34.1 The Act denotes ‘local authorities’ as being responsible for registering societies to run small society lotteries, as opposed to licensing authorities. S.2 of the Act defines licensing authorities and s.25 defines local authorities, with both given the same definition. The Commission considers therefore that for the purposes of the Act both terms are broadly the same, and in the interests of consistency with the other areas of this guidance, we refer throughout this part to licensing authorities, as opposed to local authorities, except when referring to lottery licences that local authorities can apply for themselves.
34.2 The Gambling Commission and the National Lottery Commission merged on 1 October 2013. No change has been made to the legislation which governs how commercial gambling and the National Lottery are regulated. The Commission licenses and regulates all commercial gambling and the National Lottery in Great Britain.
34.3 The Act sets out a definition of a lottery, detailed below, and provides that promoting or facilitating a lottery is illegal, unless it falls into one of two categories of permitted lottery, namely:
34.4 A lottery is any arrangement that satisfies all of the criteria contained within the statutory description of either a simple lottery or a complex lottery, under s.14 of the Act.
34.5 An arrangement is a simple lottery if:
34.6 An arrangement is a complex lottery if:
34.7 Licensing authorities should define ‘society’ as the society, or any separate branch of such a society, on whose behalf a lottery is to be promoted, and need to understand the purposes for which a society has been established in ensuring that it is a non-commercial organisation. S.19 of the Act defines a society as such if it is established and conducted:
34.8 It is inherent in this definition that the society must have been established for one of the permitted purposes as set out in s.19 of the Act, and that the proceeds of any lottery must be devoted to those purposes. It is not permissible to establish a society whose sole purpose is to facilitate lotteries.
34.9 Local authorities are entitled to operate their own lotteries, but may only do so if licensed by the Commission. Local authorities must commit a minimum of 20% of the proceeds from such lotteries for a purpose for which they have power to incur expenditure, and must also adhere to the other relevant provisions in the Act. They may also need to hold a remote gambling operating licence, in the event that they wish to sell lottery tickets via electronic or other remote technological methods such as over the telephone, email or via the internet.
34.10 Licensing authorities consider producing their own guidance for organisations and individuals seeking to operate small society lotteries. If so, the Commission’s advice note Promoting society and local authority lotteries advice note (This advice note does not form part of the Guidance to Licensing Authorities) may provide a useful starting point.
34.11 Participation in a lottery is a form of gambling, and as such licensing authorities must be aware that the societies they register are required to conduct their lotteries in a socially responsible manner and in accordance with the Act.
34.12 The minimum age for participation in a lottery is 16 and Social Responsibility (SR) code 3.2.9 in the Licence conditions and codes of practice (LCCP) requires lottery licences to have effective procedures to minimise the risk of lottery tickets being sold to children, including procedures for:
34.13 The licensee must take reasonable steps to ensure that all those engaged in the promotion of lotteries understand their responsibilities for preventing underage gambling, returning stakes and not paying prizes to underage customers.
34.14 As with other aspects of local gambling regulation, licensing authorities are encouraged to use their statement of policy as a means of making clear their expectations of lottery operators and particular risks that may exist.
34.15 External lottery managers (ELMs) are required to hold a lottery operator’s licence issued by the Commission to promote a lottery on behalf of a licensed society.
34.16 However, individuals or firms can and do provide services to a society or local authority lottery without assuming the role of an ELM. When determining whether a third party is a ‘service provider’ only, or has assumed the role of an ELM, the degree of management undertaken by both the promoter and the sub-contractor will be crucial factors. Key indicators will include:
34.17 Societies employing an unlicensed ELM may be committing an offence and they will need to satisfy themselves that any ELM they employ holds the relevant operator’s licence issued by the Commission. The Commission publishes a register of operating licences.
34.18 Licensing authorities can refer those seeking further information on ELMs to the Commission’s website or its publication Promoting society and local authority lotteries advice note (the advice note does not form part of the Guidance to licensing authorities).
34.19 Lotteries may involve the issuing of physical or virtual tickets to participants (a virtual ticket being non-physical, for example in the form of an email or text message). All tickets must state:
The requirement to provide this information can be satisfied by providing an opportunity for the participant to retain the message electronically or print it.
34.20 The Commission recommends that licensing authorities require all registered small society lottery operators to maintain written records of any unsold and returned tickets for a period of one year from the date of the lottery draw. The licensing authority is permitted to inspect the records of the lottery for any purpose related to the lottery.
34.21 The Act requires that lottery tickets may only be sold by persons that are aged 16 or over to persons that are aged 16 or over.
34.22 With regards to where small society lottery tickets may be sold, the Commission recommends that licensing authorities should apply the following criteria to all small society lottery operators:
This approach is consistent with the operating licence conditions imposed upon operators of large society lotteries and local authority lotteries.
