Sweepstakes vs Raffles: What's the Difference? Choose the Best Strategy for Your Business

Sweepstakes and raffles are two common contest forms that you can use to promote your business and get some visibility. Both pick winners randomly so they’re considered luck-based contests. Given these similarities, people tend to mix up their meanings and use these terms interchangeably.

Yet, understanding the difference between raffles and sweepstakes will help you achieve the best results while protecting your business from fines or penalties. In this article, we will explore the difference between raffles and sweepstakes software to discuss how to choose the best strategy for your business. 

• Sweepstakes and raffles are effective campaigns for promoting your brand or product and engaging customers. 
• Sweepstakes are legal and are governed by less strict official rules because they’re not considered a form of gambling. 
• Raffles are considered gambling in most states and can only be organized by specific organizations exempted by law. 
• Sweepstakes are effective for business promotions and marketing, especially across state borders because they’re subject to fewer geographic regulatory restrictions. Although raffles are limited and complex to run, they’re effective for creating awareness and raising funds. 

What Is a Raffle?

A raffle is a form of promotion where winners are selected from a pool of participants who have paid a fee or purchased a ticket to enter. Raffles are great for entertainment, but their primary aim is to raise funds from purchased tickets and donation-based entries. Because participants have to pay money for a chance to win prizes, raffles are considered a form of gambling in most states and are governed by stringent regulations. The prize value in a raffle may also depend on the amount of money raised.

How Does It Work?

Raffles are luck-based contests, defined by one key component – participants are required to purchase a ticket to enter. Some raffles also run on donation-based entries. An organization running a raffle would typically announce the raffle through traditional advertising, social media, or email marketing to get as many people as possible to participants. 

To enter a raffle, participants have to purchase a ticket, which would typically contain a set of random numbers. In some cases, entrants will also provide some identifying information such as their name and contact information. A raffle runs for a specific period after which manual drawings happen. 

The process of drawing a winner varies for different raffle contests, but the most important criterion is that it must be completely random. Once the winner has been selected, they’re informed via email, phone, or through a TV announcement. 

Raffles Types

There are different types of raffle draws depending on the type of fundraising campaign you want to run, your goals, and your budget. Here’s an overview of some of the most popular options. 

• Standard raffle: In a standard raffle, tickets are sold for a token and a winner is selected at random through a draw at the end of the raffle period. The selected winner will either get the total amount raised through the raffle or a specific amount announced before the raffle begins. 
• 50/50 raffle: This is practically the same as the standard raffle. The only difference here is that the raffle winner will only get 50% of the funds raised through ticket sales. The other half goes to the non-profit that organized the raffle. 
• Online raffles: As the name suggests, an online fundraising raffle is a type of raffle that takes place virtually. The participants purchase their tickets via an online platform and the winners are announced either via a live draw or through a social media post. 
• Instant win raffle: An instant win raffle gives participants prizes almost immediately after purchasing a ticket instead of waiting for days or weeks for the raffle period to expire. This type of raffle is commonly used at events where a winning ticket is pulled from a jar during the event. 
• Reverse raffle: A reverse raffle refers to how the winner is drawn after the contest. Unlike standard raffles where the first ticket drawn wins, the winner in this kind of raffle is the last ticket to be drawn after the others have been eliminated. 

What Is a Sweepstake?

Before we dive into the differences between sweepstakes and raffles, let’s answer the questions “What are sweepstakes” and “How do they work?”

A sweepstakes is a type of free entry promotion where winners are selected randomly from a pool of all eligible entrants. The no-purchase necessary rule is the defining feature of the free-form sweepstakes contests. This means entrants don’t have to pay any money or make a purchase to qualify for a sweepstakes. 

While sweepstakes may be used to raise money in some jurisdictions, the money contribution is not compulsory and must not have any impact on the outcome of the draw. Such contests must still have a free entry option even if they take donations. Since winners are selected through a random drawing and not based on their skill, a sweepstakes is considered a pure game of chance. This makes all the difference between sweepstakes and other contest types.

