Quick to the draw

The regulatory frameworks covering lotteries and prize competitions are very different but the dividing line between them can sometimes be difficult to spot – and hotly disputed, writes Andrew Woods.

Since the Gambling Act came into force in September 2007 the fine line between Lotteries and prize competitions has been debated at length with little case law or firm guidance available to help. One of the most common gripes that I hear is when I advise a client as to the legality of a proposed competition and explain the requirements under the Gambling Act 2005, only to be questioned as to why another competition which is operating is clearly not compliant with the relevant legislation.

Prize competitions and free draws are free from statutory regulatory control under the Act and can be organised commercially for private benefit. This is not the case with Lotteries which are heavily regulated under the Act and which are the preserve of good causes and must unless they qualify as an exempt lottery operate under a Commission Licence.

The Gambling Commission states that it has no regulatory responsibility in respect of competitions and draws which raises the question as to who would prosecute a prize competition if it is not being operated correctly. However in February 2012 it appears that the Gambling Commission did take an active interest in a free draw run by Express Newspapers in the Daily Star. This competition invited readers to answer a question by paying an entry fee in order to have a chance of winning a camper van and after positive engagement with Express Newspapers, Express Newspapers agreed to refund entrants to this competition and to add a free route of entry to similar competitions in the future.

We may get further clarification on the law relating to Lotteries as the National Lottery operator Camelot is seeking permission for a judicial review into the Gambling Commission’s continuing failure to revoke or suspend the Health Lottery Licences. Camelot believes that the Gambling Commission have made a “fundamental error” in allowing the Health Lottery to operate in its current form and further alleges that the Gambling Commission is in “real danger” of setting a precedent allowing other commercial operators to set up as rivals to the National Lottery. The argument being put forward by Camelot is that the Health Lottery must be a National Lottery as it advertises nationally and plays nationally, whereas, the National Lottery Act 1993 allows for just one National Lottery. The Health Lottery in response said: “the Gambling Commission has given a very robust response to Camelot’s argument”.

Another interesting development relates to the Mail on Sunday’s headlines on 11 March; “top TV game shows face gambling crackdown”. It was reported in the paper that the Gambling Commission are looking at top TV shows including “Deal or No Deal” in trying to ascertain whether these TV games comply with the legislation or are in fact unlawful lotteries.

It may be no coincidence that the front page of the Gambling Commission website highlights the Gambling Commissions advice on prize competitions and free draws which was initially issued in December 2009. Do the recent developments and press headlines mean that the Gambling Commission will now take a more active role in monitoring prize competitions and free draws despite its continued assertion that “the Commission has no regulatory responsibilities in respect of competitions and draws”?

The Act specifies two types of lottery: a simple lottery and complex lottery. A simple lottery is where persons are required to pay to participate, one or more prizes are allocated to the participants and the scheme and prizes are allocated wholly by chance. A complex lottery is one where; persons are required to pay to participate, one or more prizes are allocated to the participants in the scheme, the prizes are allocated by a series of processes and the first of these processes relies wholly on chance.

The argument the Gambling Commission appears to be using in the “Deal or No Deal” discussion is that the box of an unknown quantity of money which the participant has in front of them at the start of the competition is in fact their money to gamble against the other boxes held by the other participants.

In prize competitions success depends at least in part on the exercise of skill, judgement or knowledge by the participants, which distinguishes them from lotteries which are decided wholly on by chance. Section 14 (5) Gambling Act 2005 qualifies the distinction between Lotteries and Competitions and defines the circumstances in which competitions requiring participants to exercise a degree of skill or judgement or to display knowledge are to be treated as relying wholly on chance.

Such arrangements will therefore fall within the definition of a lottery provided the other elements (payment to participate and the allocation of prizes) are satisfied. A genuine prize competition is one that contains a requirement to exercise skill or judgement or to display knowledge where it can be reasonably expected that the requirement will either; (a) prevent a significant proportion of people who wish to participate from doing so or (b) prevent a significant proportion of people who participate from receiving a prize.

It remains to be seen whether competitions and prize draws will now come under greater scrutiny. Many TV shows have been operating for several years with competitions in which participants phone in (no doubt on a premium phone line) and have to answer a very simple question, such as what is the capital of France. Such a competition cannot prevent a significant proportion of people who wish to participate from doing so and cannot therefore be a competition under the Gambling Act 2005 and yet prosecutions of these competitions are few and far between.

Andrew Woods is a partner at Woods Whur. He can be contacted by email at This email address is being protected from spambots. You need JavaScript enabled to view it..