In the digital age of promotions and gaming, the terms sweepstakes and lottery are often used interchangeably—but legally, they’re very different. Understanding those differences isn’t just useful for participants; it’s critical for anyone running a contest or marketing campaign.
Let’s dive into the definitions, laws, and practical implications of each, with trusted sources and international comparisons to guide you.
What Is a Sweepstakes?
A sweepstakes is a type of promotional giveaway where winners are selected by random draw, and most importantly—no purchase or payment is required to enter.
Companies use sweepstakes to engage users, promote products, or grow email lists. For legality, they must:
- Be open to everyone equally.
- Offer free entry, even if optional paid entries are available.
- Avoid requiring “consideration” (i.e., money or substantial effort).
What Is a Lottery?
A lottery is a gambling system involving three elements:
- Prize – money or goods.
- Chance – random selection.
- Consideration – payment, fee, or purchase to enter.
Because of its gambling nature, lotteries are heavily regulated or government-operated in most countries. Running a private lottery without proper licensing is illegal in the U.S., U.K., India, and many other jurisdictions.
The Legal Formula: Prize + Chance + Consideration
| Feature | Sweepstakes | Lottery |
|---|---|---|
| Prize | Yes | Yes |
| Random Chance | Yes | Yes |
| Payment Needed | No | Yes |
To stay legal, sweepstakes must eliminate consideration. That’s why you often see “No Purchase Necessary” printed in bold.
According to Olshan Law’s Sweepstakes Compliance Guide, even a complex entry process (like writing an essay or visiting a store) could be seen as “consideration” and put a campaign at risk.
What About International Rules?
- Canada: Sweepstakes must include a skill-testing question (e.g., a math problem) to avoid being classified as a lottery.
- Australia: Permits “trade promotion lotteries,” but usually requires state permits if the prize is above a certain value.
- UK: Most competitions and raffles are considered lotteries unless they involve skill, and require licensing from the Gambling Commission.
- India: Private lotteries are generally banned; state lotteries are allowed under strict regulation.
Bonus: How Is a Contest Different?
A contest is not based on chance. Winners are chosen based on skill or merit—like writing, photography, or design.
| Type | Based On | Example |
|---|---|---|
| Sweepstakes | Pure chance | Random drawing for a car |
| Contest | Skill/judging | Best photo wins a camera |
| Lottery | Chance + Payment | Buying a ticket to win money |
Raffles, bingo nights, and spin-the-wheel games may legally fall under lottery definitions if not executed correctly.
Best Practices for Running a Legal Sweepstakes
Whether you’re a business owner, marketer, or creator, here’s how to stay compliant:
- No Purchase Necessary – Offer a free method of entry.
- Clear Official Rules – Include eligibility, odds, dates, and prize value.
- Avoid Overwork – Don’t make users complete excessive tasks just to enter.
- Don’t Call It a Lottery – Even informally.
- Research Local Laws – Especially if your promotion is international.
Final Thoughts
- A sweepstakes is legal when it involves chance and a prize, but no payment or effort to enter.
- A lottery requires payment and is usually government-run or illegal without licenses.
- If you add skill and remove chance, it’s a contest.
Running or participating in giveaways? Understanding these differences protects both your campaign and your rights.