How Does It Work?

In recent years, there has been a resurgence in sweepstakes popularity thanks to social media and other online channels. So how exactly does this kind of promotion work? 

Sweepstakes contests are free entry, so they’re open to a large population of people, as long as they meet a specific set of criteria. The organizers of a sweepstakes contest will create the official rules and entry requirements for the contest depending on the goal of the campaign.

Next, the qualifying rules and duration of the contest are announced on social media or through traditional advertising. Qualified people can enter a sweepstakes contest by providing their basic contact details such as their names, email addresses, and other stipulated information. In some cases, participants may be asked to answer a question or complete a simple task (e.g. follow the organizer’s social media channels). 

At the end of the campaign period, winners are randomly selected from the pool of entrants. This can be done using certified random generator software or any other tool. The winner of the sweepstakes contest is announced on social media, or contacted via mail or phone number and invited to claim their prizes. 

Sweepstakes Types

Sweepstakes can be organized in many different ways as long as they meet the basic criteria of free entry and random selection of winners. The format of entry (whether it’s online through SMS or mail) is the main criteria that defines the different types of sweepstakes contests. Here are some of the most common ways to host a sweepstakes.

• Mail-in sweepstakes: With mail-in sweepstakes, participants are required to send in a request to join the contest either by mailing a postcard or an entry form. 
• Online sweepstakes: This is a kind of sweepstakes contest that participants can enter online. It typically involves entering their name and contact information on a sweepstakes software or website. Depending on applicable laws, an online sweepstakes may also take physical entries.
• SMS sweepstakes: SMS sweepstakes is a type of mobile sweepstakes where participants enter by sending a text with a unique keyword to a designated number. Since most people have a mobile phone, this is a very efficient sweepstakes option. 
• Social media sweepstakes: Sweepstakes organizers can use their social media channels to organize sweepstakes. To enter such contests, participants have to like, share, or comment on a social media post. 
• Multi-level sweepstakes: A multi-level sweepstakes adds a twist to traditional sweepstakes including an extra layer of entry requirements. This may involve completing a task like referring friends, sharing a post, and so on to confirm their entry or get more entries. 

Comparison of Sweepstakes and Raffles: Decision-Making

Sweepstakes and raffles share a few similarities. At their core, both promotions are chance-based, which means winners are selected randomly through a draw. This makes them different from traditional contests that require participants to compete based on their skills. You can learn more about this difference by reading up a sweepstakes vs contest comparison. 

Despite the similarities between sweepstakes and raffles, these two campaigns also have several differences. Understanding them will help you choose the right one and also protect your brand from infringing the law. 

Entry Process and Winner Selection

The core difference between sweepstakes and raffles is the entry process for each of them. Sweepstakes allow organizers to reach a vast audience due to their no-purchase required criteria. 

This rule allows anyone to participate in a sweepstake campaign as long as they meet the eligibility requirement stipulated by the organizer. Sweepstakes organizers are also required to provide an Alternative Method of Entry (AMOE) for participants, providing access to even more people.

Sweepstakes have lessened geographical restrictions to entry. Since it is legal in most US states, anyone can participate regardless of where they live.

With raffles, the only way to enter is to purchase a ticket or make a donation. This requirement means fewer people participate in a raffle compared to sweepstakes even when tickets are sold nationally. Consequently, a raffle is an efficient way to raise funds for charity and other purposes. 

In most raffles, participants can purchase multiple tickets or make more donations to get multiple entries instead of a single entry. So while winners are selected randomly by organizations conducting raffles, the amount of money spent on a raffle can increase a participant’s chances of getting picked in a raffle draw. With sweepstakes, everyone has an equal chance of winning (even in situations where participants make a donation). 

Legal Considerations

The no-purchase required criteria also change the legal status of sweepstakes. Since it isn’t possible to gamble for free, sweepstakes is considered legal in most of the United States. While sweepstakes legislation varies from state to state, they’re generally favorable. So is sweepstakes legit? The answer to that is an emphatic yes.

