Metaverse-ing Your Sweepstakes?
Sweepstakes and other promotional devices, such as contests and giveaways, are already immensely popular in social media. With the growing popularity of the metaverse, many brands are expanding their advertising and marketing footprint to get in on the trend, and a sweepstakes in the metaverse is one prime example. While many brands already execute sweepstakes (in a compliant and not-so compliant fashion) in social media, it is important for brands to note that the same general legal considerations applicable to sweepstakes, whether conducted in a brick-and-mortar location or on social media, also apply to sweepstakes conducted in the metaverse. Indeed, the metaverse adds a layer of complexity to these legal considerations.
Free Alternative Method of Entry
Sweepstakes must offer a free alternative method of entry (AMOE) if consideration (for instance, the requirement to make a purchase) is required to enter the sweepstakes. While the concept of the AMOE has evolved over the years with the use of social media, it has always been important for brands to consider whether their sweepstakes truly have an AMOE. Historically, AMOEs have included postcard and toll-free numbers entries. The postcard and internet landing page entry form methods are the most common method of AMOEs today. A current trend among brands hosting "Like and Tag" sweepstakes in social media is to do away with the AMOE.
Whether this is advisable is a topic of debate beyond the scope of this post. With that said, when hosting a sweepstakes in the metaverse, brands must still consider whether their promotion has an AMOE. Brands also must give specific consideration to the material components of the metaverse sweepstakes – such as whether the brand is requiring the purchase of a digital item or giving away digital items (such as NFTs, digital avatars or digital apparel), which may require a social media or metaverse-related platform account or digital wallet, which will impact the free analysis of your AMOE if fees or other consideration are required to obtain, participate in or receive any prize. This analysis is extremely important, as brands want to avoid a situation where a regulator deems the sweepstakes to be an illegal lottery.
While the metaverse (as with traditional social media) allows brands to connect with consumers around the world, it is important for brands to consider the eligibility requirements of their potential sweepstakes. In addition to age restrictions and registration requirements that may be imposed depending on the location of your participants (and the value of the prize to be awarded), it is important to note that sweepstakes may not be lawful in countries outside of the U.S. or, if lawful, come with material restrictions – such as the elimination of chance or the requirement that some form of skill be involved in determining the outcome or accepting a prize. Failing to consider these issues comes with immense regulatory, financial and reputational risks. Brands are advised to consult local counsel (in addition to counsel in the U.S.) when conducting a sweepstakes that permits participants outside the U.S. to enter.
Disclosure of Material Information
In addition to considering the structure of the sweepstakes, brands must also consider how to disclose material information relating to the sweepstakes (such as the free form of entry and eligibility requirements). This is extremely important, as a common trend among brands today is forgo the preparation of a formal set of "official rules" to govern the promotion. As with the advisability of offering an AMOE for a "Like and Tag" sweepstakes, whether having an formal set of official rules is advisable is a broader topic of debate. Nonetheless, the functionality and structure of the many virtual worlds that make up the metaverse add a layer of nuance to "how" you should disclose material information in the metaverse relating to the sweepstakes and/or "how" you should direct consumers to non-metaverse spaces to obtain the official rules. This nuance presents issues as regulators may conclude that the material disclosures were inadequate to put consumers on notice.
While sweepstakes are commonplace in social media and likely to become commonplace in the metaverse, these promotions present unique legal risk considerations. The topics noted above are only the tip of the iceberg. These legal risk considerations are amplified when the sweepstakes are conducted in the metaverse or in connection with many of the new and contemplated technologies associates with the metaverse. Brands must implement policies and procedures relating to such promotions to minimize risk. And, finally, while brands may have sufficient policies and procedures, it is always important for brands to partner with counsel (both internal and external) to prevent the many avoidable mishaps associated with running sweepstakes. This is particularly important as regulatory agencies, the courts and others begin to implement new rules or interpret existing rules to apply to the metaverse.