By Gavin Doyle, Policy and Standards Officer, Fundraising Regulator
Does our charity need a licence to run a raffle online? Can we do a sweepstake in our office to raise funds for a local sports charity? How do I know if a draw to win a house is legitimate? These are some of the questions we’ve received through our enquiries service from both fundraisers and the public about lottery-based, free draw and prize competition fundraising.
Lottery fundraising can be an effective way for charitable organisations to raise funds and for people to support causes they care about. However, it can also be a complicated area. There are regulations fundraisers must follow when hosting a lottery, and the public should be aware of when taking part in this type of fundraising.
This information should help you to make an informed decision about hosting or taking part in a fundraising lottery. You should read this alongside section 12 of the Code of Fundraising Practice (the code) which sets out the standards for lottery fundraising, as well as free draws and prize competitions.
What is lottery fundraising?
‘Lottery fundraising’ is a term used to describe a range of gaming activities, such as a charity raffle, an office sweepstake or a tombola at a community fete. It is one of the most common forms of giving and is a growing source of income for charitable organisations.
Lotteries enable charitable organisations to raise money from a wide audience. The incentive of winning a prize gives charities a chance to gain new supporters and engage with people who wouldn’t normally donate.
A lottery is a game where you pay to enter, there is at least one prize and winning is purely dependent on chance. Lotteries cannot be run for private or commercial gain; they must only be run for charitable fundraising or fun.
Lotteries run by, or ‘on behalf of’, charitable organisations are either small or large ‘society’ lotteries (depending on the amount made from selling tickets). However, lotteries can also be organised by people looking to fundraise ‘in aid of’ a charitable organisation, such as workplace, residents’ and sports club lotteries (known as ‘private lotteries’).
Do you need a licence to run a lottery fundraiser?
In England, Wales and Scotland, all lotteries are subject to the Gambling Act 2005 and they are regulated by the Gambling Commission.
Some lotteries require permission from local authorities (such as small society lotteries), while organisers of other types (such as large society lotteries) need a licence from the Gambling Commission. Private lotteries at work or at home, as well as lotteries at events (known as ‘incidental lotteries’), do not need licences or permission.
The pandemic has meant that many fundraising activities have moved online. To run an online lottery you will need a licence from the Gambling Commission. Online lotteries include those carried out on social media, auction or selling sites, fundraising platforms and live streaming platforms.
The Gambling Commission sets out rules for who can enter, how many people can enter, reclaiming costs and what information must be on tickets. The rules will depend on the category of lottery you are planning.
If you are considering hosting a lottery, you should read the Gambling Commission’s fundraising and lotteries guidance, as well as its quick guide to lottery rules. Both will help you understand the regulations that apply to a lottery you may be organising or taking part in.
There is no legal definition in Northern Ireland for a lottery, but any activity must meet the Betting, Gaming and Lotteries (NI) Order 1985. The Department for Communities in Northern Ireland has a useful leaflet explaining the requirements and is currently reviewing the law related to online lotteries.
How are free draws and prize competitions different?
It is common for companies to run either ‘free draws’ or ‘prize competitions’ for expensive houses or cars in partnership with charitable organisations. Often, these companies will give a percentage of proceeds from the sale of entries to the draw to one or more charities.
Although they operate in a similar way, free draws and prize competitions are not considered types of lottery. However, there are still important things to consider when planning or taking part in one of these activities.
When you take part in a lottery, you must pay to participate. A genuine free draw, on the other hand, must either be completely free to enter or have a free method of entry (such as sending an entry using ordinary post). When you enter a prize competition, you will usually need to answer one or more questions requiring a certain level of knowledge or skill before taking part. Unlike lotteries, free draws and prize competitions in England, Wales and Scotland do not require a licence or permission and are not regulated by the Gambling Commission. They can be run for private or commercial gain.
If you are planning to run a free draw or prize competition in England, Wales or Scotland, you must make sure that it complies with the Gambling Commission's rules and is within the law. When in doubt, you should contact the Gambling Commission, which monitors the boundary between lotteries and genuine free draws and prize competitions.
The law is different in Northern Ireland, where any form of purchase that allows you to enter a prize draw is not allowed (see standard 12.6.3 of the code).
The standards on general fundraising behaviour still apply
When running any type of fundraising activity your behaviour must be guided by the Fundraising Values. These are the four core values of the code: legal, open, honest and respectful. If you are either a fundraiser planning to run a lottery, free draw or prize competition, or a member of the public considering taking part in this type of fundraising, you should read our guidance for fundraisers and advice for the public on the behaviours that should underpin all fundraising.