How do I legally hold a contest to give away a Wii?
September 6, 2007 8:01 AM   Subscribe

I'm in Oregon. I run a website which generates moderate traffic. I would like to hold a group writing project in which I would award "prizes" to participants. (Prizes would include a Wii, and possibly gift certificates, etc.) I want to do this with minimal hassle, but within the bounds of the law. What do I need to be aware of?

I'm trying to keep the barrier to entry low. Participants can write something and then link back to my site from theirs, or they can join the forums and contribute in a designated thread. I'm willing to award prizes randomly, but would prefer to make the selections merit-based. I'm concerned that the latter introduces possible legal complications.

Am I okay calling this a contest? Are there tax issues I need to be aware of? (The Wii cost me $330, and will be the top prize.) Basically, how do I stage something like this while minimizing legal liability?

Or am I just being paranoid?

I know you are not a lawyer, are not my lawyer, and are not giving legal advice.
posted by jdroth to Law & Government (5 answers total) 1 user marked this as a favorite
Hey, I just left a comment on your site, can I have the wii? ;)

For you, I think your only tax liability is to write this off as an expense ... keep your receipts, of course. You shouldn't have any legal liability but you should probably put a statement on your site saying that participants indemnify and hold you harmless in case of any losses resulting from winning the prize. (Honest! If you give me the Wii, I promise I won't yell at you when I break my LCD TV with the wii-mote...)

As for tax liability on the part of the winner, the $330 gain from the Wii is below the threshhold for reporting to the IRS.
posted by SpecialK at 8:31 AM on September 6, 2007

I think this comes down to how official you want to be. If you have ever stopped to casually glance at those contest terms you will see there is a dizzying array of clauses to handle the mismash of laws in all the jurisdictions of the United States. Not sure if you want to go broader than that, but I am sure it gets even more complicated to stay in tune with all the technicalities of the law when you go international.

If you want to really stay within the letter of the law, you really are going to have to consult a lawyer who specializes in compliance with sweepstakes regulation. A few google searches uncovers some firms that specialize in that. At your scale you may already be compliant if you provide written rules (or easy to make it compliant by excluding troublesome locations aka "Contest open to all U.S. Residents, 18 years and older except for residents of Florida, New York and Nevada").

If you aren't running a for profit venture and your contest is small enough you may wish to consider this like any other raffle or drawing that churches, schools and organizations hold all the time. However, this is strongly not legal advice on my part and IANAL.
posted by mmascolino at 8:55 AM on September 6, 2007

Find someone doing something similar and 'borrow' their terms and conditions.

Please also be aware that there is a legal distinction between a Contest, a Sweepstakes and a Raffle.
posted by softlord at 9:04 AM on September 6, 2007

Find someone doing something similar and 'borrow' their terms and conditions.

But how do you know they did the proper due diligence?
posted by mmascolino at 10:57 AM on September 6, 2007

Consider the source.
posted by softlord at 6:16 PM on September 7, 2007

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