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A lot happening in the Lotteries Sector…

This week has been a busy one for society lotteries, with the publication by the Gambling Commission (“GC”) of its finalised proposals for new Licence Conditions and Codes of Practice (“LCCP”) and a major debate in the House of Lords surrounding proceeds and prizes limits.

The GC consulted between 20 July and 30 September this year on introducing three amendments to the LCCP applying to society lotteries, centring around improving fairness and transparency for players. This is in line with its current stated priority of putting the consumer at the heart of everything operators, and the GC itself, do. This is also strongly reflected in its 3 year Strategy published in the autumn.

The proposed amendments were designed new requirements for so-called “umbrella”, or branded, lottery schemes to make plain to consumers precisely which society lottery they are signing up for, for the percentage of lottery proceeds applied directly to the good cause to be disclosed, and clearly to define for the first time each of “instant win”, “high frequency” and “low frequency” lotteries.

The GC received 27 responses to its Consultation, including 11 from charities and 11 from industry bodies. As a result of those responses it will introduce a new Social Responsibility Code provision (equivalent to a licence condition) requiring societies to disclose the percentage of lottery proceeds in the previous calendar year applied directly to the good cause – this will need to be done on the lottery page of their website, in their Annual Report or via “any other means appropriate to the size and scale of the organisation”. In addition it will introduce a new Social Responsibility Code provision to translate what has hitherto merely been contained in Guidance requiring operators promoting lotteries under a brand or “umbrella” to make it abundantly clear to players which particular society lottery they are being asked to sign up to.

The one proposed amendment that is not be pursued in full is the definition of the three categories of lottery. As a result of the Consultation the GC has reached the conclusion that defining “high frequency” and “instant win” lotteries will not achieve any additional clarity and hence the only amendment that it proposes to introduce to current social Responsibility Code provision (which currently defines “low frequency” lotteries as those where consecutive draws are at least two days apart) to make it clear that these include lotteries promoted by Local Authorities. The relevance of all of this, of course, is that “low frequency” lotteries are subject to less onerous requirements surrounding age verification and the GC’s Remote Technical Standards.

The other important event this week from society lotteries’ perspective was a major debate in the House of Lords on Tuesday surrounding an increase to proceeds and prizes limits, something which has been before Ministers for 5 years, which, as the Lords expressed, is far too long. This delay is the cause of considerable frustration and has led a significant number of my society lottery clients to seek my advice about obtaining multiple operating licences.

The problem is that, currently, society lotteries may only raise £10m in proceeds (aggregate ticket sales) per calendar year and £4m per single draw. Because the top prize is limited to £25,000 or, if greater, 10% of proceeds, this means that players of society lotteries can only stand to win £400,000 as an absolute maximum.

Those lobbying on behalf of the sector, particularly on behalf of the Lotteries Council and its members, would like to see the top prize increased to £1m, the annual proceeds limit raised to £100m and the single draw proceeds limit to £10m.

It was extremely heartening to read the Hansard transcript of the Lords debate where there was (almost) unanimous support for these reforms, together with a real appreciation of the work society lotteries do to fund good causes. They have raised over £38b for charity, the figure for 2011 of £100m rising to over £250m in the latest year for which records exist. The percentage of total proceeds applied directly to good causes rose from 43% to 43.6% last year. This is impressive when set against the statutory minimum of 20%.

As the Lords observed during the course of this debate, the total ticket sales last year in society lotteries last year of £586.66m amounts to less than 10% of the National Lottery ticket sales over the same period of £6.92b. There is no evidence to suggest that society lotteries pose any threat to the National Lottery – indeed, all the evidence points the other way – the two complement each other and there is certainly room for both of them.

As someone heavily involved in advising the society lottery sector and a passionate advocate of the good that they do in our communities, I am encouraged by the debate this week and fervently hope that this signals a possibility that these long-awaited reforms will be implemented, sooner rather than later.

I will of course keep you updated in further editions.