Game of Chance bonds are necessary in the states of Florida and New York for the benefit of the states’ contestants participating in a sweepstakes or contest run by a private entity. The bonds guarantee the company’s contest will honor their rules and regulations, including the eventual awarding of prizes to the entitled winners.
The bond amount typically equals the monetary value of the grand prize. Therefore, if the prize is cash, the bond amount usually equals the cash amount. However, if the prize is an item, such as a computer or a car, or a vacation getaway, the bond penalty will equal the cash value of the grand prize.
Game of Chance bonds typically do not renew because most contests last no longer than a year. Contests lasting longer than a year require more thorough underwriting because as an obligation’s duration increases, so does the surety’s risk as more problems may arise and oversight relaxes.
To issue these bonds, underwriters request to see the contest rules and examine them for any unusual provisions. Most contest rules and regulations specify eligible contestants, how to enter, the prizes, how they award the prizes, and the contest’s duration.
If a large, publicly traded corporation requests game of chance bonds, most underwriters will issue the bonds freely. However, underwriters will apply extra scrutiny to contests held by lesser known companies or individuals. The surety must ensure the entity hosting the contest has the capability to pay and award the prizes as specified in the rules and regulations.
Premiums for these bonds equal a small percentage of the bond penalty depending on the riskiness of the obligation.
Attorneys usually contact us for most of the bonds we issue. However, marketers and advertisers contact our office for Game of Chance bonds because they usually handle contests and sweepstakes for their clients.
New York and Florida state provide the necessary bond forms. The contestants must file the bonds with the specific department or agency regulating the gaming or consumer industry.