The call comes out of nowhere: you have won a lottery, a sweepstakes, or a prize drawing. Maybe it is $2 million, maybe a new car, maybe a “government grant” you were selected for. There is just one small catch — you need to pay a fee, tax, or processing charge before the prize can be released. That fee is the entire scam. There is no prize, and the money you send is gone for good.
This is one of the oldest frauds in existence, known as advance-fee fraud: you are promised something valuable, then asked to pay upfront to receive it. The Federal Trade Commission puts the rule in one sentence — if you have to pay to collect your winnings, you have not won anything. Legitimate sweepstakes never require winners to pay insurance, taxes, shipping, or processing fees to claim a prize.
These scams cost Americans dearly. Lottery, sweepstakes, and inheritance frauds drew more than $100 million in reported losses in 2024 alone, according to the FBI, and prizes and sweepstakes have ranked among the most-reported fraud categories to the FTC for years. Older adults report these scams at especially high rates, and the FBI’s Internet Crime Complaint Center receives thousands of lottery and sweepstakes complaints every year. Because the fraud plays on excitement and embarrassment keeps many victims quiet, the true losses are certainly much higher.
How a Lottery or Sweepstakes Scam Actually Works
Every version follows the same script, dressed up with different brand names:
Step 1: The surprise notification. You get a call, text, email, letter, or social media message saying you won. Common disguises include a foreign lottery you never entered, a sweepstakes from a company whose name you recognize, a prize drawing tied to a purchase, a government grant you were “selected” for, or a “second chance” win on a contest you may have entered years ago. Scammers also impersonate government agencies — the FTC warns that callers pretending to be from the FTC itself promise “federally supervised” lottery winnings. The real FTC never calls anyone about a prize.
Step 2: The borrowed trust. The message borrows credibility: the name of a real lottery, a real retailer, or a government agency, plus a claim number, reference code, and sometimes a “notary” or “claims agent” with an official-sounding title. Caller ID may even display a real organization’s name or a Washington, D.C. area code. Caller ID can be faked in seconds, so none of this proves anything.
Step 3: The fee. To “release” your winnings, you must first pay — framed as taxes, customs duties, insurance premiums, processing fees, or shipping charges. These fees typically run from a few hundred to several thousand dollars. In one documented FTC case, a sweepstakes operation collected $10 to $15 “processing fees” from consumers who believed they had won thousands, then kept inventing new rounds of fees for victims who had already paid.
Step 4: The irreversible payment. You are told to pay by wire transfer, gift cards, cryptocurrency, cash reload cards, or courier. These methods are chosen deliberately: once the money leaves your hands, it is essentially impossible to get back. Legitimate organizations do not ask winners to buy gift cards at a pharmacy and read the numbers over the phone.
Step 5: The vanishing act — or the repeat. After you pay, the prize never arrives. Often the scammer comes back for more, inventing a second fee (“the first payment didn’t clear customs”) because a victim who paid once is likely to pay again. Some operations run victims through round after round of fees, each promised to be the last.
The Counterfeit Check Variation
A particularly cruel twist involves a fake check. The scammer mails you a check — supposedly covering your prize taxes or fees — and tells you to deposit it, then wire a portion back. The check looks real enough to fool your bank, and the funds may even appear in your account temporarily. Days later the check bounces, and the money you wired comes out of your own funds. The North Carolina Department of Justice warns consumers explicitly: telephone con artists send counterfeit checks and direct victims to deposit them and wire cash back. Never deposit a check and send money back to the sender, no matter how legitimate the check appears.
Red Flags: The Prize Scam Checklist
The FTC and the Consumer Financial Protection Bureau list the warning signs. Any one of these means walk away:
- You are asked to pay anything upfront. Taxes, shipping and handling, processing fees, customs duties, insurance — a real sweepstakes never requires any payment to claim a prize. The U.S. Postal Inspection Service states it bluntly: you never have to pay to receive a prize, and the only entity you owe taxes to is the IRS, after you receive the money.
- You won a contest you never entered. You cannot win a lottery without buying a ticket, and you cannot win a sweepstakes without entering. A “win” on something you never entered is a guaranteed scam.
- You are told you won a foreign lottery. The FTC says these messages are almost certainly from scammers — and it is illegal for U.S. citizens to play a foreign lottery in the first place.
- Artificial urgency. “Claim within 24 or 48 hours or forfeit the prize.” The deadline exists to stop you from pausing, researching, or asking someone you trust.
- Payment by gift card, wire, crypto, or cash reload card. Irreversible payment methods are the scammer’s signature. A real prize administrator does not need iTunes cards.
- Requests for personal information. Bank account numbers, credit card numbers, or Social Security numbers “to process your winnings” are harvested for identity theft.
- You are told paying more improves your odds. Paying to increase your chances of winning is itself a scam tactic.
- A check arrives with instructions to send money back. Depositing a check and returning a portion is the counterfeit-check scam, every time.
- The caller claims to be from the FTC, CFPB, or another agency. The CFPB states plainly that neither it nor the FTC calls consumers to announce lottery or sweepstakes wins. Government impersonation layered on a prize scam is still a scam.
