Prize draws dodge regulation – for now – as UK government prepares voluntary code

The UK government is to introduce a voluntary code for prize draws and competitions (PDCs) operators later this year, going against calls to regulate the sector.

In a speech made in the House of Commons, Baroness Fiona Twycross, minister of state for the Department for Culture, Media and Sport, confirmed plans to unify the approach across the sector. Baroness Twycross said the success of the code will determine whether the government opts to take legislative action later down the line.

The UK’s Lotteries Council has previously made a case for stricter regulations for PDCs, which are not governed by the Lottery Act, but a voluntary code will not require PDCs operators to obtain a licence from the Gambling Commission.

What are PDCs?

PDCs are games where the outcome is decided by chance, with both paid and free entry routes for players to choose from. These games do not require a licence under the Gambling Act 2005, due to the option of a free entry route being offered.

An example of these types of games would be competitions run by TV shows, who can invite the audience to answer a general knowledge question without falling under the remit of the Gambling Commission. Among the prominent operators in this space is Omaze, which offers prizes such as luxury houses and cars.

Baroness Twycross said: “This government has made it clear that we want people who participate in prize draws to be confident that proportionate protections are in place.

“This code will help provide a uniform approach across the sector to strengthen player protections, increase transparency and improve accountability of prize draw operators. My department has worked closely with the sector over the past six months to start to develop this code.”

It is currently unclear what the exact terms of the code will be, or which operators will be signing up to it.

Could age verification become mandatory for PDC operators?

Richard Williams, Partner at Keystone Law, told iGaming Business: “While we are not sure what will be included in the voluntary code, the London Economics Report flags some areas that the code could focus on, as an alternative to legislation.”

Williams suggested the code could require prize draw operators to verify the age of participants and ramp up player protection measures. These could include self-exclusion schemes; safer gambling messaging and spending caps, as well as prohibiting the use of credit cards to buy draw tickets.

“It’s possible that there may also be a requirement to donate a minimum percentage of ticket sales to charity, or to clearly explain what percentage of tickets sales is donated to charity,” he added.

Prize draws a hot topic

Andrew Rhodes, CEO of the Gambling Commission, has previously suggested PDCs could be cannibalising traditional lotteries.

In a recent interview with iGaming Business, Helmut Becker, CEO of lottery brokerage Zeal Network, argued lottery operators should focus on innovation within their own products rather than PDCs.

Richard Williams expects a monitoring period of at least a year for prize draws, to assess whether any measures are successful. He said the code was largely an attempt to avoid introducing legislation.

“Introducing legislation to regulate commercial lotteries would be complex and as we have already seen, this is not a priority for the government,” Williams explained. “It’s likely that this can will just be kicked further down the road by the Labour party.

“If a few bad apples don’t improve their practices, this could lead to a major shake-up for the entire industry. The prize draw industry is highly competitive and many operators won’t want to incur additional costs, such as age verification, when their competitors have an unfair advantage by not complying with the code.”    

Government outlines prize draw concerns in market study

Baroness Twyness’ speech came after the UK Government published a data-driven market study on PDCs, claiming there is a “clear risk of gambling harm” from them.

According to the research, PDCs players are significantly more likely to experience gambling harm than the average bettor.

The study covered 22 PDCs operators and 764 PDCs players. A total of 12% of players were found to have gambled with negative consequences and a possible loss of control, according to the Problem Gambling Severity Index.

By comparison, 3% of the general population and 5% of all gamblers fall under the same category, based on data recorded in 2022. It should be noted though that it is not an equal comparison, as PDCs are a single bet type, with the 2022 data regarding all other bet types.

The report stressed that any potential intervention should be proportionate, noting it found no direct evidence of a causal relationship between PDC participation and harmful gambling. However, it did identify several areas where oversight of the PDC market needed improved.

Could PDCs fall into the Gambling Commission’s orbit?

The government noted in the report the potential option to bring PDCs under the oversight of the Gambling Commission. This would require operators to set a minimum age for participation and provide self-exclusion mechanisms, among other requirements.

An alternative option would be to assertively enforce existing consumer protection laws. The Advertising Standards Authority could provide closer scrutiny, having previously taken action against PDC operators.

The third recommendation made in the report was for the voluntary code, which the government said was supported by surveyed operators.