What is a Lottery?

In essence a lottery is an arrangement which satisfies the statutory description of either a simple lottery or a complex lottery, as per section 14 of the Gambling Act 2005 (“the Act”).

An arrangement is a simple lottery if:

persons are required to pay to participate;
one or more prizes are allocated to one or more members of a class; and
the prizes are allocated by a process which relies wholly on chance.

An arrangement is a complex lottery if:

persons are required to pay to participate;
one or more prizes are allocated to one or more members of a class;
the prizes are allocated by a series of processes; and
the first of those processes relies wholly on chance.

Arrangements that fulfil all of the criteria of either of the above categories are defined as a lottery under the Act.

What is a Society?

Section 19 of the Act defines a society as such if it is established and conducted:

for charitable purposes;
for the purpose of enabling participation in, or of supporting, sport, athletics or a cultural activity; or
any other non-commercial purpose other than that of private gain.

It is inherent in this definition that the society must have been established for one of the permitted purposes, and that the proceeds of any lottery must be devoted to those purposes. It is not permissible to establish a society whose sole purpose is to facilitate lotteries - it must have some other purpose.

What is a Small Lottery under the Act?

The Act defines a small society lottery with the definition breaking down into two distinct areas:

society status - the society in question must be ‘non-commercial’ (per ”Definition of Society” as outlined at 2. above).
size of lottery - the total value of tickets to be put on sale per single lottery must be £20,000 or less, or the aggregate value of tickets to be put on sale for all their lotteries in a calendar year must not exceed £250,000. If the operator plans to exceed either of these values then they will be classed as a large lottery operator, and must be licensed with the Gambling Commission (“the Commission”) instead.

The promoting society of a small society lottery must, throughout the period during which the lottery is promoted, be registered with a licensing authority. The licensing authority with which a small society lottery is required to register must be in the area where their principal office is located. If a licensing authority believes that a society’s principal office is situated in another area, it should inform the society and the other authority as soon as possible.

What are the limits placed on small society lotteries?

The limits are as follows:

at least 20% of the lottery proceeds must be applied to the purposes of the society (schedule 11, paragraph 33);
no single prize may be worth more than £25,000 (schedule 11, paragraph 34);
rollovers between lotteries are only permitted where every lottery affected is also a small society lottery promoted by the same society, and the maximum single prize is £25,000 (schedule 11, paragraph 35); and
every ticket in the lottery must cost the same and the ticket fee must be paid to the society (i.e. the society must take payment) before entry into the draw is allowed. (schedule 11, paragraph 37).

How is the Act different to the Lotteries and Amusements Act 1976?

The Act introduces some relaxation of society lottery law and in particular:

removes the individual limits on the percentage of proceeds that may be applied to expenses or prizes – although the maximum global amount that can be deducted for expenses and prizes remains at 80%, with a minimum of 20% going to the purposes of the society or to local authority expenditure;
allows rollovers of prize funds from one lottery to another promoted by the same society, provided the maximum single prize does not exceed £25,000 or 10% of the gross proceeds;
permits the sale of tickets by an automated process; and
removes the £2 maximum limit on ticket prices.

How do I comply with the regulations under the Act?

As the purpose of permitted lotteries is to raise money for non-commercial causes, the Act requires that a minimum proportion of the money raised by the lottery is channelled to the goals of the society that promoted the lottery. If a small society lottery does not acquiesce with these limits then it will be in breach of the Act’s provisions, and consequently be liable for prosecution (see 4. above for details of limits).

Paragraph 39 of Schedule 11 in the Act sets out the information that the promoting society of a small society lottery must send as returns to the licensing authority with which it is registered, following each lottery held. This information will allow us to assess, in particular, whether financial limits are being adhered to and to ensure that any money raised is being applied for the proper purpose. The information that must be submitted is as follows:

the arrangements for the lottery – specifically the date on which tickets were available for sale or supply, the dates of any draw and the value of prizes, including any donated prizes and any rollover;
the proceeds of the lottery;
the amounts deducted by the promoters of the lottery in providing prizes, including prizes in accordance with any rollovers;
the amounts deducted by the promoters of the lottery in respect of costs incurred in organising the lottery;
whether any expenses incurred in connection with the lottery were not paid for by deduction form the proceeds, and, if so, the amount of expenses and the sources from which they were paid; and
the amount applied to the purpose for which the promoting society is conducted (this must be at least 20% of the proceeds).

Paragraph 39 of the Act also requires that returns must:

be sent to us no later than three months after the date of the lottery draw, or in the case of ‘instant lotteries (scratch cards) within three months of the last date on which tickets were on sale; and
be signed (electronic signatures are acceptable if the return is sent electronically) by two members of the society, who must be aged eighteen or older, are appointed for the purpose in writing by the society or, if it has one, its governing body, and accompanied by a copy of their letter or letters of appointment.

Gambling and Lottery Licences