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Sweepstakes vs Lottery vs Raffle

Three kinds of prize draw, three sets of rules. Learn how prize, chance and consideration separate them, and how to find the free entry in a sweepstakes.

By Daniel Whitfield, Editor · Updated November 2, 2026

Dream homes, luxury cars and cash prizes are advertised everywhere, and they do not all work the same way. Whether a giveaway is a sweepstakes, a lottery or a raffle decides whether you can enter for free, who may run it and how protected you are. The difference comes down to three legal elements.

Prize, chance and consideration

A lottery has three elements: a prize, chance, and consideration. Consideration means you pay something to enter. Take away any one element and you no longer have a lottery.

A game of skill has no chance element. A free prize draw has no consideration. That second one is the basis of a sweepstakes.

A private company generally cannot run a lottery, so a sweepstakes removes consideration. It does this by offering a free way to enter, called an alternative method of entry, or AMOE. You will see it written into the official rules as “no purchase necessary.” A legitimate sweepstakes treats paid and free entrants the same way for the drawing.

State lotteries are the main legal exception for paid chances. Charities are the other, which brings us to raffles.

Charity raffles

States license nonprofits to sell paid tickets under raffle laws. A charity raffle is a lottery with a license, so it does not need a free entry. St. Jude Dream Home Giveaway is an example. Tickets cost $100, entrants must be 18 or older (or the age of majority) and US residents, and the odds depend on tickets sold. St. Jude states no free-entry method, because it is a licensed charity raffle, not a sweepstakes. Online reservations are not available in California.

Winners of large prizes also face tax. St. Jude says taxes on prizes above $5,000 must be paid before delivery.

Real sweepstakes examples

Rules show the differences clearly.

  • HGTV Dream Home 2026: no purchase necessary, open to legal residents of the 50 states and DC who are 21 or older. You can enter once per day on HGTV.com. The winner pays taxes on the home’s approximate retail value.
  • Publishers Clearing House: 21 or older, US residents, and its official rules say no purchase is necessary and a purchase does not improve your chances. The company also sells paid entry packs and memberships, which is why the FTC acted in 2023.
  • Dream Giveaway: states that no purchase, contribution, donation or payment is necessary. The free route is by mailing a self-addressed stamped envelope. Entrants must be 18 or older.

In the PCH case, the FTC announced on 27 June 2023 that PCH agreed to pay $18.5 million over alleged design tricks that implied a purchase was needed or improved odds. See our sweepstakes page for the reviews, and the PCH review for details.

The find-the-free-entry-in-a-minute test

Open the official rules and look for the words “no purchase necessary” or “alternative method of entry.” If you cannot find the free route in about a minute, treat that as a warning sign.

A trustworthy giveaway puts the free entry in plain language. It also tells you the sponsor, the age limit, the prize value and the odds. A page that hides the free method behind a long block of text, or makes it harder than the paid path, is a reason to walk away.

What this means for odds and taxes

Paid entries in a real sweepstakes should not improve your odds, and the rules should say so. Charity raffles are different, since your chances depend on how many tickets are sold.

Prizes are taxable income either way. Read the rules for who pays what, as Dream Giveaway does when it says it covers part of the federal prize tax on a car. Our taxes guide explains how prize income is treated.

When it is not a sweepstakes at all

If the page asks you to pay to collect a prize you did not enter for, it is not a sweepstakes. It is a scam. We cover how to recognise one in how to spot a lottery scam. For official lotteries, start with our state lotteries and scratch-offs pages.

One last point on paid extras. Some sweepstakes sell upgrades, such as bundles of extra entries or memberships with multiplied entries. These are legal only when the free route remains genuinely available, and the rules should state that paying does not improve your chance of winning. If a promotion implies the opposite, it conflicts with the legal basis on which sweepstakes operate. Read the rules, not the banner, before you pay for anything.

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