IBA Compliance Connection

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We are sponsoring a contest where students will create a product or service that will be judged. The top three finishers will receive cash prizes in different amounts. Because the event is not a networking event, would the Illinois Prizes and Gifts Act apply?

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admin

No, we do not believe that the Prizes and Gifts Act would apply to the prizes you have described, assuming that the awarding of the prizes would not involve an element of chance.

The Prizes and Gifts Act 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.” Consequently, if the contest is judged entirely based on merit and no element of chance is involved in awarding the prizes, we do not believe the Prizes and Gifts Act would apply. Similarly, the contest would not qualify as a “lottery” under the Illinois Criminal Code, nor would it qualify as a prize offer requiring disclosures under the Illinois Consumer Fraud and Deceptive Business Practices Act.

For resources related to our guidance, please see:

  • 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 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. . . .”)
  • 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.”)