The chance element requires an unbi-
ased factor, usually a random drawing,
which determines the winner. Eliminating
chance essentially means the participant will
automatically be entitled to receive a certain
benefit provided definite terms are met. A
“Buy One, Get One Free” offer is a promo-
tion that eliminates the chance element.
The consideration element requires the
entrant to provide something of value, such
as an entry fee, in order to participate in the
promotion. To eliminate consideration, the
promotion can neither require a purchase to
enter nor give an entrant an increased
chance of winning based on a purchase.
Once these elements are identified and
evaluated, one can determine if the promo-
tion is a sweepstakes, contest, raffle or some
other type of promotion. At that point,
appropriate steps can be taken to ensure
that the promotion operates consistent with
In a sweepstakes, consideration is removed
from the promotion. Essentially, entrants
are not required to make a purchase in
order to participate in the drawing.
Furthermore, a purchase of the promoter’s
goods and services should not increase an
entrant’s chances of winning; otherwise, the
sweepstakes could be viewed as an illegal
lottery. For example, if a promoter wants to
give away a free vehicle (prize) in a random
drawing (chance), it cannot require an entry
fee (consideration) for the opportunity to
participate in the promotion.
Fast food restaurants often conduct
sweepstakes in which a game piece/entry is
part of the purchased food item’s packaging. To eliminate this purchase requirement, customers should be able to receive a
free game piece/entry using alternate
means, such as submitting a postcard or
online request to the promoter.
Other states have made it clear that con-
sideration is not limited to monetary pay-
2 Some have even viewed the act of
traveling to a local store or providing
exhaustive personal information to be valid
consideration, thus characterizing a sweep-
stakes as an illegal lottery.
3 Arizona courts
have not yet characterized consideration
with such scrutiny. Accordingly, so long as
an entry fee or consumer purchase is not
required, the promotion can generally pro-
ceed as a valid sweepstakes.
In a contest, the winner is not determined
by a random drawing but by some sort of
measurable intellect or other exhibition of
skill. Examples of contests include trivia
competitions and talent shows. In such promotions, each entrant’s knowledge or skill is
judged to determine the winner. To ensure
fairness, the official rules of a contest should
have distinct judging criteria so that the
winner is not selected on an arbitrary or
Because the element of chance is
removed from this type of promotion, a
promoter is permitted to charge an entry fee
for contest participation. However, in
Arizona, intellectual contests that require
payment for participation must be registered with the Attorney General, and a winners list must be filed with the Attorney
General after the promotion.
A raffle is a promotion in which all three elements—prize, chance and consideration—
can be present. In a raffle, a prize is awarded based on a random drawing of tickets
purchased by entrants.
Arizona law is very clear about what type
of entities can conduct raffles. In the past,
only tax-exempt nonprofit organizations
and state, county and local historical societies, all of which must have been in existence in Arizona for five years, were allowed
to conduct raffles.
5 There is no limitation on
the revenue these organizations can generate from conducting raffles.
Several years ago, Arizona expanded the
class of permitted entities that can operate a
raffle to include any nonprofit organization
that is a booster club, civic club, political
club or political organization.
6 These additional organizations—which must be operated exclusively for pleasure, recreation or
other nonprofit purposes—are not required
to be in existence in Arizona for five years
before they can operate a raffle. However,
the maximum annual benefit that these
types of organizations can receive for all raffles is limited to $10,000.7
Arizona law requires that only bona fide
local members of the organization partici-
JOE BELANGER © SHUTTERSTOCK.COM
It is advisable
to not have board
eligible to win
pate directly or indirectly in the management,
sales or operation of the raffle.
8 As such, the
organization cannot retain a third-party company that specializes in the operation of promotions to conduct the raffle. Members of
the organization cannot receive any direct or
indirect pecuniary benefit from the raffle, but
they are allowed to purchase raffle tickets
themselves so long as their participation is on
a basis equal to all other entrants.
From a practice standpoint, it is advisable
to not have members of an organization eligible to win a raffle. Even if conducted legitimately, one could imagine the skepticism and
publicity fallout if a board member of the
organization happens to be the raffle’s grand
prize winner of a trip to Hawaii!
5. Other Types of Promotions
There are many other types of promotions
beyond sweepstakes, contests and raffles. For
example, many businesses have tiered purchase programs for their loyal customers,
such as accrued airline miles or credit card
points. Although a purchase is generally
required to participate, such promotions are
permissible so long as the consumer is automatically entitled to receive a prize once a certain tier of purchases is met; accordingly,
there is no element of chance to receive the
For example, a local sandwich shop can
conduct a “buy 9 sandwiches and get the
10th sandwich free” promotion. However,
if the promotion was “buy 9 sandwiches,
and become automatically eligible for a