As long ago as December 2013, we posted tips on how to avoid your sales promotions, prize draws and prize competitions being classified as gambling activities requiring a licence. We followed this:
- in 2016, with a report on developments in the law relating to the status of Spot the Ball competitions and David Clifton’s subsequent article for iGaming Business entitled “Chancing your luck at Spot the Ball” and
- in 2017, with a report on the fresh “house raffle” warning sounded by the Gambling Commission, a concept that is fraught with legal issues, as evidenced by the recent discontinuance of such schemes as:
We await to see whether a similar fate will befall the likes of:
In the meantime, the Gambling Commission has recently published on its website the following further warning under the heading “Raffling big ticket items: prizes, pitfalls and potential risks”, to which anyone contemplating a similar scheme should pay heed:
Don’t lose out on illegal lotteries
Lotteries, raffles, competitions, prize draws. They might all sound the same, but the way in which they operate is very different. The Gambling Commission has recently investigated a number of different ‘house lotteries’ and other high value prize competitions in which members of the public could buy a ticket for a few pounds for a chance to win the home or car of their dreams.
Unfortunately, many of these competitions have been run illegally putting entrants at risk . In 2017, the Gambling Commission’s Intelligence Unit received 43 reports in relation to 26 different house ‘lottery’ competitions, only six of which had no further action taken against them. And in 2018, the unit received 45 reports regarding 29 cases with just seven receiving no further action from the Commission.
As you can see, though the majority of house lotteries we investigated fall foul of the law, their popularity hasn’t seemed to have waned. With this in mind, our Lottery Specialist, Jo Cartwright, has put together some FAQs on house lotteries to help keep you safe from unregulated and unlicensed gambling.
What’s in a name?
The difference between lotteries (including raffles), competitions and free draws is significant. It’s important to identify what kind of activity the product is and how it’s categorised before attempting to create or enter one.
What is a lottery?
Raffles, or lotteries as they’re called in gambling law, are where you pay to enter. Prizes are awarded on the basis of chance, normally through a random draw of numbers or tickets, although after an initial draw you can add a skill element afterwards, such as a tiebreaker.
Lotteries cannot be run for private or commercial gain and most can only be run for good causes. These include charities, hospices, air-ambulance services, sporting or cultural clubs or other not-for-profit causes – all of which heavily rely on income from lotteries to support their work.
Lotteries are regulated under the Gambling Act and are a form of gambling. They are also subject to other rules to ensure consumers are protected from harms and that they’re operated fairly.
In 2017 alone society lotteries licensed by the Commission raised £230 million for good causes. Therefore it’s vital this area of gambling is preserved for them rather than being used unlawfully for private or commercial gain.
How are people legally raffling their house or car?
Many people operating these kinds of ‘raffles’ are actually running either free draws or prize competitions, which are not forms of gambling. The Gambling Commission does not regulate these areas. We cannot stress enough that it’s crucial to be compliant with the law and to seek legal advice if in any doubt. If it’s identified that a competition is being run as an illegal lottery, the Commission can take action.
How do I create a competition to raffle a house or car legally?
You cannot create a lottery to raffle a house where the beneficiary (that is, the recipient of all lottery profits after expenses and prize costs are deducted) is not a good cause and the organiser/promoter of the lottery is not a non-commercial society. The only competition style that might be appropriate would be a free draw or prize competition. The Gambling Commission does not regulate these and therefore does not provide advice on how they should be organised. However, these type of schemes can look similar to lotteries and we do provide some tips on the difference between lotteries, competitions and free draws.
If you’re organising a prize competition or free draw, it’s your responsibility to ensure you are compliant with the law. If in doubt, you should seek legal advice.
I’ve seen a win a house/car competition, how do I check it’s safe and legitimate to enter?
The Gambling Commission can’t advise if a competition is safe or legitimate to enter. These competitions are not regulated by the Commission. Therefore you should satisfy yourself the competition complies with the law and that you’re happy with the terms and conditions before deciding to enter. We advise to always exercise caution especially if you plan on paying a fee.
I think I’ve entered a competition that might not be legitimate and I’m unhappy with the outcome – what do I do?
Unfortunately the Gambling Commission regularly receives contact from consumers who are frustrated due to competitions being extended, prizes being different than advertised or them being closed due to compliance issues. The type of competition you’ve entered affects your next steps. Here are some useful links detailing competition styles and how to submit an enquiry:
- Free draws: https://www.asa.org.uk/advice-online/promotional-marketing-prize-draws.html
- Lotteries: https://www.asa.org.uk/advice-online/promotional-marketing-lotteries.html
- Free entry routes: https://www.asa.org.uk/advice-online/promotional-marketing-free-entry-routes.html
- Social media prize draws: https://www.asa.org.uk/advice-online/promotional-marketing-prize-draws-in-social-media.html
- Citizens Advice: https://www.citizensadvice.org.uk/consumer/get-more-help/if-you-need-more-help-about-a-consumer-issue/
- Trading Standards: https://www.tradingstandards.uk/consumers/support-advice
What is a free draw?
You can find out more information about free draws here. In summary:
- They must have a free entry route which must be displayed prominently
- They can offer both paid and a free entry route
- Both entry routes must be advertised in a way that they will come to the notice of all participants
- Paid entry routes usually include premium rate phone lines, SMS or website entries. Free entry routes typically include standard rate post and telephone
- Free draws are not gambling and they can be organised commercially for private or commercial profit
What is a prize competition?
You can find out more information about prize competitions here. In summary:
- Unlike a lottery where the outcome depends on chance, the outcome of a genuine prize competition must depend on the exercise of skill, knowledge, or judgment by the participant
- The element of skill, knowledge or judgment in a competition must prevent:
- a significant proportion of people from taking part or
- a significant proportion of people who do take part from receiving a prize
- If a competition doesn’t rely on an element of skill, knowledge or judgement, it may be considered a lottery and could be illegal
Anyone requiring further assistance in relation to this very complex area of the law and regulation (on which we first advised some ten years ago) should please make direct contact with us.
UPDATE: On 17 April 2019, the ASA made a ruling in relation to promotion of a “house raffle” that will operate as a disincentive to others wishing to promote such a scheme. In its ruling, the ASA upheld a complaint that, because the prize had been changed to a cash amount due to insufficient ticket sales, the promotion had not been administered fairly. You can read more about that here.