No, we are not aware of any rules you must follow when holding a coloring contest, provided there is no cost to enter, you do not award prizes based on chance, and the prizes are not valued at $600 or more.
The Illinois Criminal Code prohibits lotteries, which the Illinois Supreme Court has held consists of three elements: (1) chance, (2) consideration, and (3) a prize. The Criminal Code also exempts “games of skill or chance where money or other things of value can be won but no payment or purchase is required to participate.” Consequently, we do not believe a coloring contest would be considered an illegal lottery if there is no cost to participate.
The Illinois Prizes and Gifts Act requires certain disclosures to be made when making written promotional offers. This law defines “prize” as “a gift, award, or other item or service of value that is offered or awarded to a participant in a real or purported contest, competition, sweepstakes, scheme, plan, or other selection process that involves an element of chance.” As such, if the coloring contest is judged on merit and no element of chance is involved in the awarding of any prizes, we do not believe this law would apply.
The Illinois Consumer Fraud and Deceptive Business Practices Act requires businesses offering free prizes, gifts, or gratuities to promote or advertise the business to clearly and conspicuously disclose all material terms and conditions relating to the offer at the outset of the offer. We do not believe this law would apply to a coloring contest if any prizes awarded are based on merit and not offered to all participants. However, we note that if any prizes awarded are valued at $600 or more, you must issue an IRS Form 1099-MISC to the winners.
Additionally, we note that the IBA has published an article on planning bank giveaways and prize offerings, which is linked in the resources below.
For resources related to our guidance, please see:
- Illinois Criminal Code, 720 ILCS 5/28-2(b) (“A ‘lottery’ is any scheme or procedure whereby one or more prizes are distributed by chance among persons who have paid or promised consideration for a chance to win such prizes, whether such scheme or procedure is called a lottery, raffle, gift, sale, or some other name, excluding savings promotion raffles. . . .”)
- People v. Eagle Food Centers, Inc., 31 Ill. 2d 535, 538 (1964) (“[T]here are three elements essential to the existence of a lottery, viz., chance, consideration and a prize; and . . . there is no lottery if any one of these elements or ingredients is missing.”)
- Illinois Criminal Code, 720 ILCS 5/28-1(b)(13) (“Participants in any of the following activities shall not be convicted of gambling: . . . Games of skill or chance where money or other things of value can be won but no payment or purchase is required to participate.”)
- Prizes and Gifts Act, 815 ILCS 525/25 (“A written promotional prize offer must contain each of the following in a clear and conspicuous statement at the onset of the offer: . . .”)
- Illinois Prizes and Gifts Act, 815 ILCS 525/10 (“‘Prize’ means a gift, award, or other item or service of value that is offered or awarded to a participant in a real or purported contest, competition, sweepstakes, scheme, plan, or other selection process that involves an element of chance.”)
- Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2P (“Offers of free prizes, gifts, or gratuities; disclosure of conditions. It is an unlawful practice for any person to promote or advertise any business . . . by means of offering free prizes, gifts, or gratuities to any consumer, unless all material terms and conditions relating to the offer are clearly and conspicuously disclosed at the outset of the offer so as to leave no reasonable probability that the offering might be misunderstood.”)
- IRS Webpage, Form 1099-MISC (“File Form 1099-MISC for each person to whom you have paid during the year: . . . at least $600 in: . . . prizes and awards; . . .”)