The Act of Parliament controlling lotteries is the Gambling Act 2005. The Act introduces a new regulator for all gambling (except the National Lottery and spread betting) in Great Britain, the Gambling Commission. It also introduces a new licensing regime for society and local authority lotteries and a registration system for small society lotteries.
The Act creates two broad classes of lottery:
- Large society lotteries and lotteries run for the benefit of local authorities which will be licensed by the Gambling Commission; and
- Exempt lotteries, including small society lotteries which are registered with licensing authorities (local authorities).
The Gambling Commission does not regulate the National Lottery, this continues to be regulated by the National Lottery Commission under separate legislation.
Definition of a lottery
An arrangement is a simple lottery if:
- Persons are required to pay to participate;
- One or more prizes are made available; 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 made available;
- The prizes are allocated by a series of processes; and
- The first of those processes relies wholly on chance.
Note: By virtue of section 14(5) of the Act, for the purpose of these definitions, a process which requires persons to exercise skill or judgement or display knowledge is to be treated as relying wholly on chance if:
- There is no reasonable expectation that a significant proportion of persons who participate will be prevented from receiving a prize; and
- There is no reasonable expectation that a significant proportion of persons who participate will be prevented from doing so.
There are basically three types of lottery that can be promoted under the Act. These are as follows:
Large Society Lotteries
These are lotteries promoted for the benefit of a non-commercial society. A society is non-commercial 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
- For any other non-commercial purpose other than that of private gain.
A licence is needed from the Gambling Commission.
Local authority lotteries
A local authority may use the net proceeds of its lottery for any purpose for which it has power to incur expenditure. A licence is needed from the Gambling Commission.
Exempt lotteries
Exempt lotteries do not require a licence from the Gambling Commission, although small society lotteries are required to register with their local authority. In addition to small society lotteries, exempt lotteries include:
- Incidental non-commercial lotteries – commonly held at charity fund raising events
- Private society lotteries – only members of the society and those on society premises can participate in the lottery
- Work lotteries – only people who work together on the same premises may participate
- Residents’ lotteries – only people who live at the same premises may participate
- Customer lotteries – only customers at the business premises may participate.