34.23 Prizes awarded in small society lotteries can be either cash or non-monetary. Licensing authorities need to be aware that the value of prizes declared on returns must not exceed the limits on prizes set out by the Act - in effect that combined with any expenses incurred with the running of the lottery, such as managers’ fees, they must not comprise more than 80% of the total proceeds of the lottery. Donated prizes would not be counted as part of this 80% (as no money would be withdrawn from the proceeds to cover their purchase) but are still subject to the limit on a single maximum prize of £25,000 and should be declared on the return following the lottery draw.
34.24 The Commission recommends that licensing authorities should advise small society lottery operators to check with local police if they wish to award items containing alcohol as prizes. This is in order to ensure that licensing law is not breached.
34.25 The Act sets out a number of offences that apply to lotteries, as follows:
Section of the Act
Promoting a non-exempt lottery without a licence
Facilitating a non-exempt lottery without a licence
Misusing the profits of a lottery
Misusing the profits of an exempt lottery
Purporting to operate a small society lottery when not registered, or failing to make the required, or making false or misleading, returns in respect of such lotteries
Without reasonable excuse, obstructing or failing to co-operate with an authorised person exercising his/her powers
Without reasonable excuse, giving false or misleading information to the Commission or a licensing authority
34.26 If a society running small lotteries fails to comply with any of the conditions of running such lotteries specified in Part 4 of Schedule 11 of the Act, it will be operating in an illegal manner, irrespective of whether it is registered with a licensing authority or not. In these circumstances, small society lottery operators may face prosecution by the Commission, a licensing authority, or the police. The lead organisation for initiating prosecutions will vary depending upon the specific circumstances of the case, but it is expected that licensing authorities will investigate offences in respect of small society lotteries. If necessary, licensing authorities can ask for advice from their Gambling Commission compliance manager, but the Commission is unlikely to investigate a case unless it has national or regional significance.
34.27 Licensing authorities in Scotland should refer cases where there has been a breach of the Act to the police for investigation, in line with Crown Office and Procurator Fiscal Service guidance on reporting practices for non-police agencies.
34.28 When licensing authorities are approached by societies who want to register with them to operate lotteries, they will need to refer to the Act’s definition of a small society lottery, which falls into two distinct areas:
34.29 The Commission has published a series of advisory documents which licensing authorities may wish to refer applicants or potential applicants to, to enable them to establish which type of lottery they plan to operate. Promoting society and local authority lotteries advice note provides information for those seeking to run small and large society lotteries and local authority lotteries. Organising small lotteries provides advice on exempt lotteries that do not require a licence or registration. The Commission has also published Running a lottery, a quick guide for fundraisers, to help them identify what types of lottery they can run (the advice note/leaflet/quick guide do not form part of the Guidance to licensing authorities).
34.30 The promoting society of a small society lottery must, throughout the period during which the lottery is promoted, be registered with a licensing authority. Parts 4 and 5 of Schedule 11 of the Act set out the requirements on both societies and licensing authorities with respect to the registration of small society lotteries.
34.31 The licensing authority with which a small society lottery is required to register must be in the area where their principal office is located. If a licensing authority believes that a society’s principal office is situated in another area, it should inform the society and the other licensing authority as soon as possible.
34.32 Applications for small society lottery registrations must be in the form prescribed by the Secretary of State and be accompanied by both the required registration fee and all necessary documents required by the licensing authority to assess the application. Licensing authorities are encouraged to ask applicants for a copy of their terms and conditions and their constitution to establish that they are a non-commercial society. They may also choose to require applicants to provide a declaration, stating that they represent a bona fide non-commercial society.
34.33 The Commission has been made aware that some small society lotteries may be avoiding applying for a society lottery operating licence from the Commission by obtaining two or more registrations with the same or different licensing authorities. Asset out previously, the Act states that a society lottery is a large lottery if the arrangements for it are such that its proceeds may exceed £20,000 in a single lottery, or if the aggregate proceeds in a calendar year exceed £250,000.
34.34 In cases where a society has separate branches with different aims and objectives, it is acceptable for them to hold more than one licence or registration. However, in cases where a society holds more than one registration and the aims and objectives of those societies are the same, this may constitute a breach of the threshold limits for small society lotteries set out in Schedule 11 of the Act.
34.35 Licensing authorities are advised to carefully consider any application by a society for more than one registration. If the aims and objectives are the same and therefore the threshold limits for small society lotteries are likely to be exceeded, the applicant should be advised to apply to the Commission for a society lottery operating licence.
34.36 By virtue of Schedule 11 paragraph 31(5), societies may not hold an operating licence and a local authority registration with the same aims and objectives at the same time. This paragraph also provides for a statutory period of three years during which a large society cannot convert to small society status. Licensing authorities should check that applicants for registration do not hold (and have not held in the preceding three years) a society lottery operating licence granted by the Commission.
34.37 Licensing authorities may also wish to check with the society at the time the annual fee is paid to renew the registration, to ensure that a society does not hold a duplicate registration with them or another licensing authority where the aims and objectives of the societies are the same. If that is the case and the combined proceeds exceed or are likely to exceed the threshold limits for small society lotteries, the society should be advised to apply to the Commission for a society lottery operating licence. The licensing authority should also notify the Commission.
