Archive for February, 2012

Sweepstakes SCAMS

Friday, February 17th, 2012

The phrase “buying a pig in a poke” is a common English expression meaning that something is sold or bought without the buyer knowing its true nature or value, especially when buying without inspecting the item beforehand. (Wikipedia)

The expression is a perfect description of the experience many newcomers face upon entering the complex world of sweepstakes promotions. Hundreds of would-be entrepreneurs enter the market bright-eyed and bushy-tailed, with a wallet full of cash and delusions of grandeur. Like Dorothy in Oz, these unfortunate, trusting souls are quickly “educated” by a university of fast-talking used-car salesmen peddling hope.

In this article we will point out the FOUR most common traps to which newcomers in the Sweepstakes industry fall prey. We will explain in simple terms how to recognize these pitfalls, how to avoid them, and how to dramatically increase your odds of launching a successful business.

Let’s get started.

Here’s a quick “cheat sheet” – with more details below.

1. Understand the basic definition of a sweepstakes promotion.
2. Sweepstakes entries have no cash value until revealed.
3. Sweepstakes must offer a free method of entry and a way to instantly revel entries.
4. Trust your instincts!

1. A sweepstakes requires NO CONSIDERATION. This is a kindergarten-level, basic sweepstakes definition. The fact that we even have to mention this is a sad testament to the scams we have seen on the market. Simply put, one CANNOT purchase a sweepstakes entry. Purchasing a sweepstakes entry is, in fact, a contradiction in terms. The common name for the kind of sweepstakes that allow you to “purchase entries” is GAMBLING!

Just as McDonalds sells hamburgers and gives away a FREE sweepstakes entry with the purchase, ALL sweepstakes must sell a legitimate PRODUCT (not sweepstakes entries), and then GIVE the sweepstakes entry away for FREE.

Some systems that claim to be sweepstakes machines accept money and then award sweepstakes entries–but no product. A few common names for these systems include: Poker Machines, Eight-Liners, Cherry Masters, and Pot of Gold machines. In nearly every jurisdiction these systems have been ruled to be illegal gambling (even if they are misrepresented as a “Sweepstakes”).

Recently one of our distributors called and explained that he tried out a competing “sweepstakes” (note the quotes) company. Upon giving the cashier $10, he was handed a receipt. At the bottom of the receipt the following was printed: YOU HAVE PURCHASED $10 IN SWEEPSTAKES ENTRIES. Wow!! It is inconceivable that a company that manufactures a “sweepstakes” product could possibly be so ignorant as to actually PRINT this on the receipt.

Another major sweepstakes parlor software company sent out an announcement to all of its operators today (I received a copy of it). This was discussing the way their jackpot works. It reads “A cost of 2 cents per spin is added for the Community Jackpot. For example, if a player is playing at the 25 cents level it will cost them 27 cents per spin…” WHAT!? It costs them 25 cents per spin!? Wow!! Once again, we have a clear and blatant misunderstanding of the difference between sweepstakes and GAMBLING. If you PAY for a spin, it’s a SLOT MACHINE.

We predict that anyone who has anything to do with such software, from developers to distributors, to business owners and operators will soon find themselves facing heavy prosecution for illegal gambling. And they will lose.

2. Sweepstakes entries HAVE NO VALUE until they are revealed.

When you purchase a cheeseburger at McDonalds you are given a free sweepstakes entry. Common sense dictates that it would be ludicrous to ask to redeem that entry without first revealing whether or not it is a winner. What is the legal value of a sweepstakes entry that has not been revealed? ZERO. Legally that entry MUST NOT have a value and CANNOT, therefore, be redeemed or purchased back by the company that gave it away for free.

How does this translate into an electronic promotional sweepstakes “revealer” game? When you receive entries for purchasing a product, those entries must be designated ENTRIES. These unrevealed entries CANNOT legally be “redeemed” or “cashed out” for money. Any system that allows this is breaking the law–it is GAMBLING.

