A text transcription follows.
This transcript is for anyone with a hearing impairment or who for any other reason cannot listen to the MP3 audio file.
The following is the text spoken by OUT-LAW journalist Matthew Magee.
Hello and welcome to OUT LAW Radio, the weekly podcast that keeps you up to date on all the twists and turns in the world of technology law.
Every week we bring you the latest news and in depth features that help you to make sense of the ever changing laws that govern technology today.
My name is Matthew Magee, and this week we try to unravel the legality of a rash of competitions that are springing up in which you can buy a ticket for something like £25 to try to win a house. Is it a lottery? Is it a competition? Do they really do anyone any damage?
Well we are skipping the News this week to squeeze more gambling debate in, but you can catch up on all the week's technology law news at OUT-LAW.COM.
When is a competition not a competition? And when is drawing a name out of a hat of 46,000 names not a raffle or a lottery? All sound a bit philosophical? Well not for the Wilshaws, or the gambling industry, for whom these questions are absolutely concrete.
The sale of thousands of tickets to enter a draw to win the Wilshaws' Devon house has opened up a faultline in the UK's gambling legislation, leaving charity lotteries and competition companies in a state of confusion about how the law should be applied.
It all began when the Wilshaw family couldn't sell their house. They hatched a plan to sell 46,000 tickets at £25 each, with one ticket holder winning the house. They sold their forty six thousandth ticket this week raising £1.15 million, and the competition is now closed, although the winner hasn't yet been picked.
The trouble is they couldn't hold a straight draw because it is illegal to run a private lottery for profit. The National Lottery is a special case which is separately regulated, but all other lotteries must be run on behalf of good causes, can't give away more than £200,000 and must have a gambling commission issued licence.
What you can run for profit is a prize competition, but to qualify for this there must be something in the competition demanding the exercise of skill or judgement.
The Wilshaws asked a single question about the price of a fishing permit whose answer was easily findable online. Does this make it a prize competition? That is the crucial question.
The Gambling Commission's guidance is unclear and all parties agree that this will remain slightly uncertain until someone takes a court case and a judge clarifies how the law should be applied.
What the Commission's guidance does say is that something is not disqualified from being a prize competition just because the answer is findable online.
Steve Kuncewicz, a solicitor with law firm Ralli who is acting for the Wilshaws, told OUT LAW that it's that passage that makes the Wilshaws' competition legal.
Antoinette Jucker disagrees. She is a gambling law expert with Pinsent Masons, the law firm behind OUT LAW, and she says that she thinks the Wilshaws' plan breaches section 14(5) of the Gambling Act. This says that the piece of a competition requiring skill or judgement should discourage people from entering the competition and should knock out many of those who do enter.
In the case of the Wilshaws, because of the way the competition was structured, every single one of the 46,000 who have paid £25 will have answered the question correctly before they paid their money. One name will then be randomly chosen.
The confusion is not helped by the fact that the Gambling Commission refuses to clarify the situation. A spokesman did say that if there is any doubt about whether a competition involves skill or judgment the test in section 14(5) should be applied. It is this test that Jucker says the Wilshaws' competition fails.
But does all this matter? Jucker says it does, and that it leads to the rather unsavoury prospect of a market emerging of unregulated activity which some say amounts to gambling.
Jucker: It looks a little odd to have it entirely unregulated unless the Gambling Commission takes some interest in whether these prize competitions do indeed fall generally within the Regulation, where really significant sums can be raised - a million is not insignificant - in an entirely unregulated environment.
If you can convince the Gambling Commission that yours is in fact a prize competition it won't be regulated by them.
But those who do run lotteries on behalf of charitable causes have to contend with a stringent regulatory regime that limits what they can raise and what they give away. They couldn't, for example, give away the Wilshaws' million pound house because a prize can't be worth more than £200,000.
David Griffiths is the Lottery Manager of Ty Hafan Children's Hospice in South Wales. He explains some of the hoops he has to jump through to run the lotteries for his hospice.
Griffiths: The size of the lottery is limited to protect it against being attractive to crime and underworld interests. The amount that people are allowed to, the price that you're allowed to put on a lottery is now unlimited but it wasn't before, and there are certainly protections against selling to the young and the vulnerable to protect them from themselves. We have to offer a provision for people with problem gambling to be able to self exclude from our lottery if they so wish and that self exclusion we must monitor for them for a minimum of 6 months. That's something that we have to think about.
