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Can I offer contests that involve cash prizes in Arkansas? What are the requirements?

Requirements for Contests with Cash Prizes in Arkansas

Based on the Arkansas Code, contests that involve cash prizes are allowed in Arkansas, but there are certain requirements that must be met.

  1. Prize Limitations: The value of a bingo prize cannot exceed $1,000 for a single game, and the total value of all prizes awarded during a single bingo session cannot exceed $7,500 [1.1]. For raffles, the total value of prizes in a calendar year cannot exceed $50,000, unless the prizes were donated to the licensed authorized organization, in which case the total value of prizes cannot exceed $100,000 [1.1].
  2. Cash Prize Limitations: A raffle prize cannot exceed $5,000 in cash [1.1].
  3. License Requirements: Any organization offering contests with cash prizes must obtain an authorized organization license from the Department of Finance and Administration [4.2]. The license application must include the name and address of the applicant, a designation and address of the premises intended to be used for the contest, the name and address of the person or persons within the authorized organization who will be responsible for organizing, conducting, and otherwise administering the contest, and a statement that the applicant complies with the conditions for eligibility for the license [4.2].
  4. Disclosure Requirements: No sponsor shall offer a prize nor shall a sponsor use any solicitation, whether written or oral, and however communicated, that offers a prize, unless the person to whom such offer is made has first received a written prize notice containing the information required in subsections (b) and (c) of this section [2.3]. The written prize notice must contain the true name or names of the sponsor and the address of the sponsor’s actual principal place of business, the retail value of each prize the person receiving the notice has been selected to receive or may be eligible to receive, a statement of the person’s odds of receiving each prize identified in the notice, any requirement that the person pay shipping or handling fees or any other charges in order to obtain or use a prize, or any fees required to obtain information about a prize, including the nature and amount of such charges, if the receipt of the prize is subject to a restriction, a statement that a restriction applies, and a description of the restrictions, any limitations on eligibility for the prize, and if a sponsor represents that the person is a “winner”, is a “finalist”, has been “specially selected”, is in “first place”, or is otherwise among a limited group of persons with an enhanced likelihood of receiving a prize, the written prize notice must contain a statement of the maximum number of persons in the group or purported group with this enhanced likelihood of receiving a prize [2.3].
  5. Expenses: Expenses that are reasonable and necessary to lawfully conduct contests with cash prizes are allowable and include expenses incurred for advertising, repairs to premises and equipment, supplies and equipment, prizes, stated rental or mortgage and insurance expenses, license fees, and bookkeeping or accounting services [4.1]. No person may be compensated for organizing, promoting, conducting, or otherwise administering a contest with cash prizes [4.1].

Legislative Finding, Declaration, and Intent

The Arkansas General Assembly has become aware of the sweepstakes, contests, and prize promotions that have been and are being directed at Arkansas consumers and recognizes that consumers are often misled by these sweepstakes, contests, and prize promotions. The General Assembly also recognizes that Arkansas consumers have paid hundreds of thousands of dollars to sweepstakes, contests, and prize promoters based upon misrepresentations by those promoters to Arkansas consumers. Many of the sweepstakes, contests, and prize promotions are artfully crafted to lead Arkansas consumers to believe that they have been selected to receive valuable prizes, when such is not the case. The promotions often mislead Arkansas consumers as to the value of the prizes. The promotions often mislead Arkansas consumers as to their chances to receive the prize. The promotions often mislead Arkansas consumers to believe that they must purchase the promoter’s product, or otherwise pay to the promoter sums of money in order to be eligible to receive the prize, or that the likelihood that the prize to be awarded will be increased, or that the consumer’s application for the prize will receive special handling if the consumer purchases the promoter’s product. These sweepstakes, contests, and prize promoters prey particularly upon elderly Arkansas consumers [2.1].

Exemptions

This chapter does not apply to sponsors of prize promotions where all prizes are awarded absolutely for free and there is no opportunity for the payment of money from the person to the sponsor or any agent of the sponsor. The fact that a prize promotion makes provision for entry into the contest or eligibility for the prize without any payment does not exempt the prize promotion or its sponsor from the provisions of this chapter where the prize promotion requires, or creates the reasonable impression of requiring, or allows the person to pay, any money as a condition of receiving, or in conjunction with allowing the person to receive, use, compete for, or obtain a prize or information about a prize. If the prize promotion provides any opportunity for any payment by the person to the sponsor for any reason, regardless of whether such payment is required, and regardless of how such payment is denominated, this exemption shall not apply [2.2].

Conclusion

Contests that involve cash prizes are allowed in Arkansas, but there are certain requirements that must be met, including prize limitations, license requirements, disclosure requirements, and expense limitations. Additionally, the Arkansas General Assembly has enacted regulations to protect consumers from misleading and deceptive prize promotions.

Source(s):
Jurisdiction

Arkansas