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2016 – A busy year in the lotteries sector

2016 has certainly been busy for the lotteries sector, with good causes and External Lottery Managers (“ELMs”) alike constantly seeking to innovate in order to raise funds, in what has been a somewhat tricky climate for the charitable sector, during a year which has, notably, seen the introduction of the new Fundraising Regulator.

I am lucky enough to be standing advisor to the Lotteries Council and its members and I have been kept busy with a whole range of queries in the past year, coming from organisations large and small.

One of the areas in which I have most frequently been asked to advise is the question of whether it might be possible for a society to obtain multiple lottery operating licences in order to increase the amount of good causes money raised in this way. The Gambling Act 2005 places a limit of £10 million on aggregate proceeds – the total amount paid in respect of lottery tickets – that may be raised in reliance upon a single operating licence in the course of a year. A number of charities have already successfully obtained multiple operating licences in order to maximise revenue, and I know that more are currently considering doing the same.

A number of issues arise from the need to establish multiple, separate societies, how to structure these and the implications of any new arrangement in corporate governance terms. Perhaps most importantly, the Gambling Commission (“GC”) requires the aims and objects of each individual society to be absolutely distinct, if they are to hold multiple licences. This involves careful consideration of the totality of the work undertaken by the “umbrella society” and its division into clearly distinct and distinguishable areas. Early input and guidance from the GC as to what they might and might not find acceptable is essential. I have found the GC to be invariably helpful and proactive in this regard. Some care will also need to be taken to co-ordinate the applications for new licences with the surrender of the previous, “umbrella” licence.

All of this is taking place against the backdrop of the Government itself considering whether to increase the £10 million proceeds limited, something which the Lotteries Council is lobbying for. We know that this is very much still on the Government’s agenda, and the hope remains alive that this reform can be brought about by Statutory Instrument – something which is provided for within the primary legislation itself – rather than being swept up with the Government’s review of the gambling industry more generally, which includes its examination of the much more controversial area of fixed odds betting terminals, or Category B2 gaming machines, found in high street betting offices. The alternative, then, would be that any increase to lottery proceeds limits might be included in a new Gambling Bill which, of course, would take some time to work its way through Parliament. We anticipate that some progress may be made with this issue next year, and will keep you informed as soon as any further detail is known.

2016 has also seen various societies and ELM’s joining forces in innovative new collaborative lottery schemes, again, with a view to maximising revenue and I have also frequently been asked to advise on many of these new structures, and to carry out the regulatory due-diligence required before any agreements are signed.

Another area which those in the lotteries sector have been working on in the last year surrounds implementing changes brought about recently by the GC to its Licence Conditions and Codes of Practice, intended to bolster the provisions on social responsibility and keeping crime out of gambling. The requirements expected of the lotteries sector in terms of age verification have very helpfully been clarified by the GC and it is now clear that, save for instant win lotteries and lotteries that might conceivably particularly be attractive to children, it is not necessary independently to verify the age of each and every player, provided that the terms and conditions state that no one under the age of sixteen may participate. Independent age verification of a reasonable sample of players is, instead, acceptable.

At the same time, some changes have given certain societies and ELMs cause for concern – notably, the requirement to notify all players of any material changes to the terms and conditions of a lottery before they take effect. Some have worried that this will prove unwieldy and expensive and I have frequently been asked to advise on what are and are not material changes.

One very interesting recent development concerns the new requirement in Social Responsibility Code 3.5.3(8), which, as matters stand, applies to all remote gambling operators including society lotteries and ELMs, requiring them to make self-exclusion available via a wholly automated process. I was asked by one major ELM whether this provision should apply to them, as the arrangements that they currently had in place with their charity partners do not provide for such a facility to be made available on those partners’ website. Rectifying the matter would involve considerable work. Happily, through discussing the matter with the GC, we were able to secure a concession that this provision perhaps should not apply to the vast majority of remote lotteries, who operate simply by receiving low-level regular subscription payment details by telephone or email. The GC is now consulting internally on amending this provision to exempt remote lotteries which do not offer gambling via a website or instant win lotteries or other types of remote lotteries involving repetitive play. This may well result in a consultation paper on the issue next year and represents a significant positive result for my client in that we were assured that, in the meantime, the GC would be “very unlikely” to take compliance action because they were not making available a fully automated self-exclusion process.

Another sphere in which I have begun to see evolution – and this, in my view, is likely to gather pace next year – is the take-up by Local Authorities of the ability to use lotteries to raise monies to fund the work that they carry out pursuant to their statutory duties. The Gambling Act states that non commercial societies, sporting organisations and local authorities are all entitled to run lotteries but, whilst the first two categories currently commonly avail themselves of this opportunity, local authorities have not, historically, tended to do so. There are of course a few exceptions to this, and I know that many more authorities are looking at the possibility of running lotteries in the future. This is one area where I expect to see significant expansion moving forward.

Any review of the lotteries sector this year wouldn’t be complete without paying tribute to Clive Mollett, Chair of the Lotteries Council, who very sadly passed away in early October. Clive was a much respected stalwart of the Lotteries Council and the sector generally, a wealth of knowledge on lottery fundraising and a champion of the sector and of Lotteries Council members. I shall remember him fondly and should like to wish his successor, Jo Bucci, Managing Director of the People’s Postcode Lottery, all the very best in her new role. I look forward to continuing to work with Jo and the rest of the Lotteries Council Board and its members in 2017 and moving forward in, what will undoubtedly continue to be a period of change, development and innovation for lotteries.