Glossary of Terms
Below are the terms that are frequently used in both Sweepstakes and Contests:
Sweepstakes are regulated by both Federal and State laws. Sweepstakes (typically, random drawings for prizes) possess two of three characteristics of a lottery; "Chance" and "Prize," without requiring participants to pay any consideration in order to participate. Participation in a sweepstakes, winner(s) are randomly selected (chance) and prize(s) awarded.
Contests are a type of promotion that do not contain the element of chance (as defined above) but rather depends on the skill of each entrant. E.g. A photo contest where the entrant is required to accumulate votes would be a perfect example of a contest.
Registration & Bond:
Registration and Bond are needed when the cumulative prize value (of all prizes) is greater than $5,000.00. This only applies to Sweepstakes (as defined above) and does not apply to Contests.
If the aggregate value of the prize pool, in a given sweepstakes, exceeds $5,000, Florida and New York require that the game be registered and bonded. In Rhode Island, the prize threshold for registration is $500, but there is no bonding requirement, and the registration requirement only applies to contests that are conducted by brick and mortar-businesses in connection with a retail outlet.
A Bond Form must be filled out by the client (never an agency) and it must be submitted a minimum of 10 days prior to the start of a promotion. The cost of Registration and Bonding is based on the total value of all prizes being awarded. E.g. if the cumulative value of all prizes being awarded is between $5,000.00 & $6,000.00 the standard fee is $1,375. If the value of all prizes being awarded is greater than $6,000.00, ask CFA for a quote.
When a promotion is over, CFA will send a copy of the final winners list to the applicable state(s) to get the bond released.
Winners are typically required to sign an Affidavit which is more commonly referred to as a Winner Affidavit & Publicity Release form. This form is used to ensure that winners are in no way affiliated with the sponsor, or with any of the agencies that the sponsor has engaged in connection with the sweepstakes or contest. It is also used to confirm a winner's age and legal residence as well as secure permission from the winner to use his/her likeness, name, etc... in connection with promoting either the Sweepstakes or Contest. This form is typically used when the value of a prize is valued at, or above $600.00
IRS Form W9:
This form is required to be completed by any winner who receives a prize valued at, or above $600 and it is used to report winnings. At the end of the year (typically prior to January 31, of the following year in which the prize was won), CFA will issue a winner a 1099 which the winner then needs to include when filing their taxes.