These are not restrictions that any house selling competition runner will have to deal with. But is it so bad if someone manages to shift their house via a competition in a depressed housing market?
The trouble, says Jucker, is that it is unlikely to be a one off. Already in the wake of the Wilshaws' success half a dozen new competitions have appeared. That number is only likely to increase, says Jucker, creating a whole market that is not subject to the Gambling Commission's restrictions.
Jucker: The terms and conditions are the terms on which one play on are apparent on the face of the internet. You don't have to go and rewrite the rules. There is a sort of template out there and I think, again, the temptation for people to run their own competitions using this, the very same or a similar format, will be very great. It is said that these limits were imposed in order to reduce the risk of fraud and criminal activity. I'm not for a moment suggesting anybody is doing that but, as I say, once these schemes proliferate then there is the risk of that activity coming to the fore.
But will these competitions actually do any damage? Well those that run charity lotteries think so. Clive Mollett is the Chairman of the Lotteries Council, which represents those that run licensed lotteries in aid of good causes. He says that such competitions will take money out of the pool that the charities are all competing for.
Mollett: Even isolated instances shouldn't be permitted, frankly, because they are in breach of the Regulations and they are diverting money from good causes. But the reality is that the Gambling Commission, despite its very generous funding which runs into some £14 or £15 million the last time I looked, doesn't appear to have the resources or perhaps the inclination to stamp out these kinds of abuses.
Ty Hafan Lottery Association Manager Griffiths also agreed that such competitions compete with charities and risk taking money out of a limited pool.
So we asked the Gambling Commission to clear the issue up. Is a question that is easily answered online enough to qualify something as a competition?
They told us to look at the guidance. We explained that lawyers who had looked at the guidance had read it in diametrically opposing ways. Could they clear up the confusion? They told us to look at the guidance.
Though the spokesman claimed that the Commission policed diligently the boundary between prize competitions and illegal lotteries, though the Commission was given powers under the Gambling Act to take action against infringers, and despite the recent rash of similar competitions popping up in the Wilshaws' wake, the spokesman was unable to clarify at all whether these schemes are prize competitions or illegal lotteries.
Charities are not the only losers. Asmat Monaghan, a former IT Director for Nortel Networks, says she has spent two years putting together a system to sell houses, amongst other things, which she believes does satisfy the skill test in the Gambling Act and qualifies as a prize competition.
She says she and family members in the business Humraz Auction House have spent significant time and money ensuring that they comply with the rules. She says that anyone running a competition which doesn't comply poses a risk to all of those who do.
Monaghan: What I'm worried about is because of the way these raffles work, there's no vetting of them, there's no management of them, auditability. You can get a PayPal account no problem, bung it on. You just need somebody to be able to plonk together a website. If you're of the mind you can plagiarise somebody else's terms and conditions and you can lump this together offering something because of the euphoria of this one, people will participate thinking they are in for something good; and something somewhere will go pear shaped and then people will think everything like that is bad, but there is this potentially knock on bad publicity when these things go pear shaped because there's no control over them. There's no management of them. I always thought the Gambling Commission was the safety net. It seems that to be able to get away with putting something like this into the media going forward is to make it of such a high value that many people who should act and could act are the Gambling Commission. And if they don't then there's no safety net at all.
The trouble is that if the Gambling Commission will not take action, nobody else will. Customers of these schemes are unlikely, for example, to take a court case over a £25 ticket.
Pinsent Masons' Jucker believes that when parliament passed the Gambling Act it was clear about what it did and didn't want to see. What it didn't want was an unregulated market of private competitions which she at least believes are basically lotteries.
Jucker: Interestingly when this was going through Parliament, there were discussions with - some of the debates - they touched on this question of the power that the Gambling Commission would have to prosecute and it says: 'I don't think for one moment the Gambling Commission is going to go round having to do hundreds and thousands of prosecutions. One or two well publicised ones will probably do the trick and then everybody will know where they are.' This is in the context of forcing the line between lotteries and prize competitions. And I suppose that's really the point about this particular manifestation is that unless the Gambling Commission steps up now to sort of nip in the bud what could burgeon into quite a lot of activity they are going to have a job on their hands of actually discouraging proliferation of something which is actually sort of out of kilter with the line that Parliament has taken in relation to lotteries.
That’s all we have time for this week, thanks for listening.
Why not get in touch with OUT-LAW Radio? Do you know of a technology law story? We would love to hear from you on radio@out-law.com.
Make sure you tune in next week; but for now, goodbye.