Lotteries, Gambling and Prize Draws

Lotteries

A lottery – a promotion where participants make a payment in exchange for the opportunity to win a prize based solely on luck – must be run with a lottery operating licence. There are two types of lottery: a simple lottery and a complex lottery. Irrespective of the type of lottery you intend to run, you must ensure that the competition is entirely dependent on chance. Running an illegal lottery can result in a fine of up to £5,000 and imprisonment for up to 51 weeks.

A simple lottery must meet the following criteria:

• Payment for entry
• Allocation of prizes for winners
• Determined solely by chance.

Whereas a complex lottery must meet the following criteria:

• Payment for participation
• Allocation of prizes to participants through a series of processes
• The first process is determined by chance
  
  

Gambling

Gambling is heavily regulated with gambling operators obligated to have a Gambling Commission licence to trade with, and market to, consumers. The operating licences are particularly stringent about the basis on which the licensee will utilise their licence, with it being regularly reviewed for responsible implementation.

Anti-money laundering regulations must also be adhered to as well as the advertising codes regulated by the Advertising Standards Authority.

Prize Draws

Prize competitions where prizes are awarded to individuals do not qualify as gambling according to the Act. However, attention should be given to structuring the competition to avoid falling under the Act’s definitions of ‘gaming’, ‘lottery’ or ‘betting’ and therefore under its regulatory requirements.

Mitigating Risk

In addition to the Gambling Act, businesses should also refer to and be compliant with the Data Protection Act as it is likely that any competition you run will require collecting an individual’s data.

The Consumer Protection regulations will also need to be adhered to in any of the sales promotion to ensure individuals are protected.

Whether you’re running a prize draw or lottery, you do not want to gamble with your adherence to rules and regulations. Should you need any advice on how to make your terms and conditions of participation compliant or simply how to structure a competition correctly, our Commercial Team will be able to advise you.