It’s unfair for free draws to evade lottery regulations

Among the most likeable attributes of the British public – as well as their incredible generosity to charities – is their attachment to fairness. The public believes that people and organisations should be treated fairly and equitably – as does the Lotteries Council – and that in essence is our concern behind the present and growing inequality that exists between the society lottery sector (commonly referred to as the charity lottery sector) and large scale, million-pound free draws.

Despite being widely recognised as low-risk and existing for charitable, rather than commercial purposes, charity lotteries are mired in regulation by virtue of being provided for by the Gambling Act.

Meanwhile, the million-pound free draw sector that has sprouted in Britain since the turn of the decade exists to make commercial profit while returning modest levels to charitable causes – all while offering the consumer an unregulated gambling product.

As the government acknowledged in its Gambling Act review white paper, there is concern that few people could tell the difference, or explain the difference, between a charity lottery and a million-pound prize draw. To the public they present as the same. 

A charity lottery is a ticketed draw that exists to raise money for a named charity or good cause. A prize draw is different because, while it can also be a paid-for ticketed draw donating money to a good cause – just like a charity lottery – there must also be a ‘free’ route of entry.

Rules regulating charity lotteries

This legislative loophole then means the difference between the two games of chance becomes huge. A charity lottery must secure a Gambling Commission licence, it cannot sell more than £50 million of tickets in any one year and it cannot sell more than £5 million of tickets in any one draw.

Similarly, a prize cannot exceed £500,000 in value and the prize must not exceed 10% of ticket sales. Rules also require 20% of the draw proceeds to be donated to the licensees’ nominated charity.

In terms of age restrictions and protective measures, the minimum age of play is 18 and no tickets can be bought on a credit card. While licence holders can also only incur reasonable expenses. All this is tightly regulated by the Gambling Commission to ensure compliance. 

As for free draws, absolutely none of these restrictions apply. Given that our sector has historically been told we must endure such a heavy burden, so as to maintain a distinction with the National Lottery, the present situation becomes doubly unfair. The supposed ‘unique ability’ of the National Lottery to offer million-pound prizes is completely upended.

How much do operators contribute to charity?

For the charities, million-pound free draws present the thin end of the wedge in respect of civil society fundraising. Society lotteries, on average, return 45% of every ticket to their chosen good cause, the Gambling Commission reports. By contrast, an operator like Omaze returns just 17% and Raffle House only 10%, according to their websites. Others give little information on what they give to charities.

The discrepancy may well date back to Heinz baked beans – remember the time when you could win a free family holiday to Florida if you sent in the winning wrapper? Prize draws were more of a marketing tool, not a ‘gambling’ product capable of competing with National Lottery and so were largely left alone.

But the world moves on and enterprising individuals have spotted an opportunity to heavily advertise a multi-million pound house in a free prize draw, allow free entries for the price of second class stamp (85p) postage, while offering a bundle of tickets for less than half that price.

Added to the appeal of the game is a seemingly hefty donation to a well-known charity and such operators have certainly created a viable market – one in which the free draw owners can keep private profit.

What does the future hold for licensed charity lotteries?

Charity lotteries could run free draws instead and avoid all the GC’s regulatory requirements. The concern is that some are actively thinking of doing so because of the regulatory divide. 

But I don’t see that as the answer as the government would still worry about consumer protection and the all-important charitable contribution as UK charities presently benefit to the tune of £420 million per annum from charity lotteries.

It is clear the new government must deliver on the previous administration’s commitment to regulate free draws, as noted in the Gambling Act review’s white paper.

To add insult to injury, if the government does introduce a new compulsory levy to tackle gambling harm – applicable to all products regulated by the Gambling Act – then it’s likely that charity lotteries will also be hit with this new ‘charity tax’, yet free draws that operate in much the same kind of way will not be included.

The Lotteries Council applauds innovation and effort that raises money for good causes – including free draws. We’d just like the same terms and conditions to apply to all, for the benefit of fundraisers, supported charities and consumers alike.

This op-ed is in response to previous opinion pieces on lottery regulation. These cover the challenges of regulating free draws and the views of a free draw operator.