

Constant Contact Use. Please leave this field blank.

Privacy Policy | Opt-Out

Linkedin-in Facebook Instagram

Share:

Determining the Odds of Winning

10 Hot Summer Prize Ideas

How the High Cost of Gas Affects Your Promotional Offers

Sweepstakes Prizes are Considered Income by the IRS