34.38 Licensing authorities may delegate the registration of small societies to licensing officers, subject to each authority’s own specific process of delegations.
34.39 Licensing authorities are required by paragraph 44 of Schedule 11 of the Act to record details of the society on a register. While it does not have to be a public register, the Commission recommends that licensing authorities make the register available to the public on request.
34.40 Once the application for registration has been accepted and entered on the local register, the licensing authority must then notify both the applicant and the Commission of this registration as soon as practicable. The Commission would prefer to receive this information electronically via email to firstname.lastname@example.org, although licensing authorities may also forward this information by post.
34.41 Registrations run for an unlimited period, unless the registration is cancelled. If a licensing authority cancels the registration of a society they are required by paragraph 53 of Schedule 11 of the Act to notify the Commission.
34.42 Paragraphs 47 and 48 of Schedule 11 of the Act set out the grounds for licensing authorities to refuse a small society lottery registration application. In summary, licensing authorities may propose to refuse an application for any of the following reasons:
34.43 A licensing authority may only refuse an application for registration after the society has had the opportunity to make representations. These can be taken at a formal hearing or via correspondence. Licensing authorities should inform the society of the reasons why it is minded to refuse registration and provide it with at least an outline of the evidence on which it has reached that preliminary conclusion, in order to enable representations to be made.
34.44 Representations, and any objections that may result after such a decision, should be handled in accordance with local procedures, and in the same way that the licensing authority would deal with any other licensing matters. The Commission considers that, as a matter of good practice, licensing authorities should set out the principles they will apply in such circumstances. This could be in their statement of policy or on their website.
34.45 A licensing authority may determine to revoke the registration of a society if it thinks that they would have had to, or would be entitled to, refuse an application for registration if it were being made at that time. Revocations cannot take place unless the society has been given an opportunity to make representations at a hearing or via correspondence. In preparation for this, licensing authorities should inform the society of the reasons why it is minded to revoke the registration and provide them with the evidence on which it has reached that preliminary conclusion. Representations that may result after such a decision should be handled in accordance with local procedures.
34.46 Following the conclusion of any hearings and receipt of representations, paragraph 51 of Schedule 11 of the Act then requires the authority to notify the applicant or the society as soon as possible if their registration is still to be revoked,or if their application for registration has still been rejected.
34.47 The applicant or society may decide to make an appeal against the decision, and has 21 days following receipt of the notice of the decision to lodge an appeal, which must be made directly to the local Magistrates’ court if in England or Wales, or the Sheriff court in Scotland. On appeal they may choose to affirm the decision of the licensing authority, reverse the decision, or make any other order.
34.48 As the purpose of permitted lotteries is to raise money for non-commercial causes, the Act requires that a minimum proportion of the money raised by the lottery is channelled to the goals of the society that promoted the lottery. If a small society lottery does not comply with these limits it will be in breach of the Act’s provisions, and consequently be liable to prosecution.
34.49 The limits are as follows:
34.50 Paragraph 39 of Schedule 11 in the Act sets out the information that the promoting society of a small society lottery must send as returns to the licensing authority with which it is registered, following each lottery held. This information allows licensing authorities to assess whether financial limits are being adhered to and to ensure that any money raised is applied for the proper purpose.
34.51 The following information must be submitted:
34.52 Paragraph 39 of Schedule 11 in the Act also requires that returns must:
34.53 The Commission may inspect a society’s returns, although it will not routinely do so. As such, licensing authorities are required to retain returns for a minimum period of three years from the date of the lottery draw. They should also make them available for inspection by the general public for a minimum period of 18 months following the date of the lottery draw. Licensing authorities should ensure that information is made available to the public regarding the location of statements, when they can be viewed and the cost of obtaining copies.
34.54 Licensing authorities should allow for returns to be sent to them both electronically and manually. The Commission recommends that each licensing authority should make details concerning the form of returns required available through appropriate media, such as licensing authority websites and leaflets.
34.55 Where societies run more than one lottery in a calendar year, licensing authorities must monitor the cumulative totals of returns to ensure that societies do not breach the annual monetary limit of £250,000 on ticket sales. Licensing authorities must notify the Commission if returns reveal that a society’s lotteries have exceeded the values permissible, and such notifications should be copied to the society in question. The Commission will contact the society to determine if they are going to apply for a lottery operator’s licence, thereby enabling them to run large society lotteries lawfully, and will inform the licensing authority of the outcome of its exchanges with the society.
34.56 Licensing authorities will also need to be aware of the status of external lottery managers, when monitoring returns. They are an individual, a firm or a company appointed by a society to manage a lottery or lotteries on behalf of the society, and are generally consultants that take their fees from the expenses of the lottery. A maximum of 80% of a lottery’s proceeds may be attributed to expenses and prizes, and managers’ fees must be included within this total.
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