NFT contests and NFT lotteries: what businesses need to know – Technology

United States: NFT contests and NFT lotteries: what businesses need to know

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NFTs (short for non-fungible tokens) represent a rapidly growing industry in the online space. Evidence of this trend, NFT sales topped $ 2 billion in the first quarter of 2021 alone. In an effort to attract consumers to this increasingly competitive environment, NFT vendors frequently turn to contests. Promotional NFT as a Marketing Tool.

However, legal issues frequently arise when contests are added to the mix. For example, sellers of NFT may authorize participation in contests through the purchase of NFT. But unless some other free means of entry (“AMOE”) is also provided, it is likely that these contests violate applicable state lottery laws. Violating any of these laws has serious regulatory repercussions. In view of the risks, it is essential that NFT providers who wish to run NFT contests retain attorneys who have experience with the laws applicable to both NFT and raffle promotions to assist them.

What legal issues apply to NFT contests?

FYI, NFTs are unique, often one-of-a-kind digital files (usually images or short videos) that use blockchain technology to establish verified proof of ownership. The NFT market has grown exponentially since 2015 when the first NFT business transaction was completed.

Below are some key legal considerations to take into account when designing an NFT competition (which is by no means an exhaustive list):

  • Where an NFT contest allows consumers to gain entry through the purchase of an NFT (or other consideration), an AMOE must be offered. In addition, participants who use the free AMOE method must have the exact same opportunity, with exactly the same odds, of winning all available NFT prizes.
  • Where an NFT Prize Draw requires entrants to have an existing account with the Contest Sponsor, the Contest Sponsor must provide clear instructions in the Contest Rules on how to obtain such an account.
  • Where receipt of an NFT prize requires the winner of the prize in question to have an account linked to the blockchain (such as an account at, the sponsor of the NFT promotion must provide clear instructions in the contest rules on how to get such an account.
  • Clear and concise information must be included in the contest rules, as well as in all applicable marketing material. These disclosures must make it clear that no purchase of an TVN is necessary to enter the Contest and that a purchase will not increase the odds of winning.

Lawyers familiar with the NFT competition law can help you comply with applicable legal requirements

It is extremely difficult to consider all of the criteria associated with sponsoring an NFT competition that conforms to the ever-changing framework of local, state, and federal laws. In addition, significant legal and regulatory liability may arise if an NFT Contest Sponsor does not take the necessary steps to ensure that its promotional contest complies with such laws and regulations. As such, it is advisable to obtain advice from attorneys experienced in the laws applicable to both NFTs and promotional contests before proceeding with any NFT-related promotion or raffle. Please note that the above offers only a brief overview of some of the legal issues involved in operating an NFT Compliant Contest.

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The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


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