Sweepstakes have become a popular marketing tool in Israel in recent years, with prizes ranging from airline tickets to product giveaways on social networks. However, quite a few companies launch such commercial sweepstakes without knowing that they are obligated by law to obtain a permit in advance, and thus, face unnecessary legal risks.
Israeli Penal Law: holding sweepstakes is a criminal offense
Section 225 of the Penal Law prohibits, inter alia, the holding of sweepstakes. A sweepstakes is any arrangement enabling participants to win cash, a cash equivalent or other benefit, when winning depends more on chance than on understanding or ability.
Holding a sweepstakes without an appropriate permit constitutes a criminal offense, even when the sweepstakes organizer’s intention is innocent and its sole purpose is 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 anyone authorized on the minister’s behalf), to issue permits to hold sweepstakes. By virtue of this authority, the Minister of Finance issued a general permit in 2010 for holding commercial advertising sweepstakes, provided that they fulfill a series of conditions, including:
- submission of a permit application to the Ministry of Finance’s online system and attaching the sweepstakes’ official rules;
- oversight, through the appointment of a lawyer or accountant to supervise the sweepstakes from start to finish;
- publicizing the sweepstakes’ official rules, which must contain all details;
- the sweepstakes must not require any payment or other fee to enter or win;
- the duration of the sweepstakes is limited to up to 120 consecutive days, and no more than two sweepstakes may be held per calendar year;
- raising the price of the product or service close to the date of the sweepstakes is prohibited.
Can businesses expect any relief? No progress to date on amending the permit
A draft amendment to the general permit, which was published for public comment last year, is looking to make it easier for some businesses by exempting them from some of the permit’s conditions, such as, when the value of the prize does not exceed ILS 20,000 and the sweepstakes organizer’s turnover does not exceed ILS 25 million per annum.
In addition, the proposed new permit offers a dedicated track for NPOs to obtain a permit to hold raffles encouraging donations, which does not currently exist under the general permit and instead requires a special application process with the Ministry of Finance.
However, since the draft was published for public comments, no progress has been made in this regard and there is no clear timetable for its approval. As of today, the original general permit from 2010 still sets the rules of the game.
Exemption pursuant to the Penal Law: private lotteries
In addition to the general permit, the Penal Law also recognizes a narrower exemption, which applies to casual gaming and games of chance that do not exceed the scope of pure amusement and entertainment and are intended for a closed circle of people, provided that they are not held in 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 a promotional tool. Consequently, in most instances, businesses are still obligated to obtain a permit.
What should businesses check before publicising sweepstakes?
Before launching a marketing sweepstakes, it is important to ascertain in advance whether it is considered a “lottery” pursuant to the law, whether a permit is required, and whether you can rely on one of the existing exemptions. If a permit is required, you need to prepare in advance to comply with its conditions, including appointing a supervisor, preparing the sweepstakes’ official rules and submitting the application on time.
We often encounter businesses that hold sweepstakes for their customers without checking the statutory requirements in advance, only to discover in retrospect that they could face criminal charges.
Therefore, before you hold sweepstakes offering customers a chance to win an airline ticket, a package of products or any other prize, you should take a minute to check the legal situation.
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Barnea Jaffa Lande’s Regulation Department helps businesses and companies ascertain the need for a permit to hold sweepstakes, advises them about the procedures for obtaining a permit and complying with its conditions and whether they can rely on the law’s current exemptions.
Adv. Or Levi is an associate in our firm’s Regulation Department.