It was in the Neopets magazine that it's allowed... her daughter got frozen because she gave something to someone that she didn't know, and the person reported her. But if you're giving them away to guild members who just participated in a "competition" it's alright.
Quote:
From the Neopets Magazine, verbatim~*
Contests vs. Competitions
Often times, when attempting to generate interest in their guilds, people will make the mistake of offering 'contests.' Regardless of whether their intentions are noble or not, the fact is that this is simply not allowed on the Neopets site. Any time that you say, "I will give you a reward for winning (or even participating) in such and such an activity," then you are entering a situation where, more ofthen than not, people end up getting scammed.
On the other hand, if you announce to your guild members that a competition is being held (let's say, a competition to see who can make the best drawing), and you do not offer or promise any prizes as part of the competition, then that is perfectly within the rules of the neopets site. Now, as the person running the guild, you have an active interest in getting as many people as possible to participate in our competition (because, naturaly, the more people who take part, the more interest there will be in your guild).
Therefore, if you decide (after the competition has taken place) to give one/some of the particiaptn(s) an item(s) of your own, then there's nothing wrong with that, either - after all (at least in theory) people didn't sing up for your competition because they were being told they would get something, remember? By the same token, there are no rules saying that you can't just give someone an item out of the kindness of your generous little heart.
So, just to recap:
A contest is an activity where the participants are offered (or promised) the possibility of receiving a prize in exchange for participating in (or 'winning') that activity. This is NOT allowed on the Neopets site.
A competition is an activity in which participants are never offered (or promised) the possibility of receiving a prize in exchange for their involvement. They participate solely because they want to. This is allowed by the Neopets site. keeping this in mind, should ghe proprietor of a guild decide to give an item(s) to someone who happened to be a particiapnt in one of their competitions, then this is okay, as there are no rules against this on the Neopets site.
That was in September that one of my guildmates typed that up, so I don't know what issue it came from.