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Home » Professionals » Legal Guidance » A to C » Betting and Gaming

Betting and Gaming / Lotteries and Prize Competitions

This guidance was last updated on 14th December 2007.

 

Code for Crown Prosecutors Considerations 

Despite the growth and development of lotteries and competitions, there have been very few prosecutions. The most recent ones were in 1995.

Allegations of offences are rare. They have tended to come from the legitimate lotteries industry rather than members of the public. Nevertheless the Gaming Board for Great Britain has concerns about the proliferation of competitions used to promote commercial products, many of which are conducted by means of premium rate telephone lines.

The Law

As a general rule gaming, gambling and lotteries are illegal. However, certain activities are permitted subject to strict regulation. The only legal lotteries are the National Lottery, private, society (charity lotteries are the most common example of these) and local authority lotteries which are strictly regulated. Gaming (bingo, bets placed via bookmakers, fruit machines and casino gambling) is allowed but again is regulated. Prize competitions are allowed as long as they fall within the relevant legal definition.

The general rule that lotteries are illegal is contained in section 1 of the Lotteries and Amusements Act 1976 (the Act):-

All lotteries which do not constitute gaming are unlawful, except as provided by this Act (and Section 2(1) of the National Lottery Etc. Act 1993).

This rule stems from concerns about the potentially damaging effects of exposure to lotteries and other forms of gambling.

Section 2 of the Act sets out numerous offences which may be committed by persons connected with any unlawful lottery promoted, or proposed to be promoted, either in Great Britain or elsewhere. The list includes anyone who:-

(i) prints any tickets for use in a lottery;

(ii) sells, distributes, offers or advertises for sale or distribution, or has in his possession for such purposes, any tickets or chances in the lottery;

(iii) prints, publishes or distributes any advertisements of the lottery or any list of prize winners or any description of the drawing or intended drawing of the lottery calculated to act as an inducement for persons to participate in it or in other lotteries;

(iv) uses any premises or permits them to be used for purposes connected with the promotion or conduct of a lottery.

Definition of a Lottery

The Act does not define a lottery. The accepted definition is that given by Lord Widgery CJ, in Readers Digest -v- Williams [1976] 3 All ER 737, where he stated:

A lottery is a distribution of prizes by chance where the persons taking part in the operation, or a substantial number of them, make a payment or consideration in return for obtaining their chance of a prize.

Three essential elements therefore have to be present:-

(i) a distribution of prizes;

(ii) a distribution done by means of chance;

(iii) some actual consideration made by the participants in return for obtaining the chance.

In Imperial Tobacco Ltd -v- The Attorney General [1981] AC 718, the House of Lords approved Lord Widgerys definition. In that case it was found that in order to establish an unlawful lottery, it was not necessary to prove that money paid by the participants in return for obtaining a chance of winning was used to provide prizes or was paid into a fund from which prizes were provided. Therefore the donation of a prize would not necessarily stop a particular lottery from being found unlawful.

Prize Competitions

Under section 14 (Stones 6-1093) of the Act, prize competitions involving skill are permitted.

Section 14(1) makes it unlawful to conduct in or through any newspaper, or in connection with any trade or business or the sale of any article to the public-

(i) any competition in which prizes are offered for forecasts of the result either-
of a future event; or
of a past event, the result of which is not yet ascertained, or not yet generally known;
(ii) any other competition in which success does not depend to a substantial degree on the exercise of skill.

In Imperial Tobacco, Lord Fraser said that a competition must involve some effort or striving or dexterity. The presence of such factors would indicate that the scheme is a competition rather than a lottery. It is necessary then to consider whether a particular competition is one in which success depends to a substantial degree on the exercise of skill.

Free Entry

There is some uncertainty about what is and what is not free entry to a lottery or competition. With regard to alternative entry processes, there seems to be an acceptance that the cost of postage may be disregarded, although the legal basis for this is unclear.

For there to be a realistic alternative entry process, the availability of a free alternative process needs to be made obvious. What has not been clear is whether the Imperial Tobacco case can be distinguished from other situations when alternative entry processes are entirely open-ended. In Imperial Tobacco there was a strictly limited number of cards available through a free entry process (although they were very readily available). In most alternative entry processes there is no limit to the number of people who can use the alternative (normally postal) route. The CPS has expressed the view that with an open-ended alternative system, the approach under which the number of alternative free entries is assessed (to see if it is) would not apply. This is also a matter which was addressed in the Telemillion case and that approach was adopted. The CPS view was expressed in 1991 as follows: -

1. It is not in itself sufficient to make a scheme lawful that some participants do not purchase a chance in the draw.

2. The position is likely to be different where there is a genuine, realistic and unlimited alternative method of entry which is free.

