Small lotteries

In essence a lottery is an arrangement which satisfies the statutory description of either a simple lottery or a complex lottery, as per section 14 of the Gambling Act 2005.

An arrangement is a simple lottery if:

• persons are required to pay 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 pay 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.

Arrangements that fulfil all of the criteria of either of the above categories are defined as a lottery under the Act.

Section 19 of the Act defines a society as such if it is established and conducted:

• for charitable purposes;
• for the purpose of enabling participation in, or of supporting, sport, athletics or a cultural activity; or
• any other non-commercial purpose other than that of private gain.

It is inherent in this definition that the society must have been established for one of the permitted purposes, and that the proceeds of any lottery must be devoted to those purposes. It is not permissible to establish a society whose sole purpose is to facilitate lotteries - it must have some other purpose.

The Act defines a small society lottery with the definition breaking down into two distinct areas:

• society status – the society in question must be ‘non-commercial’ 
• size of lottery - 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 lottery operator, and must be licensed with the Gambling Commission instead.

The promoting society of a small society lottery must, throughout the period during which the lottery is promoted, be registered with a licensing authority. The licensing authority with which a small society lottery is required to register must be in the area where their principal office is located. If a licensing authority believes that a society’s principal office is situated in another area, it should inform the society and the other authority as soon as possible.

The limits are as follows:

• at least 20% of the lottery proceeds must be applied to the purposes of the society (schedule 11, paragraph 33);
• no single prize may be worth more than £25,000 (schedule 11, paragraph 34);
• rollovers between lotteries are only permitted where every lottery affected is also a small society lottery promoted by the same society, and the maximum single prize is £25,000 (schedule 11, paragraph 35); and
• every ticket in the lottery must cost the same and the ticket fee must be paid to the society (i.e. the society must take payment) before entry into the draw is allowed. (schedule 11, paragraph 37).

Lotteries may involve the issuing of physical or virtual tickets to participants (a virtual ticket being non-physical, for example in the form of an email or text message). Schedule 11(36) requires that a purchaser of a small society lottery ticket must receive a document which identifies:

• the name of the promoting society;
• the price of the ticket (must be the same for all tickets);
• the name and address of the member of the society who is designated as having responsibility at the society for promoting small lotteries, or (if there is one) the external lottery manager; and
• the date of the draw, or enables the date to be determined.

However, the requirement to provide this information can be satisfied by providing an opportunity for the participant to retain the message electronically or print it.

The Act requires that lottery tickets may only be sold by persons over the age of 16 to persons over the age of 16.

Prizes awarded in small society lotteries can be either cash or non-monetary. However the amount of money deducted from the proceeds of the lottery to cover prizes must not exceed the limits set out by the Act - i.e. that combined with any expenses incurred with the running of the lottery, such as manager’s fees, they must not comprise more than 80% of the total proceeds of the lottery. Donated prizes would not be counted as part of this 80% (as no money would be withdrawn from the proceeds to cover their purchase) but should still be declared on the return following the lottery draw.