The rules behind rewards programs in the US

In card programs, most people see rewards as the fun part. Designing a loyalty program is like designing a game—you determine the behaviors you want to encourage and engineer the payoff. It’s the step everyone wants to be involved in, especially your lawyers. 

Card incentives are arguably your most effective tool for attracting and retaining cardholders. These programs are also among the most heavily regulated features in payments, sitting at a unique intersection of consumer protection, prize promotion law, and financial regulation. 

There may be some game theory involved in designing a reward program, but it’s certainly not all fun and games—I know from experience. Before joining Rain, I was a federal prosecutor. I later served as Associate Deputy Attorney General at the Justice Department, and then as Associate Counsel to the President in the White House Counsel's Office. It’s easy to cross a legal line you didn’t realize was there, and rewards programs come with lots of lines. 

In this guide, I’ll talk about the rules around rewards programs in the United States at a high level. I'll also share how we built Rain’s native Rewards product and explain the legal review process all Rain programs must complete. The exact laws and regulations depend on the state and specific structure of the offering, so take this as educational and not legal advice.

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Deliver what’s advertised 

The general principle for rewards programs is the company must to fulfill the promise it makes. Cardholders are told they will receive something in exchange for some behavior—like one point per dollar spent—and when they complete that behavior, they need to be credited. 

This falls under consumer protection. Federal law prohibits unfair, deceptive, or abusive practices in connection with consumer financial products, and every state has its own consumer protection statute. The regulators enforcing these laws—the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), and state attorneys general—read a program's marketing copy and its terms as a single document. If the headline says 3% back on everything, the fine print needs to match.

The CFPB made this explicit in Circular 2024-07, issued in December 2024. This policy statement warned that a program operator may violate federal law when it devalues rewards a cardholder has already earned, when it revokes or denies rewards based on conditions that were buried or vague at signup, or when it deducts points without delivering the corresponding benefit. 

The circular also addresses a scenario that applies to rewards programs with merchant partners. When a partner drops out of a program, the CFPB expects the operator to take reasonable steps to preserve the value cardholders have accrued, whether by shifting points toward other partners or by allowing a cash-out. For example, if cardholders are told their points can be redeemed with a certain airline, and then that airline stops working with the card program, the cardholders should be given something of relatively equal value. Earned rewards are a liability the program owes its cardholders. 

In May 2025, the CFPB withdrew 67 guidance documents in a sweeping rollback, but the circular remains. 

Card rewards also intersect with banking regulation, and which rules apply depends on the underlying product. When rewards attach to a credit card, the Truth in Lending Act and Regulation Z govern how the card's terms can be advertised. Certain phrases trigger mandatory disclosures. The Credit Card Accountability Responsibility and Disclosure Act of 2009, known as the CARD Act, added further transparency requirements for how card terms are presented and changed. Debit and prepaid card programs fall under the Electronic Fund Transfer Act and Regulation E, and the disclosure obligations depend on the type of product.

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When rewards become a raffle

When a rewards program has an element of chance it moves into prize promotion law. Every state prohibits private lotteries, and generally a program becomes one when it combines three elements: prize, chance, and consideration. Most card rewards programs are deterministic—a behavior (spending) results in a prize (points or cashback). When programs do add in an element of chance the classification can change. 

Some examples of this structure are spin-to-win, mystery point drops, and campaigns where one lucky cardholder wins something. If cardholders are required to pay or spend to participate, the promotion now has consideration, which can make it a lottery.

A sweepstakes is a promotion without consideration. This is why you’ll often see "No Purchase Necessary" on sweepstakes advertisements paired with a free way to enter, known as an Alternate Method of Entry, or AMOE. The free path is what keeps a sweepstakes from becoming a lottery, and it has to carry the same odds of winning as the paid entry option. If the free route is hidden, slow, or far less attractive than paying, regulators can decide that consideration effectively exists and treat the whole promotion as unlicensed gambling. A contest takes the opposite approach and removes chance instead of consideration. In this case, winners are judged on skill or merit. An example could be a card program offering a prize to the cardholder who makes the most referrals. Contest entry fees are allowed in many states, but not all. 

Sweepstakes carry specific administrative obligations in a few states. New York, Florida, and Rhode Island are the only three with registration requirements (as of the writing of this article). New York requires registration and a surety bond at least 30 days before launch for prize promotions exceeding $5,000 in total value. Sweepstakes operators must also submit a list of winners afterwards. Florida imposes a similar registration and bonding requirement, with a filing due at least seven days before the promotion begins. Rhode Island has the strictest policy, requiring registration without a bond for retail promotions where prizes exceed $500. Many national programs handle this by excluding residents of the registration states or by keeping total prize values under these thresholds.

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How we built Rewards from Rain

The rules I described above shaped how we built Rain’s native Rewards product, an optional add-on to any of our card programs. Partners can customize the specific mechanics of their rewards programs, but in every case, terms are always clearly disclosed to the cardholder. 

Rewards from Rain does not support sweepstakes or prize draws. Those move a program into prize promotion law and carry the risk of a promotion being classified as an illegal lottery. Rain’s Rewards offering complies with every US rule covered above, and with the rules of every other market where we operate.

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Legal review before launch

Any rewards, cashback, or promotional program tied to a Rain card product is reviewed and approved by Rain's legal team before it goes live. That includes deterministic cashback, points tiers, referral incentives, and anything with a prize or chance component.

The same mechanic can be legal in one state and prohibited in the next. It can require a simple filing in one country and months of government authorization in another. It can change legal character entirely based on how entry, odds, and disclosures are structured. Review before launch catches these issues while they are still design questions, when fixing them is much easier.

The best time to involve us is when the program is still being created. Bring the concept to your account manager and to our legal team early, and we'll help you land on a structure that works.

This guide is for general educational purposes and does not constitute legal advice. Promotion laws change frequently and vary by jurisdiction. For any specific program, consult qualified counsel, and for any program tied to a Rain card product, obtain Rain Legal review and approval before launch.