Luck of the draw

Workplace Sweepstake Pot

A number of helpful guidelines have been published by law firms advising on how to make sure workplace sweepstakes, presumably for the World Cup, stay legal.  In essence, to stay within the “work lottery” exemption under  the Gambling Act 2005,  make sure the whole pot goes out in winnings. 

If your office has been public-spirited enough to decide that some of its World Cup sweepstake pot should go to charity, it is more difficult to get this within the relevant exemption in the Gambling Act 2005 (the “incidental non-commercial lottery”).  It may therefore be running an unlawful lottery, as it will almost certainly not be licensed. 

So what do you do with this unwelcome news? I’m afraid this is a classic example of lawyers hijacking an event with wide public interest in order to generate publicity – you could say this post is merely another example. What is the point of lawyers describing what may be a commonplace situation without helpful practical advice? 

Commercial lawyers understand that as with many things in life, it’s a matter of risk. Here, the risk of the Gambling Commission descending upon you to prosecute you for having a charity lottery is very small. You were almost better off not knowing that you were operating an illegal lottery. That said, lawyers can get the assessment of risk wrong, too. For example, I would have put the risk of being prosecuted for a poor taste, joke tweet on Twitter at near zero, but the Paul Chambers case disproves that (see our post on this below). 

It’s the luck of the draw. 

Speaking of draws, let’s hope last night’s dire 1-1 against USA was England’s one and only poor performance of the World Cup and that your team in your office sweepstake wins, but only if you drew England.

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Dumb or Dumber Prize Competitions

If you need evidence that prosecuting authorities consider that the general public in the UK is intellectually challenged, then consider the application of the skill and judgment test in the law governing prize competitions.  This test is currently in the Gambling Act 2005 (s.14(5)), but existed in its predecessor, the Lotteries and Amusements Act 1976 (s.14(1)(b)).

The law on prize competitions is that persons operating a prize competition are not regulated by the Gambling Commission and do not need an operating licence under the Gambling Act 2005 if the prize competition is not a lottery.  To be a lottery, the competition must allocate one or more prizes wholly by chance and participants are required to pay to take part.  This covers competitions where there is an indirect payment, such as a charge in addition to the network costs of sending a text message in a competition with entry by mobile phone or entering a competition by phone with a premium rate number.

However, if there is an element in the competition that requires participants to exercise a degree of skill or judgement or display knowledge, then the competition will not be a lottery.  The degree of skill, judgement or knowledge required is that which can “reasonably be expected to prevent a significant proportion of persons” from participating or winning a prize.

The Gambling Commission has published revised guidance on prize competitions and free draws.  In the guidance it makes clear that only a court can definitively interpret the skill and judgement test.  In its guidance, however, the Commission points out that “competitions that ask one simple question, the answer to which is widely and commonly known or is blatantly obvious from the material accompanying the competition” do not in its opinion pass the test.  Yet these competitions appear to be everywhere.

So is the proliferation of these one-question competitions evidence that:

  1. the Commission is avoiding using its prosecution powers for some undisclosed internal policy reason (such as to preserve limited resources)?
  2. the Commission is unwilling or unable to use its prosecution powers for a lack of certainty about how a court would interpret the skill and judgment test? or
  3. prize competition organisers have been able to prove to the Commission’s satisfaction that significant proportions of participants are unable to answer simple questions?

Don't bet your house on it

No House

Avoiding negative equity or a slow-moving residential property market is proving to be a challenge for many homeowners wishing to sell.  One creative solution appears to be the use of competitions, lotteries or raffles, where the prize is the house.  In fact, there are reports of some going further, putting up cars, yachts, planes or helicopters as well as houses.

Sadly, in many cases these are all illegal.  Under the Gambling Act 2005 only licensed operators can conduct lotteries.  Prize competitions are lawful as these are not subject to the Gambling Act 2005 or the regulation of the Gambling Commission.  However, to be a prize competition outside of the scope of the Act it must not be a competition where the winner is chosen by a method relying wholly on chance.  In the words of the Gambling Act 2005:

“A process which requires persons to exercise skill or judgment or to display knowledge shall be treated for the purposes of this section as relying wholly on chance if— (a) the requirement cannot reasonably be expected to prevent a significant proportion of persons who participate in the arrangement of which the process forms part from receiving a prize, and (b) the requirement cannot reasonably be expected to prevent a significant proportion of persons who wish to participate in that arrangement from doing so. (section 14(5))

If a competition does not pass this skill, judgement or knowledge test, it is a lottery.  The Gambling Commission has published guidance in Prize competitions free draw: the requirements of the Gambling Act 2005.  However, this is not very helpful, as there is little case law to determine where the courts draw the line in deciding whether a competition requires an appropriate level of skill and judgement. This has led to a proliferation of “spot the ball” type competitions and other fairly lame ruses to introduce a skill and judgement test.

The Gambling Commission reports in its advice note Prize competitions and free draw: house competitions (May 2009) that the majority of organisers of house competitions it has contacted “have had significant difficulty in satisfying themselves that their house competition is legal.” If you really want to put your house up for a prize, get some proper legal advice.