The Gambling Commission (GC) national strategic assessment has recognised the increasing presence of ‘social media lotteries’ and the increasingly prominent risk of exposure to unlicensed gambling.
Social media lotteries are a growing issue due to their increasing presence on Facebook and other social media platforms. Historically such lotteries were low-level events, and intelligence identiﬁed many were being run from home by a small group of people and for low value prizes. However recent intelligence suggests larger, more organised operations may be in effect, generating signiﬁcant proﬁt.
The Gambling Commission deems social media lotteries, including those run by influencers, to be unlicensed gambling and therefore unlawful.
The following guidance has been provided by Woods Whur and Woods Valldata to assist Societies in ensuring they are aware of the risks ‘social media lotteries’ present as well as safeguarding the societies’ obligations concerning promoting the GC’s licencing objectives and not supporting unlicensed gambling.
Q: What makes a draw promoted by members of the public on social media platforms and giving sites such as Just Giving, Virgin Money Giving etc. an illegal lottery?
A: The requirements that meet the definition of a lottery are set out within Section 14 of the Gambling Act 2005 (the Act) and, specifically, a simple lottery is one where:
- There is a requirement to pay
- One or more prizes are awarded
- Those prizes are awarded by chance.
Therefore, if someone is required to ‘donate’ to be eligible to be entered into the draw this would meet the requirement to pay element of this definition. The other points regarding the prizes and those prizes are awarded by chance would mean that the promoter would be promoting an illegal lottery.
There are different requirements for a lottery to be defined as a ‘complex lottery’.
Q: What if the person promoting the draw on social media platforms and giving sites is part of a club or organisation, would it still be an illegal lottery?
A: Lotteries are regulated under the Act and must be either licensed by the GC or registered with a local authority, depending on the size of the lottery. It is illegal for a lottery to be run without a licence or registration.
Q: Can a member of the public register themselves as a small society lottery with a local authority?
A: An individual, group or organisation would need to set themselves up as a non-commercial society to allow them to promote a lottery. It is not a requirement for this to a be a registered charity, but the promoter must be promoting as a non-commercial society and be able to show evidence of this when applying to be registered with the local authority.
Q: What should a Society do if they become aware a member of the public is running an illegal lottery with proceeds going to the Society?
A: If the individual changes the route of entry to allow both paid (donation) and free entry into the draw this would then be permitted and classed as a ‘free draw’ and therefore does not need to be licensed or registered. The definition within the Act requires payment for each entry. Where there is the option for entrants to be entered via a ‘free route’ then this would not be classed as a lottery in accordance with the Act.
Q: Would a Society need to refund any monies already donated whilst it was an illegal lottery?
A: There is no direct Licence Condition in breach as the Society has not promoted the lottery however a Society should be mindful of the overarching licensing objectives to which it must operate, i.e. gambling is to be conducted in a ‘fair and open way’. Where societies and charities become aware of illegal lotteries all efforts should be made to return the monies and confirm the position regarding acceptance of illegal lottery proceeds.
Q: Are there other types of lottery that do not require any licence or registration with the Gambling Commission or local authority?
A: There are a number of lotteries known as ‘exempt lotteries’ set out in Schedule 11 of the Act and they are as follows:
- Incidental lottery: These can be held at both non-commercial and commercial events to raise money for charities and other good causes, but they cannot be operated for private or commercial gain. Lottery results can be announced during or after the event, but tickets can only be sold at the event and while it is taking place.
- Private society lottery: These must raise money for the purposes for which the society is conducted or to raise funds to support a charity or good cause . The advertisement of the lottery can only be done on the society premises and only members or guests on the society premises are permitted to purchase a ticket.
- Work lottery: These can be held at both non-commercial and commercial premises to raise money for charities and other good causes, but they cannot be operated for private or commercial gain. The advertisement of the lottery can only be done on that single premises and only employees at that single premises are permitted to purchase tickets.
- Residents lottery: These must raise money to support a charity or good cause. The advertisement of the lottery can only be done on the premises and only residents are permitted to purchase a ticket.
- Customer lottery: No profit can be made and the price payable must be the same, tickets must not be sold to children under 16 years of age. The advertisement of the lottery can only be done on the premises and only customers are permitted to purchase a ticket. A customer lottery cannot be conducted on a vessel.
In all the above lottery types there are also restrictions on deductions for expenses and prizes; requirements surrounding tickets and rollovers are not permitted. These lottery types do not require a licence or authorisation if they meet the definition of the exempt lottery type.
For more information on running prize competitions and free draws please refer to the Gambling Commission guide: https://www.gamblingcommission.gov.uk/PDF/quick-guides/Prize-competitions-and-free-draws-quick-guide.pdf
For more information on ‘exempt lotteries’ please refer to the Gambling Commission guide: https://www.gamblingcommission.gov.uk/PDF/quick-guides/Running-a-lottery-quick-guide.pdf