Free draws should not face the same regulatory requirements as other gambling activities, says founder and CEO of free draw provider Raffle House Benno Spencer. Here he discusses why Labour should take a different stance to the previous government.
Labour’s plans for the gambling industry have been the topic of much debate in recent weeks, thanks largely to speculation on tax rises. But there have also been renewed calls for the government to make clear its plans in other areas, especially on proposals that were outlined in the previous government’s long-awaited white paper last year.
This includes the plan for a consultation on prize draws and competitions. The former Conservative government said it would consider regulating these operators.
In June, the UK’s Lotteries Council urged the incoming government to proceed with this consultation. And in recent weeks, anti-gambling groups and gambling industry consultants have argued that such draws are exploiting a loophole in the gambling legislation.
Free draws are compliant
But it isn’t a loophole. Indeed, as Keystone Law’s Richard Williams pointed out in his recent iGB piece on why it is so difficult to regulate free draws, “compliant draws are currently free of regulation in Great Britain”.
There’s a valid exemption carved out under the Gambling Act 2005 that allows organisers to arrange prize draws outside the legal definition of a lottery or gambling by offering people the chance to enter for free.
It’s used by all sorts of companies – think TV competitions, for one ubiquitous example – to allow them to offer prizes and run competitions without falling under the remit of the Gambling Commission.
The rules and regulations UK gambling companies need to follow are strict, and rightly so given the harm that high-volatility products such as slots could lead to if there were no regulation. But this type of regulation isn’t necessary or appropriate for draws where people have a chance to win things by entering for free.
Are consumers confused?
The previously government’s gambling review white paper suggested larger-scale competitions offering homes and cars as prizes could be confused with large society lotteries. The Lotteries Council’s argument when pushing for the consultation was that these draws can “prove hard for consumers to distinguish from not-for-profit charity lotteries”, however I’ve not seen any evidence suggesting consumers are confused.
But why would they be? We don’t offer the same prizes, we don’t have numbers draws and we offer a free entry option, which lotteries do not.
Lotteries argue that they are losing business to firms like ours, but that’s not really a reason for the government to intervene. If people prefer to enter draws where they can win a house and where they can enter for free, then perhaps that indicates a direction lotteries might follow rather than asking the government to take action.
It also seems like prize draws and competitions should be a low priority when the overarching aim of the gambling reform was the prevention of gambling-related harm.
If we look at the previous government’s track record, it consulted on loot boxes and then decided these should not fall within the Gambling Act. It is therefore difficult to understand why free draws should. This is particularly true when the concerns about loot boxes were mostly related to gambling harm, especially among minors, whereas competitive concerns seem to be the leading motivation for the criticism of free draws.
Even for those who choose to pay to enter our competitions, the frequency of our draws is so low that it is difficult to conceive of any gambling harm risks. The very fact we offer a postal free entry option prevents us from running high-frequency prize draws.
In fact, I’d suggest the potential for harm in our sector is less related to gambling addiction, but rather to consumer protection. While under the white paper the previous government planned to focus on large-scale prize draws, in my view, this government should change tack and focus instead on the lower end of this space.
Checks and balances
Because while we’re not subject to gambling regulation, there are many other marketing and consumer protection requirements that companies such as ours are subject to in the UK.
As we and others like us provide funding to charity, we are registered with the Fundraising Regulator, which provides a certain level of scrutiny and regulation.
When you’re of a significant size, you can’t get away with flouting these; as Advertising Standards Authority (ASA) rulings make clear, consumers are quick to complain about large companies running competitions if they aren’t in line with legislation and the regulator is equally quick to clamp down.
It’s the smaller companies that are more likely to go unnoticed if they break the rules and we do sometimes see bad actors in this space. It’s not feasible to suggest the ASA or Gambling Commission could police all of these, so a code of practice might help consumers.
A code of practice would give consumers the tools to identify good actors and also ensure they could continue to have the chance to win a life-changing prize for free.
Regulation, on the other hand, would likely mean consumers no longer have the chance to play for free and that would likely impact the amount we’re able to give to charities.
