What are the Differences between Trade Promotions and Raffles?

Gaming activities such as raffles and trade promotions are popular fundraising tools. However, it’s crucial to understand the differences between them beforehand, as each has distinct legal requirements. 

 

What are Trade Promotions? 

A trade promotion is a free-entry competition conducted by businesses to promote their goods or services. 

 

What sets them apart: 

  • Absolutely free to participate 
  • Focused on promoting select goods or services 
  • Run by legitimate, registered businesses

These promotions come in two exciting varieties: 

  • Games of skill 
  • Games of chance

Example: Company XYZ might run a trade promotion where purchasing any of their juice products makes you eligible for a draw to win a car. The winner is selected at random. Essentially, entry is free, but the business is also promoting their products. 

 

What are Raffles? 

On the other hand, a raffle is a lottery in which participants purchase tickets for a chance to win prizes. Like trade promotions, raffles are also games of chance. However, they are typically conducted for charitable fundraising purposes. To ensure a raffle is legally compliant, specific conditions must be met according to state regulations. 

Example: There is a raffle where you can win a box of chocolates. To enter, you need to buy a ticket for $1.00. The winning ticket is drawn at random, and the holder of that ticket will win the box of chocolates. 

 

Important Differences between Trade Promotions and Raffles

  • Entry Fee

  • Raffles: Typically require entrants to purchase a ticket for entry. 
  • Trade Promotions: Must be free to enter, often requiring a purchase of a product or service to participate. 
  • Purpose

  • Raffles: Commonly used for charitable fundraising purposes. 
  • Trade Promotions: Largely intended to promote a business’s products or services. 
  • Legal Requirements 

  • Raffles: Often subject to stricter regulations and licensing requirements, which can vary significantly by state. 
  • Trade Promotions: Also regulated, but usually under different, often less stringent, guidelines focused on consumer protection and fair-trade practices. 
  • Audience Awareness

  • Raffles: People see raffles as a form of gambling, even if they are for a good cause.
  • Trade Promotions: People view trade promotions as marketing activities designed to increase brand awareness and sales.

  

Key takeaways 

  • Raffles and trade promotions are subject to different laws, which vary by state. 
  • You must obtain different licenses to conduct each type of activity. 

 

 

 

Gladwin Legal are experts in Trade Promotions and have extensive experience in advising businesses. If you require assistance in understanding your legal obligations, please contact us at or 1300 033 934.