Raffles enjoy less legal latitude compared to sweepstakes. According to federal laws, a raffle is considered a form of gambling since participants make a donation for a chance to win, just like they do in a real money casino. As a result, the law either prohibits raffles entirely or sets stringent exception criteria that organizers must meet to run this kind of campaign. 

At the federal level, only charitable organizations are allowed to organize raffles. Raffles are typically subject to state gambling laws and regulations as well. These laws may require specific licenses, permits, and tax registrations for organizations to conduct raffles. The local laws will determine the method of entry and default official rules of your raffle. This is particularly important for an interstate raffle contest.

Operational Guidelines

Sweepstakes and raffles share some similarities in terms of their operational guidelines. Organizers are required to disclose the eligibility criteria, methods of selecting winners, and any other requirements from the start of the campaign. However, there are certain official rules that apply to each campaign type. 

For instance, Alternative Method of Entry (AMOE) Laws apply to charity sweepstakes which means organizers have to make their contest accessible to everyone by providing alternative methods of entry. 

Depending on the value of the top prize in the promotion, some states require organizers to register and secure a surety bond before launching the campaign. In New York, for instance, the surety bond is 2% of the prize value for any campaign where the price exceeds $5,000. Some states may also prohibit certain types of promotion unless you add extra legal disclaimers in the sweepstakes rules. 

Raffles are even more heavily regulated compared to sweepstakes so they have stricter operational guidelines. Organizers have to get specific licenses, permits, and tax registrations before launching a campaign in line with local raffle laws. Again, the law governing raffles varies for different states, so always do your research to determine the operational guidelines beforehand. 

Whether you’re organizing a sweepstakes or a raffle for charitable purposes, you should seek legal counsel. This way, you are aware of all the legal requirements so you don’t end up running an illegal gambling activity.

Purpose And Use Cases

Raffles and sweepstakes serve various important purposes. Both methods of promotion can be used to promote a brand, product, or service. They offer giveaways for participants, generating buzz and excitement, with the potential to attract new customers.  

Sweepstakes are primarily used for marketing and brand awareness. Since they’re free, many people get to participate, with an equal chance of winning for everyone. Businesses can also use sweepstakes to collect data by asking participants to provide their contact information and fill out a form to answer some questions. It is an effective way to build and grow customer databases while engaging them. Check out the best sweepstakes examples in our dedicated article. 

Raffles provide a way to raise money, especially for nonprofit organizations looking. By selling tickets or requesting donations, you can raise funds for a good cause while also creating awareness. It’s also an effective way to engage with your target audience by getting them to perform specific tasks related to the goals of your campaign. 

Charity sweepstakes can be used to raise funds as well. But a sweepstakes fundraiser must be organized carefully to avoid breaking any laws. For instance, donations in a charity sweepstakes must not influence the chances of winning prices.

Sweepstakes vs Raffles: Which One to Choose for Your Business?

Sweepstakes campaigns are generally considered legal across the United States, but they are subject to varying regulations depending on the state. While most states have relatively favorable rules that make sweepstakes easier to organize, some, like Florida and New York, require registration and bonding for campaigns offering high-value prizes.

On the other hand, raffles are governed by stricter regulations and are often limited to nonprofit organizations. In some states, such as Alabama, Hawaii, and Utah, raffles are prohibited altogether, making them more complex and restricted compared to sweepstakes. Organizers should always review federal and state-specific laws to ensure compliance when planning either sweepstakes or raffles.

Your choice between both options ultimately comes down to the purpose of your campaign. If the goal is to promote your business or product throughout the country, then a sweepstakes campaign may be suitable for you. Raffles can be used for promotions as well but also provide a way to raise funds, especially for charity purposes. However, you’ll need to have a clear understanding of the governing laws for raffles in your location. 

With either option, you may need to work with a software development partner to set up your sweepstakes software or online raffle platform. You can get the most out of your campaign by working with a company with iGaming experience like CrustLab. Contact us to learn more about how to create an immersive and compliant solution for your business.