A regulatory guide to competition services, quiz services & lotteries in the UK market
Services involving a prize or reward for premium rate interaction are, of ever increasing regulatory interest. Several factors can be of concern and should be considered to avoid operating an illegal lottery.
In the UK, Phonepaid Services Authority regulate the Premium rate industry yet do not have jurisdiction or involvement in the policing of illegal lotteries; this is done by the Gambling Commission. http://www.gamblingcommission.gov.uk/
We strongly advise seeking independent UK legal advice to avoid your service being viewed as an illegal lottery.
Section 14 of the Gambling Act 2005 covers this particular issue and we would suggest this is reviewed. The Gambling Commission have offered guidance on the distinction between prize competitions and lotteries. They draw attention to the intention of the law: that competitions that genuinely rely on skill, judgement or knowledge are to be permitted. As an example; a that game selects a winner based on the highest performance in a skilled game, would appear to fall within this.
The below factors when included in a promotion can avoid a potential illegal lottery:
A skilled route of entry – This is defined as an entry mechanism or barrier that can only be passed with a level of skill. This level of skill must not be “too easy”. Question's that are obvious or have no ability to get wrong may render your service a lottery.
> A free route of entry – This has to be the exact same prominence on the promotional material as the premium route.
> The definitions and exact requirements for these factors are open to interpretation to an extent however for the avoidance of doubt, txtNation will review your promotions.
Phonepaid Services Authority are unable to offer advice on the definition of a lottery. The Gambling Commission do have a guidance page but do not provide advice on individual competitions:
You do not need any kind of licence from the Gambling Commission to run a prize competition under the Gambling Act 2005.
A prize competition is a competition where success depends to a substantial degree on the exercise of skill, knowledge, or judgment. Such competitions may involve answering questions, solving puzzles, tie-breakers and so on.
Your competition could be classed as relying on chance if it does not prevent:
- a significant proportion of people from taking part
- a significant proportion of people who do take part from receiving a prize.
If a competition relies on chance it may be considered a lottery and could be unlawful.
If you are considering running a scheme of this nature please read our guidance *Prize competitions and free draws - The requirements of the Gambling Act 2005 - December 2009 and take independent legal advice beforehand.