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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 118788
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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Can a company based in NV hold legally contests for skill on

Customer Question

Can a company based in NV hold legally contests for skill on the internet?
Submitted: 8 years ago.
Category: Business Law
Expert:  Dwayne B. replied 8 years ago.
Are you asking if a company based in Nevada can do something like poker online for real money?
Customer: replied 8 years ago.
no, like written essays, which people send in with an entrance fee. The winner would be choosen by 3 judges.
Expert:  Dwayne B. replied 8 years ago.
I am going to opt out of this one and let another expert who may have more info on this area take a shot at it.
Customer: replied 8 years ago.
Thanks for anyway for trying
Expert:  Law Educator, Esq. replied 8 years ago.

Your previous expert has asked me to assist. A contest is, strictly speaking, a game of skill, such as an essay contest, a trivia game, a sales volume award, or an athletic competition, where the outcome is determined by some factor other than chance. Contests are lawful in NV, BUT they are subject to a myriad of federal laws and regulations, including postal service regulations, broadcast restrictions, trademark and copyright laws, and the Federal Deceptive Mail Prevention and Enforcement Act of 1999 concerning misleading and fraudulent sweepstakes and contest offerings. Further, the FTC's authority to regulate unfair or deceptive trade practices extends to games of skill and chance. Finally, there are applicable laws from the 50 states, which vary considerably and can be quite onerous. Generally, however, there are four basic legal requirements for contests and sweepstakes:

1. The promotion must not be an unlawful lottery. A supposed contest is an unlawful lottery when all three of the following elements are present: (i) a prize is awarded to the winner(s), (ii) the selection of a winner(s) is random or by chance, and (iii) entrants must pay or provide consideration for entry. Almost all sweepstakes include the first two elements (prize and random drawing). The presence or absence of consideration paid by participants for entry typically determines the legality of the promotion. Certain states have determined that the requirement of any type of consideration by entrants that would be sufficient to support a contract renders the promotion unlawful. This is the minority view maintained by only a few states. The majority view is that the requirements for participation must represent true value or necessitate significant effort to constitute "consideration." Games of skill avoid the second element (chance) and may require payment or other consideration without running afoul of state anti-lottery laws. Games that combine chance and skill (such as poker) exist in a regulatory gray area.

2. The overall promotion must be fair, non-biased and non-confusing. The sponsor must actually award the prize described, the winner cannot be preselected or chosen because of an affiliation with the sponsor, and all advertisements and representations must be accurate and not misleading in any way.

3. Certain disclosures must be made in the official rules, advertising, and promotions. While these disclosures vary by state, all material terms and conditions must typically be set forth in the "Official Sweepstakes Rules" which may be presented in print or online. The statement, "No Purchase Necessary," should accompany each and every description of the promotion. The disclosures should also include the prize description, the approximate retail value of each prize, the number of prizes awarded, the odds of winning (typically stated as "the odds of winning depend upon the number of valid entries received"), the start and end dates for entry, what is required for entry, the method or means for entry, eligibility requirements for entry, dates for claiming and using the prize, how and when the winner will be selected and notified, where the drawing will be conducted, the identity of the sweepstakes sponsor, and all other restrictions, limitations, and requirements of the promotion.

Games of skill also require disclosure of the number of rounds involved, the criteria for winning, the qualifications of the judges, and the costs for entry into each round. Many games of skill provide that, in the event of a tie, the winner will be selected by drawing lots. Such a provision turns the promotion into a game of chance rather than skill and no consideration can then be required for entry.

When travel is awarded, the disclosures should specify whether airfare, meals, lodging, ground transportation, taxes, resort fees, etc. are included, and any excluded properties, availability restrictions, and/or black out dates. That said, the restrictions should not be so onerous as to make it overly burdensome for the winner to redeem the prize. Promoting "prizes" that would require significant expenditure by the putative winner (such as a free airline ticket conditioned upon booking a specified number of nights at a specific hotel) should be avoided if possible.

4. Before advertising and conducting contests and sweepstakes, the promotions and supporting materials must be registered in accordance with the various state laws of EVERY state, since you are on the internet reaching each and every state and you will need to check the laws of each state by contacting the State Attorney General's offices in each state. For example, a contest must be registered under the laws of New York and Florida if the value of the prize exceeds $5,000, and in Rhode Island if the value exceeds $500 for example and you need to check each state law to determine their regulation since you are running this on the internet. Registration of such a promotion requires payment of a fee and submission of the contest rules and advertising, and may necessitate posting a bond in the state.

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Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 118788
Experience: All corporate law, including non-profits and charitable fraternal organizations.
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