Legal Question in Business Law in New York

Re: international online contest registerd in NY legalities

Not to sound discouraging, but to undertake this type of project requires a significant legal effort to ensure compliance.

Basically, every state in the U.S. regulates games and promotions and many foreign states do too. Some non-U.S. jurisdictions (even as close as Quebec, Canada) are extremely restrictive; others are less so. In the U.S., your choice is essentially between a game of skill (contest) and a game of chance without consideration (sweepstakes). It is not easy at all distinguishing between skill and chance, and courts and regulators have been known to lean toward finding any degree of chance mixed in with skill as controlling. Running afoul of the consideration element in games of chance would result in an illegal lottery, which is a criminal offense in most U.S. jurisdictions. With respect to legal games, some states require advance registration and bonding; others impose special disclosure requirements. New York is one of the states that requires a filing and a bond for certain sweepstakes based on the amount to be awarded as prizes.

On the federal level, FTC regulates certain promotional and advertising aspects of such promotions as well as specifically all online, e-commerce transactions. FTC generally aims to prevent unfair, misleading, fraudulent and other types of marketing schemes. State attorney general offices also act in a similar vein.

The bottom line is that (regardless of where the entity running this contest is formed or is found) a multi-jurisdictional research survey would be needed if the contest is open to everyone everywhere. U.S. state laws in this area change frequently, and foreign laws are sometimes difficult to locate (translate and interpret). So, considering the civil and criminal penalties involved and the cost of legal research and compliance in this fairly esoteric area of law, the realistic choice for smaller companies is often limiting contests to the residents of a few selected jurisdictions where the law can be relatively easily ascertained.

It goes without saying that in this area of law reputable firms face very high risks in undertaking any sorts of promotions like these without competent legal counsel.

The above reply is in the nature of general information, is not legal advice and is not to be relied on as such.