The Gambling Commission publishes guidance on free draws and prize competitions

Press release

Date: 29 June 2007

The Gambling Commission today (29 June 2007) publishes guidance under the Gambling Act 2005 on the distinction between prize competitions and free draws on the one hand, and lotteries on the other.

The Guidance covers the boundary between lotteries and a wide range of prize competitions, free draws and product promotions including TV quizzes and prize draws which accompany the purchase of a good or service.

Following consultation the Commission remains concerned that entry to TV quizzes through an alternative web-based free entry route may not be considered to be as convenient as via the paid route, and may not meet the statutory test to qualify as a free draw; particularly where the need for immediate responses is emphasised or the quiz is only run for a relatively short period. The Commission intends to meet with the major operators prior to 1 September to discuss how such concerns can be addressed.

The guidance also sets out the Commission's concern that competitions which ask just one simple question, the answer to which is widely and commonly known or is obvious from the material accompanying the question, will fail to meet the test in the Act and will fall to be classed as lotteries because the simple question fails to eliminate a significant proportion of actual or potential entrants.  

The publication of Prize competitions and free draws - The requirements of the Gambling Act 2005 - December 2009sets out the Commission's position so that those organising competitions and draws have guidance available on what the Commission considers is needed to avoid breaches of the Gambling Act 2005 when it comes into effect on 1 September.

Although the Commission will have no regulatory responsibilities in respect of prize competitions and free draws, it will be expected to monitor the boundary between them and lotteries.  It will also have new duties in respect of pursuing and prosecuting illegal gambling and to act where schemes are organised and promoted which, in its view, amount to unlicensed and, therefore, illegal lotteries.

The Commission's Deputy Chief-Executive Tom Kavanagh said:

"Over the past ten months, the Commission has consulted extensively on the provisions on free draws and prize competitions in the new Act.

"Prize competitions and free draws remain free of statutory control but operators who cross the boundary and operate a lottery will be required to apply for an operating licence from the Commission or cease to operate.

"Operators can use this guidance to help ensure they stay within the law. The Commission will have powers to take action against breaches of the Gambling Act when it comes into full effect on 1 September."

Notes to editors

Free draws, prize competitions and lotteries

You can download the guidance, responses and copies of the original issues paper and letter to respondents.

Under the Gambling Act 2005, public lotteries will remain the preserve of good causes and must, unless they qualify in one of the ‘exempt' categories, continue to be licensed by the Gambling Commission. In contrast, prize competitions and free draws are and will remain, under the Gambling Act 2005, free of statutory regulatory control. (They may however come under the control of either Ofcom, where they use broadcast media, or ICSTIS where they use premium rate telecommunications services.)

The current law is unclear on the distinctions between lotteries, prize competitions and free draws.

In August 2006 the Commission published an Issues paper on the distinctions and in April it sent a letter to all respondents to the original issues paper seeking further views on the question of what constitutes ‘payment to enter' in respect of TV Quiz competitions.

The Commission received 53 responses to its consultation paper and a further 28 in reply to its subsequent letter on what constitutes ‘payment to enter' a draw. A substantial majority of responses were from those involved in the competitions and draws sphere, whether as companies which offer them, those that produce them or advisors to one or both. The remainder came from members of the public, organisations involved in the gambling industry and a faith group. 

The Commission has published a summary of the responses to the consultations and its reactions to them and the non-confidential responses are available to download from the Gambling Commission website.

From 1 September operators of larger lotteries will require an operating licence from the Gambling Commission and will be required to observe licence conditions and codes of practice on social responsibility. These include requirements to ensure that at least 20% of the proceeds of any lottery are distributed to a non-commercial beneficiary and to complete regular financial returns to the Gambling Commission. 

Licence conditions and codes of practice - consolidated May 2014 is available on the Gambling Commission's website.

You can also download advice on the main principles and requirements of lotteries law.

The Commission will continue to work closely with ICSTIS and Ofcom in providing proportionate regulation in areas of joint responsibility.

The Gambling Commission

The Gambling Commission regulates gambling in the public interest. It does so by keeping crime out of gambling, by ensuring that gambling is conducted fairly and openly, and by protecting children and vulnerable people from being harmed or exploited by gambling.

The Commission will regulate all gambling other than the National Lottery and spread betting, which will remain, respectively, the responsibility of the National Lottery Commission and the Financial Services Authority.

From 1 September 2007, British-based operators who wish to provide gambling must have a licence from the Gambling Commission. Licensed operators who fail to observe the Commission's licence conditions and codes of practice will be at risk of unlimited fines, prosecution and the removal of their licence.

Further information

For further information please contact us on (0121) 230 6700 or email communications@gamblingcommission.gov.uk.