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If you are running a business or a charity, you may want to carry out a promotional lottery or competition. For example, tombolas, raffles and sweepstakes are all treated as lottery games. This can be an effective way of fundraising or developing your brand’s image. When carrying out a lottery or competition, you will want to make sure that you comply with all of the relevant laws. This article will explain how to run a lottery or competition in England and Wales and your legal obligations.
When to Run a Lottery or Competition?
Running a lottery or competition could be a great way of increasing publicity or raising money for a good cause, which can improve the image of your business.
You could also run a lottery purely for the sake of making a profit. A lottery run purely for profit will need a licence from the UK Gambling Commission.
What is a Lottery or Competition?
In England and Wales, a lottery has a technical definition. A lottery is a type of gambling which has three requirements:
- you must pay to enter the game;
- there is at least one prize in the game; and
- prizes are awarded purely by chance.
Competitions, on the other hand, require a significant element of skill. For example, a competition may require you to guess the outcome of a race or other events.
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Lotteries
Lotteries usually take the form of a draw-based lotto game. There are different types of lotteries, each with different rules. The Gambling Act outlines these rules. Some of the different types of lotteries include:
- private lotteries;
- lotteries held at events;
- society lotteries; and
- customer lotteries.
Typically, any small or private lottery for a good cause will not need a licence. However, you will need a licence from the Gambling Commission if:
- you are running a large scale lottery;
- your lottery is for the purpose of making a profit; or
- your lottery is part of the National Lottery.
If you are planning on running a lottery for profit, then you will need a licence from the UK Gambling Commission. Specific information on the requirements for a licence can be found on the Gambling Commission website.
General Responsibilities in a Lottery
If you are running a lottery, whether with a licence or not, you will also have some general responsibilities. This includes making sure that you are not running an illegal lottery. A lottery may be illegal where participants are required to pay an entry fee or make a purchase for a price that reflects the opportunity that they have to win.
Competitions
A prize competition must require skill or judgement so that the competition is not ‘pure chance’ like a lottery. Some competitors must have an advantage over others based on their knowledge or ability. For example, a competition where participants have to solve a crossword puzzle to win has the required amount of skill for a competition.
If your competition has multiple stages, then only the first round will need to satisfy the skill test. Thus, if all participants who solve a crossword puzzle are then entered into a draw to select the winner, this will be a competition and not a lottery.
If you run a competition without a licence and it later emerges that it did not have the required skill to amount to a lottery, you may end up running an illegal lottery. As a result, if you are not sure whether your competition has the required amount of skill, then it is recommended that you seek legal advice or contact the Gambling Commission.
Key Takeaways
A lottery or competition can be a good way of increasing brand exposure by raising money for a good cause or involving consumers with your business. However, if you are planning on running a lottery or competition, you should make sure that you are familiar with whether you need to get a licence or not.
The key difference between a lottery and a competition is that a competition requires skill on behalf of the participant. If you are not sure whether your game is a lottery or competition, LegalVision’s regulatory and compliance lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
The key difference between a lottery and a competition is that a competition requires skill, while a lottery is a game of pure chance.
Yes, though you will need to get a licence from the Gambling Commission first. Getting a licence is important, as you may face fines and legal action if you do not.
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