3. In deciding whether a scheme appears to be unlawful and, accordingly, whether there is a realistic prospect of conviction for an offence under Sections 1 and 2 of the Lotteries and Amusements Act 1976, an assessment of the free entry route, is frequently the central issue.

R v Interactive Telephone Services Ltd 

Despite the growth and development of lotteries and competitions, there have been relatively few prosecutions. For this reason, the Telemillion case (August 1995) was of some interest. The case concerned a scheme (upon which legal advice had been taken) under which participants rang a premium rate telephone line and answered questions requiring skills. Approximately 60% of the participants answered the questions correctly and were entered into a draw. The draw was a matter of pure chance.

There was a free postal route into the scheme which enabled a participant to enter without payment other than the cost of a card and postage. The proportion of participants using the postal route never exceeded 0.18% of the total number of participants in any one month. The top prize was £250,000.

The prosecution contended that the scheme was an unlawful lottery, and an unlawful competition contrary to section 14(1)(b). The prosecution further argued that the postal route was not promoted with enthusiasm and should be regarded as irrelevant.

The defence was that the scheme had to be considered as a whole and, as an exercise of skill was involved, success in winning money prizes was dependent to a substantial degree on that skill. It was accordingly a lawful competition under section 14 and therefore not a lottery.

Alternatively it was argued that if the scheme was severed, skill played a sufficient part in the first stage for that to be a lawful competition. The prize in that competition was a lottery entry and that prize has a value. The second stage was then a lottery but it was free and therefore legal. It was finally argued that there was a genuine free route into the scheme and the actual number of postal entries was on the increase.

The case was heard by a Stipendiary Magistrate at Southampton Magistrates Court who found that:

i. the inducement to the public was the prospect of a substantial cash prize (as opposed to free entry into a draw as the defence had argued);

ii. although some skill was required to answer the questions put, that part of the scheme simply reduced the number of participants who entered the draw, but did not reduce the income to the defendant company from the participants;

iii. the postal route was never intended to be and never was used by any more than a tiny minority of participants and should be disregarded;

iv. The draw was matter of pure chance and this had become so predominant in the scheme that any initial skill ceased to be operative and could have no effect in determining the result.

A finding was therefore made that the Telemillion scheme was a lottery. Furthermore it was not a lawful competition and was in breach of section 14 because success did not depend to a substantial degree on the exercise of skill and it had been conducted by the defendant company in connection with its trade or business. Interactive Telephone Services Ltd was fined £2,500 for the lottery offence and nothing for the section 14 offence.

Premium Rate Telephone Competitions

Although it has been generally understood that a caller to a premium rate telephone competition was making a payment or consideration in return for obtaining their chance of a prize there has been a degree of uncertainty. The network operator is interposed within the payment process between the caller and the service provider. Also, it might not be the caller who is making the payment if the caller is not also the bill payer. However, in R v Interactive Telephone Services Ltd (the Telemillion Case) a premium rate provider was convicted in respect of an unlawful lottery. No argument was put on behalf of the defence that a payment or consideration was not being made.

Under section 21 (Stones 6-1110) offences under the Act may be committed by a company and its officers as well as by individuals.

Penalties

Offences under the Act are triable either way under section 20 (Stones 6-1099).

DPP Consent

Proceedings under Section 2 (1) (c) (iii) in respect of any matter published in a newspaper shall not be instituted except by or by direction of the Director of Public Prosecutions.

Under Section 23(1) newspaper includes any journal, magazine or other periodical publication.

Procedure Pre-trial

If you ask the Police to make enquiries in respect of an unlawful lottery, care must be taken to advise them about lottery law. If the allegation is in respect of a company, the police must be careful to establish the following:

(i) the company position of the person(s) interviewed;

(ii) the precise name of the company and its registered office;

(iii) confirmation that the scheme was run by the company;

(iv) whether legal advice was taken in connection with the scheme;

(v) whether the scheme was devised by the company or was it devised by a commercial organisation specialising in such promotions;

(vi) the number of entrants;

(vii) the number of entrants who used any alternative entry route.

Useful Links

The Gaming Board for Great Britain
5th Floor
Berkshire House
168-173 High Holborn
London WC1V 7AA
Tel: 020 7306 6269

E-mail address: enqs@gbgb.org.uk

Further Information

DPP -v- Bradfute and Associates Ltd [1967] 2QB 291.

Readers Digest Associates Ltd -v- Williams [1976] 3 All ER 737.

Imperial Tobacco Ltd -v- Attorney General [1981] AC 718.

Express Newspapers Plc -v- Liverpool Daily Post and Echo Plc [1985] 3 All ER 680.