Do I need a licence to run a prize competition?

It is a misconception that prize competitions are not regulated. The Gambling Commission oversees all regulatory measures and will monitor prize competitions to ascertain whether they are compliant with the provisions of the Gambling Act 2005. In addition, the Advertising Standards Authority will oversee how the CAP Code is being adhered to.

With this in mind, prize competition owners must not only comply with the above requirements, but they must also ensure that consumer laws and data protection laws are being adhered to, to ensure that they are compliant and able to operate their businesses.

The landscape of prize competitions is ever changing as the industry continues to expand rapidly, so it is important that you seek legal advice to ensure your business meets all of the current requirements.

How do I prevent my online prize competition becoming an illegal lottery?

As stated, betting, lotteries, and raffles are all overseen by the Gambling Commission and involve strict regulatory measures and require promoters of such businesses to apply to the Gambling Commission for a gambling licence. The Gambling Commission has a duty to prevent illegal gambling.

The Gambling Act 2005 does however permit online prize competitions and free draws to proceed without a gambling licence, if they meet the appropriate exemptions including where the “skill” based test is satisfied, or where no payment is required to enter.

What is the difference between gambling and a genuine prize competition?

Gambling is regulated by the Gambling Act 2005 which is defined as ‘gaming’, ‘betting’, or ‘participating in a lottery’. What these activities all have in common is the winning of a prize based entirely on chance.  Lotteries cannot be run for commercial gain, and most can only be run for good causes such as charities, sporting and cultural clubs, or other not-for-profit causes – all of which heavily rely on income from lotteries to support their work.

Prize competitions, on the other hand, involve either the exercise of ‘skill, judgment or knowledge’ in order to win a prize, or a free entry route. The distinction is not as clear cut as it might first appear. Having a test in your prize competition that is plainly obvious from the context, common knowledge, or that can be easily answered by an internet search will not be enough. The competition needs to be sufficiently difficult to either deter a significant proportion of people from entering the competition (e.g. because they think it is too challenging) or prevent a significant proportion of people from receiving a prize (e.g. because they get the answer wrong). What does and does not meet this threshold can be difficult to determine, but as these are highly scrutinised by the Gambling Commission, it is important that you get advice on whether your prize competition meets the requirements. The Gambling Commission would also expect to see lots of data to support the criteria.

The Gambling Commission advises that in case of uncertainty, you seek legal advice, as should you be found to be running an illegal lottery this may lead to prosecution.

Are there any other ways to run my prize competition lawfully?

The Gambling Act only regulates lotteries where the participants are required to pay to enter. Therefore, if you offer a free method of entry (even if it is not the only route of entry) you can ensure that your prize competition is lawful. To qualify as a free method of entry, there needs to be no additional charge above the standard rate – for example postage. The choice must be clearly publicised with as much prominence as the paid route and be no less convenient than any paid route. The system for allocating prizes must not distinguish between either route.

Can I advertise my raffle or prize competition site on Facebook and Instagram?

Facebook and Instagram (Meta) have very strict requirements when it comes to advertising prize competitions. Promoters must obtain Facebook’s permission to advertise their prize sites, which is requested by completing a Real Money Gaming (RMG) questionnaire. For prize competitions, Facebook requires a legal opinion from legal counsel (i.e. solicitor), that the prize competition is being run lawfully without the need of a gambling licence. We can assist with providing a legal opinion letter to support any RMG licence.

What else is necessary to ensure that your prize competition is legally compliant?

Your competition needs to be fully transparent around how it runs, by having good terms and conditions and a well drafted privacy policy in place. You also need to have regard to consumer laws, data protection laws and ensuring your website is protected

You also need to ensure your prize competition adheres to the rules in the UK Code of Non-Broadcast Advertising and Direct & Promotional Marketing (CAP Code) in so far as they apply to how you advertise and promote your prize competition.  For instance, any terms and conditions need to be clearly indicated on each piece of marketing. This includes specifying the number and nature of prizes available and noting any geographical, personal, or technological restrictions.

How can Ellis Jones help me with my prize competition?

The Gambling Commission will not offer any guidance on how your prize competition should be run. It is therefore advisable for you to seek legal advice on whether your prize competition is legally compliant.

Our expert lawyers have a wealth of experience in advising businesses on how their prize competitions should be structured and operated. We can offer a fixed fee for the legal fees to enable you to have bespoke terms and conditions, website terms of use and a bespoke privacy policy.

We also can advise you on your prize competition, whether you opt to include the postal entry route or include the element of ‘skill, judgment or knowledge’ in order to win a prize. We can also assist with providing you with a legal opinion letter in order to advertise your prize competition via Facebook or if your payment provider has requested it.

Please contact Diane Pearce at diane.pearce@ellisjones.co.uk and Victoria Simpkin at victoria.simpkin@ellisjones.co.uk to discuss your prize competition requirements. Alternatively, you can email us at info@ellisjones.co.uk

Our regulatory team may also be able to assist you with applying for a gambling licence should you require one, and if you have been treated unfairly by a gambling company then our specialist betting, gambling and gaming dispute solicitors can help. Get in touch with our experts today.