Avoiding Falling Within the Scope of the Gambling Act 2005

The Gambling Act which came into force on 1 September 2007 presents a trap for the unwary.  For those running anything other than a skill competition or a free prize draw it is essential to be aware of the dangers of unknowingly falling within the scope of the licence requirements of the Gambling Commission.

 Where a competition is “betting”

A competition which involves guessing the outcome of a race or other event, or the likelihood of something occurring or not, or whether something is true or not, will be betting if payment is required to enter that competition. It does not matter whether or not the race or other event, whose result is being forecast, has already occurred, or whether or not one party knows the outcome. Guessing includes predicting using skill or judgment. A betting operating licence will be required to run such a competition.

Where a competition is “gaming”

If a skill competition involves “playing a game of chance”, it will be gaming – and so require the appropriate licence, usually a casino operating licence – whether or not any payment is involved. A game of chance includes a game involving elements of both chance and skill (and even if the chance element can be eliminated by superlative skill) other than a sport and it does not matter whether or not there are more than one participants.

Where a competition is a “lottery”

It is a criminal offence to run a lottery unless either you have a lottery operating licence or the lottery is exempt from the licensing requirement because it is a private lottery (e.g. a workplace lottery), a customer lottery, an incidental non-commercial lottery or a small society lottery and in each case the exempt lottery fulfils certain conditions set out in the Act.

Small society lotteries (that is, lotteries below certain financial thresholds which are operated by non-commercial societies) still need to be registered with the local licensing authority.

Lottery operating licences are only available to local authorities or non-commercial societies (or external lottery managers managing lotteries on their behalf). A commercial organisation cannot get a lottery operating licence for its own promotional purposes – see here.

Incidental non commercial lotteries

Incidental non-commercial lotteries – typically raffles at one-off charity fundraising events – are, generally exempt under the Act provided certain conditions are met as detailed below, but for most organisations, they are little help to avoid the scope of the Act. They must for example, be incidental to an event which is not (and is not intended to be) profit making, and the lottery must not be promoted for private gain. Tickets can only be sold at the event and only during the event and the results must be announced before the end of the event. This offers no reprieve for those organisations looking to operate a profit making enterprise.

The Limited Exemptions for Customer Lotteries

The Act introduced a new exemption for customer lotteries, but the conditions for exemption mean this is unlikely to be very useful in practice.  These conditions include the following:

• a maximum win of £50 per ticket;
• tickets must be supplied only to people who are on the promoter’s business premises as customers;
• no advertisement outside the business premises.
• no profits may be made;
• no rollover; and
• not more than one draw in any 7 day period.

Consequences of non- compliance

Any individual or company involved in promoting or managing an illegal lottery – including a competition which is a “lottery”- is guilty of a criminal offence under the Act and on conviction is liable to a fine of up to £5,000 and/or imprisonment for up to 51 weeks. 

If the competition does not satisfy the skill requirement, and involves payment (without a free entry alternative) the competition must meet the requirements of the Act, and applications for licensing must be made to the Gambling Commission.

The costs of application depend on the type of licence required and the category of fees applicable.