Once these entries have been revealed, they will have a value. This value must be displayed in a SEPARATE location, which is usually labeled “WINNINGS”. Thus, any legitimate electronic sweepstakes promotion MUST display TWO SEPARATE FIELDS–one for ENTRIES and one for WINNINGS. If only one field is displayed from within the live game, it is unmistakably GAMBLING.

(Note: our DEMO games grant unlimited free entries and have no winnings. Thus, the demo only has a FREE GAME column. Our LIVE games have both required columns–ENTRIES and WINNINGS as shown in the image above.)

3. Sweepstakes must have a FREE method of entry and should have a way to INSTANTLY REVEAL the results. Notice on the McDonalds Monopoly game the “NO PURCHASE NECESSARY” disclaimer. This is not a joke–omitting this rule can completely invalidate the sweepstakes and make it illegal. Ideally, this method should be easy to understand and easy to use. Mailing in an entry form is probably okay–but is not the best solution.

Our Totem units accept coupons, which can be handed out by the business owner. These coupons are exactly the same size as US currency and, for all intents and purposes, act like a $1 bill. This free coupon (no purchase necessary) gives the customer 1 free “credit” (or 100 sweepstakes entries). These coupons can also be used in conjunction with other product sales. For example, a bar owner may run a promotion “buy a burger and fries and get 3 free coupons for sweepstakes”.

Another test of a true sweepstakes is the ability to instantly reveal all sweepstakes entries. Upon playing the live game, you should find an option to reveal all sweepstakes entries instantly without using the entertaining reveal option. Slot machines make you spin the wheels. Sweepstakes give you the option to reveal your entries immediately.

4. At last, we will close with perhaps the most important rule to avoid being swindled by the bottom-feeders in the industry. TRUST YOUR INSTINCTS!

If it feels fishy–it probably is! Use common sense. Pay attention. Don’t be afraid to call a few different companies or to do additional homework. A sweepstakes company that believes in its product will only make money if YOU make money. It will not demand that you buy expensive hardware from the company or “proprietary” technology up front. It will not propose “flat monthly fees”, which require you to pay on an ongoing basis whether or not you make any money. Flat fees in the sweepstakes industry are a sure sign of a scam. (They may sound good on paper–until you don’t make much money and end up paying an exorbitant bill while keeping very little money for yourself)

Don’t take legal advice from anyone who is not an attorney. Many salesmen who have no clue about law (much less sweepstakes law) will happily preach to you about why it’s legal in your city–all in an effort to persuade you to write them a check. These are probably the same “experts” who print “you have purchased $10 in sweepstakes entries” at the bottom of their receipt!

Any legitimate company will answer its phones, return calls promptly, has a professional recording or answering service if nobody is in the office, has a website that displays its games and its pricing, and won’t send you email messages from aol, gmail, hotmail, or other “free” email accounts, but from the actual business (such as “sweepscoach.com”). On a related note, examine the URL of the company. Does it appear that the company is trying to misrepresent itself? Many are. Be careful. Is it a free, “make your own website” hosting site–this screams of unprofessionalism. Don’t fall for it.

NEVER pay cash for sweepstakes equipment. NEVER pay with Western Union (this is as much of a “red flag” as an email from someone in Nigeria claiming they need your help to get money into the US)

If there are no pictures of the games on the site–the company isn’t legitimate; real sweepstakes companies have real games. If you can’t play the games on the company site, the games are not web-based (regardless of any excuses or song and dance given to you by the salesmen). If the demo of the games displays the brand of a company other than the one contacting you, the salesman is a “middle man” (especially if the salesman has an email address that’s not the same as the brand displayed on the games). Wisdom dictates that you contact the legitimate company to verify that the person selling you the system is an authorized distributor of their games.

Most of these warnings, one would think, are common sense. But you would be surprised at how many people get duped. This industry is just a hop-skip-and a jump away from gambling. Unfortunately, it sometimes attracts a few unsavory characters. Don’t let them fool you.

In conclusion; be alert! Take the time to learn about the business. Pay attention. Shop around. Understand the industry before you make a purchase. We hate getting calls from people who have been taken advantage of by sleazy salesmen and, unfortunately, it happens far too often. And whatever you do… don’t buy “a pig in a poke”!