Publishers Clearing House Impersonation: A Special Warning
Scammers frequently claim to represent Publishers Clearing House, one of the best-known sweepstakes brands in America. Two things make this especially dangerous right now. First, the real Publishers Clearing House has stated it will never ask a winner to pay a fee to collect a prize — any such demand is fraud. Second, Publishers Clearing House declared bankruptcy in 2025, which scammers exploit by inventing “final payout” or “bankruptcy settlement” prize claims. Treat any PCH prize call that demands payment as a scam without exception.
How to Verify a Prize Claim: 7 Steps
- Ask yourself one question: did I enter? If you did not buy a ticket or submit an entry, you did not win. End of story.
- Never pay to collect. No fee, tax, or charge paid in advance is ever legitimate. Real taxes on real winnings are owed to the IRS after you receive the money — never wired to a “claims agent” first.
- Verify through official channels only. Look up the lottery or company’s real contact information yourself — from its official website or the number on the back of your bank card — and ask whether the prize is real. Do not use phone numbers, links, or addresses the “winner notification” provided.
- Do not deposit their check. If a check arrives with instructions to send money back, do not deposit it. Take it to your bank and ask them to verify it, or simply destroy it.
- Do not share personal or financial information. No legitimate prize requires your Social Security number, bank login, or credit card number over the phone.
- Slow down and tell someone. Scammers rely on excitement and secrecy. Describe the offer to a friend or family member — an outside perspective breaks the spell.
- Check the law. It is illegal to sell lottery tickets over the phone or through the mail in the United States. Anyone pitching lottery tickets by phone is breaking the law by definition.
What to Do If You Already Paid
Act immediately — speed is your only leverage:
- Contact the payment provider now. If you wired money, call the wire service; if you bought gift cards, call the card issuer. Tell them it was a fraudulent transaction and ask whether it can be reversed. Reversals are rare with these methods, but minutes matter.
- Stop all contact. Do not answer follow-up calls demanding more fees. Block the numbers.
- Protect your identity. If you shared your Social Security number or bank details, place a fraud alert with the credit bureaus and consider a credit freeze. You can report identity theft at IdentityTheft.gov.
- Save everything. Keep the messages, letters, checks, receipts, and phone numbers. Investigators use these to map scam networks.
- Tell your bank. If you deposited a counterfeit check, notify your bank immediately and ask what you owe.
How to Report Lottery and Sweepstakes Scams
- FTC: Report at ReportFraud.ftc.gov. The FTC’s enforcement actions — including a $9.5 million judgment against a sweepstakes promoter who ran a phony prize operation — start with consumer reports.
- FBI Internet Crime Complaint Center: File at ic3.gov, which tracks thousands of lottery and sweepstakes complaints each year.
- U.S. Postal Inspection Service: If the scam arrived by mail, report it — mail fraud is a federal crime.
- Your state attorney general: State consumer protection offices investigate prize fraud operating in their states.
- Do Not Call Registry: Register at donotcall.gov to reduce telemarketing calls, though determined scammers ignore it.
Documented Enforcement: What the Records Show
Regulators do pursue these operators. In an FTC case concluded in 2015, sweepstakes promoter Crystal Ewing was hit with a $9.5 million judgment and permanently banned from direct mail marketing after violating a 2007 court order — she had gone back to running prize promotions that tricked consumers into paying fees for winnings that did not exist. In another pattern the FTC has documented, defendants mailed personalized letters falsely telling consumers they had won large cash prizes, typically over $2 million, “guaranteed” — but requiring a $20 to $30 fee to collect. The prizes did not exist. These cases confirm the central truth of every prize scam: the fee is the product, and the prize is the fiction.
The Bottom Line on Prize Scams
A lottery or sweepstakes scam is not a contest with bad terms — it is theft with good marketing. The prize does not exist, the deadline is fake, the official titles are costumes, and the fee is the entire point. The defense fits in one sentence: never pay to collect a prize. If you did not enter, you did not win — and if you are asked for money, gift cards, or personal information, you are being robbed, not rewarded.
Sources
- Consumer Financial Protection Bureau, “How to spot a scammer” (Lottery or sweepstakes section) — https://www.consumerfinance.gov/archive/blog/how-spot-scammer/
- Federal Trade Commission, “FTC Obtains $9.5 Million Judgment Against Sweepstakes Promoter for Contempt” (2015) — https://WWW.FTC.GOV/news-events/news/press-releases/2015/02/ftc-obtains-95-million-judgment-against-sweepstakes-promoter-contempt
- Federal Trade Commission, “How To Avoid a Government Impersonation Scam” — https://consumer.ftc.gov/articles/how-avoid-government-impersonation-scam?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axioscodebook&stream=top
- North Carolina Department of Justice, “Telemarketing Scams – Do Not Call Registry” — https://ncdoj.gov/protecting-consumers/telephones-telemarketing/telemarketing-do-not-call/
- ConsumerAffairs, “Lottery and Prize Scams” — https://www.consumeraffairs.com/news/sweepstakes-and-lottery-scams/
- Moneywise, “MI woman lost $200K in prize scam” — https://moneywise.com/news/suspect-arrested-in-sweepstakes-fraud-that-cost-michigan-woman-200k-spot-signs-of-a-lottery-scam-to-protect-yourself
Last reviewed: October 2026
This article is for education only and is not financial or legal advice.