Sweepstakes have become a popular marketing tool in Israel in recent years, with prizes ranging from airline tickets to product giveaways on social media. However, many companies launch commercial sweepstakes without realizing that they are legally required to obtain a permit in advance, thereby exposing themselves to unnecessary legal risk.
Israeli Penal Law: Holding a Sweepstakes Is a Criminal Offense
Section 225 of the Penal Law prohibits the holding of sweepstakes. A sweepstakes is any arrangement that enables participants to win cash, a cash equivalent, or another benefit, where winning depends more on chance than on understanding or ability.
Holding a sweepstakes without an appropriate permit is a criminal offense, even where the organizer’s intentions are innocent and the sweepstakes is intended solely to promote its business.
Obtaining a Permit to Hold a Sweepstakes
Section 231(a)(1) of the Penal Law authorizes the Minister of Finance, or a person authorized by the Minister, to issue permits to hold sweepstakes. Pursuant to this authority, the Minister of Finance issued a general permit in 2010 for commercial advertising sweepstakes, subject to a series of conditions, including:
- Submitting a permit application through the Ministry of Finance’s online system and attaching the sweepstakes’ official rules.
- Appointing a lawyer or accountant to supervise the sweepstakes from start to finish.
- Publicizing the sweepstakes’ official rules, which must include all relevant details.
- Ensuring there is no payment or other fee requirement to enter or win.
- Limiting the duration of the sweepstakes to 120 consecutive days, with no more than two sweepstakes held per calendar year.
- Not increasing the price of the product or service shortly before the sweepstakes.
Can Businesses Expect Any Relief? No Progress on Amending the Permit
A draft amendment to the general permit, published for public comment last year, seeks to ease certain requirement for some businesses. For example, it would exempt businesses from some permit conditions where the prize value does not exceed ILS 20,000 and the sweepstakes organizer’s annual turnover does not exceed ILS 25 million.
In addition, the proposed permit offers a dedicated track for NPOs seeking permits to hold raffles that encourage donations. No such track currently exists under the general permit, and NPOs must instead submit a special application to the Ministry of Finance.
However, since the draft was published for public comment, no progress has been made, and there is no clear timetable for its approval. As of today, the original general permit issued in 2010 still sets the rules.
Exemption under the Penal Law: Private Lotteries
In addition to the general permit, the Penal Law recognizes a narrower exemption for casual gaming and games of chance that are purely for amusement and entertainment, are intended for a closed circle of people, and are not held at a venue intended for prohibited gaming.
This exemption mainly covers social or private games and does not apply to most sweepstakes that businesses use as promotional tools. Consequently, businesses are still required to obtain a permit in most cases.
What Should Businesses Check before Publicizing Sweepstakes?
Before launching a marketing sweepstakes, businesses should determine whether it constitutes a “lottery” under the law, whether a permit is required, and whether an existing exemption applies. If a permit is required, they should prepare in advance to comply with its conditions, including appointing a supervisor, preparing official sweepstakes rules, and submitting the application on time.
We often encounter businesses that hold customer sweepstakes without first checking the statutory requirements, only to discover later that they may face criminal charges.
Therefore, before holding a sweepstakes that offers customers a chance to win an airline ticket, a package of products, or any other prize, businesses should take a moment to assess the legal requirements.
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Barnea Jaffa Lande’s Regulation Department helps businesses determine whether a permit is required to hold sweepstakes, advises on the process for obtaining a permit and complying with its conditions, and assesses whether the current statutory exemptions apply.
Adv. Or Levi is an associate in the firm’s Regulation Department.