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

Based on the documents provided, it is legal to offer contests that involve cash prizes in Rhode Island. However, there are certain requirements that must be met.

Requirements for Offering Contests with Cash Prizes in Rhode Island

  1. Taxation: Prizes received pursuant to Rhode Island lottery laws are subject to personal income tax laws [2.1][3.1][3.2]. Therefore, winners of cash prizes must report their winnings as income on their tax returns.
  2. Withholding: Winnings and prizes received from the Rhode Island Lottery and from pari-mutuel betting licensees in Rhode Island are subject to withholding provisions similar to 26 C.F.R. § 31.3402(q)-1 (2018) [3.2]. Therefore, the entity offering the contest must withhold taxes on the winnings and report them to the appropriate authorities.
  3. Prohibited Persons: No lottery prize award shall be awarded to or for any officer or employee of the state lottery division, or any blood relative of that officer or employee living as a member of that officer or employee’s household [1.2].
  4. Payment to Minors and Persons under Legal Disabilities: If the person entitled to a prize or any winning ticket is under the age of eighteen (18) years, the director shall direct payment to the minor by depositing the amount of the prize in any financial institution to the credit of a member of the minor’s family or legal guardian of the minor as custodian for that minor. The person named as custodian shall have the same duties and powers as a person designated as a custodian in a manner prescribed by the “Rhode Island Uniform Gifts to Minors Act”. If a person entitled to a prize or any winning ticket is under any other legal disability, the director shall direct payment to a fiduciary responsible for that person pursuant to the laws of this state [1.3].

Conclusion

In summary, it is legal to offer contests with cash prizes in Rhode Island, but the entity offering the contest must comply with the taxation and withholding requirements, and must not award prizes to prohibited persons. Additionally, if the winner is a minor or under any other legal disability, the prize must be paid to a custodian or fiduciary.

Source(s):
Jurisdiction

Rhode Island