Legal Eagle - UK Lotteries in clubs
Lotteries, such as prize draws, are often organised with the best of intentions, but are they always legal? Our Legal Eagle David Lucas explains.
According to the Gambling Commission, lotteries are the preserve of good causes. A lottery can provide a method of raising money for a good cause provided none of the proceeds are used for private or commercial benefit.
The Gambling Act 2005 defines an arrangement as a lottery if it contains all of the following elements:
• People pay to take part.
• Prizes are awarded to those people.
• The prizes are awarded by chance (i.e. luck)
An arrangement which falls within the definition of a lottery is illegal unless it fits within one of the eight categories of permitted lottery contained in the Act.
Three categories (small and large society lotteries and local authority lotteries) require a licence fromthe Gambling Commission or registration with a licensing authority. This article is concerned with the other five types of lotteries which are allowed under the Act without the need to obtain any form of permission.
1. Incidental lottery These lotteries can be held at any event as an additional amusement. The event may last for more than a day but tickets for the lottery may only be sold at and during the event. The lottery must be promoted for a charitable or other good cause and not for private gain. A maximum of £100 can be deducted from the proceeds in respect of the expenses of organising the lottery. No more than £500 can be deducted from the proceeds for prizes. There is no maximum limit on the value of donated prizes. The outcome of the lottery can be determined at the event or on a later date. A rollover from one lottery to another is not allowed. An example would be a raffle at a dance or a fete.
2. Private society lottery Any society or group which is not established for gambling purposes can organise such a lottery. This will include private members’ clubs and sports clubs. The lottery must be promoted for any purpose for which the society is conducted or any other purpose except private gain. Tickets may be sold to members of the society in any location but can only be sold to non-members on the society’s premises. The lottery may only be advertised on the society’s premises and rollovers are not permitted. An example would be a sports club raffle.
3. Work lottery Tickets may only be sold to people who work for the same employer at the same set of premises. Advertisements relating to the lottery are also limited to the same set of premises. All the proceeds of the lottery must be used to pay for prizes and the expense of organising the lottery or for a purpose other than private gain. An example would be a raffle at an office Christmas party.
4. Residents’ lottery Tickets may only be sold to persons who live in the same set of premises and advertising must be limited to those same premises. All the proceeds of the lottery must be used to pay for prizes and the expense of organising the lottery or for a purpose other than private gain. No rollovers are allowed An example would be a raffle in students’ hall of residence. Tickets in a private society, work and residents’ lottery must all be the same price and are not transferable.
5. Customer lotteries The lottery may be organised by a person who occupies premises in Great Britain for the purpose of their business. Tickets may only be sold to customers aged 16 or over when they are on the business premises and advertising is limited to those same premises. No profit can be made from this type of lottery; all the proceeds of the lottery must be used to pay for prizes and the expense of organising the lottery.
No individual prize can be worth more than £50 and rollovers from one lottery to another are not allowed. There must be a period of at least seven days between lotteries held on the same business premises. Each ticket sold in the lottery must contain the name and address of the promoter of the lottery, the price of the ticket, the people allowed to buy or receive tickets and a statement that the rights created by the ticket are not transferable.
If an arrangement contains all three of the essential elements of a lottery it is regulated by the Gambling Act and can only be provided lawfully if it is one of the eight types of permitted lottery. If one of the elements is missing, there will still be a lottery but not one that is subject to any control by the Act and it can be provided without any form of authorisation. An example would be an arrangement whereby a group of people are involved in a prize draw but are not required to make any payment in order to take part.
Such an arrangement is often referred to as a “free draw”. If an arrangement does constitute a lottery as defined in the Act but does not fit within one of the types of lottery which is permitted by the Act it will be unlawful. It is an offence to promote or facilitate an unlawful lottery. It is also an offence to misuse the profits of a lottery which is authorised by the Act.
Report: David Lucas - Club Mirror Legal Eagle
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