Every promotion law in the country runs on the same three-part test. A lottery exists when a prize is awarded by chance for consideration. Remove chance and you have a contest of skill. Remove consideration and you have a sweepstakes. Keep all three and you are running an illegal lottery, whatever the flyer calls it. The word that sinks mortgage promotions is consideration, because it means far more than an entry fee.
What counts as consideration
- Money, obviously. But also:
- Requiring a loan application to enter. The application is effort and information of value, and it is the most common way a mortgage giveaway becomes a lottery.
- Requiring attendance, a lengthy survey, or significant time investment.
- Restricting entry to new customers, when becoming a customer is the price of a ticket.
The standard cure is a free alternative method of entry, genuinely equal in odds and genuinely free, stated in the official rules. "Apply to enter, or mail a postcard" only works when the postcard entries really go in the same drawing.
The RESPA layer
Promotions aimed at referral sources carry a second problem. A drawing open only to real estate agents who send business is a thing of value flowing to referral sources, which is RESPA Section 8 territory regardless of how random the drawing is. Referral-source promotions need broad eligibility that does not condition value on referrals.
The state layer
Several states regulate promotions directly. New York and Florida require registration and bonding for prize promotions above statutory value thresholds (N.Y. Gen. Bus. Law 369-e; Fla. Stat. 849.094), and platform rules add their own conditions on top. Official rules, odds disclosures, eligibility, and winner selection need writing down before the first post, sized to the states the promotion actually reaches.
What good practice looks like
- Run the three-part test in writing before launch, and cure with a real free entry.
- Never require an application, a meeting, or new-customer status to enter.
- Publish official rules and keep them with the promotion in the marketing file.
- Check registration thresholds for the states the promotion reaches.
- Keep referral sources out of prize pools, or open the pool wide.
Audit Hound catches giveaway posts across your officers' profiles as they run, so promotions get the three-part test before a regulator applies it for you.
This article is compliance reference material, not legal advice. Rules change and states differ; confirm requirements for your licenses with your compliance advisor or counsel.