Definition of a lottery
A lottery is an arrangement which satisfies the statutory description of either a simple lottery or a complex lottery
An arrangement is a simple lottery if:
- persons are required 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 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.
The Gambling Act 2005 creates two broad classes of lottery:
- Large society lotteries and lotteries run for the benefit of local authorities registered with the Gambling Commission
- Exempt lotteries - including small society lotteries which are registered with the Licensing Authority in which the principal office of the society is located.
Large Society and Local Authority Lotteries
If the arrangements for a society lottery are such that the total proceeds (ticket sales) in a single event exceed £20,000 or proceeds of previous lotteries in same calendar year reach £250,000 then the lottery is deemed a large lottery and may only be run under a lottery operating licence by the Gambling Commission.
Local Authority Lotteries may use the net proceeds of it's lottery for any purpose for which it has power to incur expenditure.
Application for such licences is undertaken with the Gambling Commission.
Exempt Lottery Types under the Gambling Act 2005
Incidental Non-Commercial Lotteries
An incidental non-commercial lottery is one that is not promoted for private gain and which is incidental to a non-commercial event. Examples may include a lottery held at a school fete; or at a social event such as a dinner dance. An event is deemed to be non-commercial if all the money raised at the event, including entrance fees, goes entirely to purposes that are not for private gain. Therefore a fundraising social event with an entrance fee would be non-commercial if the profits went to a society but would be commercial if the profits were retained by the organiser.
For this type of lottery, part one of schedule 11 of the Act, and regulations laid by the regulations, specify the following:
- The promoters of the lottery may not deduct more than £500 from the proceeds in respect of the cost of prizes.
- The promoters of the lottery may not deduct more than £100 from the proceeds in respect of the cost of other expenses, such as the cost of printing tickets or hire of equipment.
- The lottery cannot involve a rollover of prizes from one lottery to another.
- Tickets must only be sold at the premises during the event, and the result must be made public while the event takes place.
These can only be run by a business, at it's own premises and for its own customers. No prize can be more than £50 in value. This type of lottery cannot make a profit, and is unsuitable for fundraising.
The Act requires that in customer lotteries:
- the lottery must be arranged to ensure that no profit is made;
- tickets may be sold or supplied only by or on behalf of the promoter;
- no advertisement may be displayed or distributed except on the business premises;
- another customer lottery cannot take place within seven days on the same business premises;
- tickets are non transferable
- no ticket may result in the winner receiving a prize worth more than £50.
- no rollovers of prizes are permitted.
Each ticket in a customer lottery must state:
- the name and address of the promoter of the lottery
- the person to whom the promoters can sell or supply tickets;
- that the rights conferred by the sale or supply of a ticket in a customer lottery are non transferable.
For further information, please contact Newcastle City Council Licensing Authority.
Private lotteries must comply with conditions relating to advertising which state that no advertisement for a private society, work or residents lottery may be displayed or distributed except at the society or work premises, or the relevant residence, or sent to any other premises.
Private lotteries must comply with the conditions set out in the Gambling Act to tickets. In summary these are:
A ticket in a private lottery may be sold or supplied only by or on behalf of the promoters
Tickets (and the rights they represent) are non transferable
Each ticket must state the name of the promoter of the lottery, the person to whom the promoter can sell or supply tickets and the fact that they are non-transferable.
The price paid for each ticket in a private lottery must be the same, must be shown on the ticket and must be paid to the promoters of the lottery before any person is given a ticket.
Work lotteries - only people who work together on premises may participate. The promoter of the lottery must work on the premises. The lottery must not be run for profit and all the proceeds must be used for prizes or reasonable expenses incurred in organising the lottery e.g. a Grand National sweepstake. As this type of lottery cannot make a profit it it therefore unsuitable for fundraising.
Residents' lotteries - held by people who live in the same premises. The promoter of the lottery must reside on the premises and tickets can only be sold to other residents of the same premises. The residency requirement can still be satisfied where the premises are not the sole premises in which a person resides (e.g. a students halls of residence). This type of lottery cannot make a profit, and so is unsuitable for fundraising.
Small Society Lotteries
Small Society Lotteries are held by a non-commercial society and require registration with the Licensing Authority in which the principal office of the society is located.
If you wish to apply for a first registration, you must make an Application for Small Society Lottery Registration (pdf 30.74Kb) under the Gambling Act 2005. The fee for new registration is £40.
The Act defines two specific criteria for small society lottery:
Section 19 of the Act defines a society lottery as one promoted for the benefit of a non-commercial society. This would require it to be 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.
Furthermore the proceeds of any such lottery must be devoted to those purposes.
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 operator and must be licensed with the Gambling Commission.
Guidance for Small Society Lotteries (pdf 47.32kb)
Every society registered with local authority to run small society lotteries must submit a statement providing the following information:
the date on which the tickets were available for sale or supply and the date of the draw;
the total proceeds of the lottery;
the amounts deducted by promoters
the amounts deducted by the promoters of the lottery in respect of costs incurred in organising the lottery;
the amount applied directly to the purpose for which the promoting society is conducted or for which the local authority has power to incur expenditure (at least 20% of the gross proceeds) and
whether any expenses incurred in connection with the lottery were not paid for by the deduction from the proceeds, and, if so the amount of expenses and the sources from which they are paid.
Statement of return form (pdf 23.59Kb)