First of all, I see that a ton of companies on the internet (true company's and indivuals) run contests and things that award the winner a fixed prize for doing something, tons of these contests are not legit and in no way 'legal'. Since no one is getting hurt it doesn't really harm anyone in any way. That being said. Let's say that I own a website that collects donations from the users (or collects monthly membership fees for a 'club'). What if I use some of the membership fees to promote traffic by awarding the top generator of traffic a piece of the donation/membership pie. Or what if I just give them a free gift (being cash)? Is there anything illegal with this where I could actually go to jail or anything like that. If your thinking, hmmm pyramid scheme/ponzi or something like that it is definetly not! It isn't even some cleverly worded pyramid scheme like some big businesses do *cough* Network Marketing *cough* or even *cough* Crowdstorming *cough* All very unethical business procedures in my opinion... Today at work we had a discussion about selling customers a product that they already had and divised some cleverly worded scripting for the sales agents to use. That is damn unethical, and this is a Fortune 500 company! Anyways any feedback is appreciated.
Your questions are potentially those only an attorney can directly answer. It's dependent on any and all applicable laws, federal or otherwise. Other people's behavior is not indicative of what's legal or not.
To me it sounds more like you are attempting to create a REWARDS program, which seems perfectly legal. If you create a contest where there is a random winner, you may have to speak to a lawyer, as there are laws in place for things like this. But if you are merely rewarding someone who is bringing traffic to your site, I dont see a problem. It's basically like an affiliate type program. I know a site, Helium.com, which is an online article site, and they reward the people who get the top rated articles, because essentially, quality content helps to bring in more traffic. If you're going to post a notice to your users about the reward, I'd probably keep it as vague as possible and state that you have the final decision over who qualifies. You also may want to point out that spamming, etc is against the TOS. And don't make any claims to set %s or dollar amounts. Just say the top 10 or whatever will recieve a % of the site revenue.