Real prizes are free, the FTC says, so any request for fees or taxes is a scam

The first sign of a prize scam, in the Federal Trade Commission’s words, is a request for money: a “tax,” a shipping charge, a processing fee or customs duty that supposedly must be paid before a prize arrives. The agency’s consumer-advice rule is blunt, and it explains why the fee request is the tell. Real prizes are free, so a payment demand converts the offer into the theft itself.

The page, published May 5, 2021 and updated most recently in December 2025, lays out three signs and a list of scammer tactics that reach households by phone, text, email, social media and the mailbox.

The three signs in the FTC’s prize-scam rule

Under the FTC’s page on fake prize, sweepstakes and lottery scams, the first sign is any payment to receive a prize. The second is a payment to improve the odds of winning, which the agency says is illegal because real sweepstakes are free and decided by chance. The third is a request for bank account, credit card or Social Security numbers to claim a prize.

The page also lists tactics that signal trouble: posing as a government body or a well-known name, including a made-up “National Sweepstakes Bureau” or the FTC itself; claiming the recipient is the only winner when the same message went to many people; offering foreign lottery tickets, which U.S. citizens may not play; and attaching “act now” deadlines. Links in texts, emails and social media messages may install malware, the FTC adds.

A mailer that charged $20 to $30 for a prize that did not exist

The fee pattern is not new. In September 2013 the agency announced a complaint against a California operation it alleged had mailed more than 3.7 million personalized letters over two years promising cash prizes, typically over $2 million, if recipients sent a fee of about $20 to $30. Contradicting fine print on the back said recipients had not actually won, according to the FTC.

The complaint, which the Commission authorized by a 4-0 vote, alleged more than $11 million had been collected from consumers since 2009 and that the vast majority of victims appeared to be over 65. A federal court temporarily halted the conduct, froze assets and appointed a receiver. Those were allegations in a lawsuit and the release says the case would be decided by the court. The small size of each payment is the point: a $25 fee feels like a small price against a seven-figure prize, and it repeats across millions of letters.

The FTC’s archive of lottery and sweepstakes actions shows the same script across decades. A 2007 case ended with a sweepstakes operation that had consumers send money to win prizes agreeing to pay almost $1.4 million, and a 2009 case halted a scheme that paired counterfeit cashier’s checks with promises of large winnings. The vocabulary has moved from stamped envelopes to texts and payment apps, but the demand is the same: money first, prize later.

Payment methods that are hard to trace and fake checks

The FTC singles out the ways scammers prefer to be paid. The prize page lists wire transfers such as Western Union and MoneyGram, payment apps such as Apple Pay, Cash App, PayPal and Zelle, and cash, gift cards and cryptocurrency, describing them as hard to trace and hard to recover. In the agency’s 2024 fraud data, losses to scams paid by bank transfer or cryptocurrency exceeded losses from all other payment methods combined, though the release does not break out prize scams.

A second variant sends a check. The FTC’s fake-check guidance says banks must make deposited funds available quickly, but that does not confirm the check is good, and the agency warns that funds showing in an account do not mean the check is real. Banks can take weeks to detect a fake, and when the fake is discovered, the depositor may owe the bank the money already sent out. The agency advises ignoring offers that ask for payment to receive a prize and never sending money from a check by gift card, money order, cryptocurrency or wire transfer.

What a genuine contest looks like is also spelled out. Entry is free and winning is by chance, though promoters may sell entrants’ information to advertisers. Promoters must disclose that entry is free, the prizes and their value, the odds and how to redeem a prize, and sweepstakes mailings must state that no payment is required. Any enclosed check must say it is non-negotiable and has no cash value.

The FTC says anyone who has paid a scammer should act as soon as possible, because the sooner the better for any chance of recovery. Reports go to ReportFraud.ftc.gov, the state attorney general, the U.S. Postal Inspection Service if the offer came by mail, and IdentityTheft.gov if personal information was used.

This article was produced with the assistance of AI and reviewed by Morning Overview editors prior to publication.

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