This guide is based on the UK's Gambling Act 2005. It was written in June 2010.
The Act sets out the regulatory framework for lotteries, betting and gaming.
Two kinds of sweepstake will be considered here:
- where an entrant makes a payment and is allocated, for example, a horse or team purely based on chance; and
- where an entrant makes a payment in order to guess the result of an event, for example a football match.
In each case, certain criteria will need to be met in order for the sweepstake to be exempt from the regulatory regime of the Gambling Act.
This is not a comprehensive consideration of all the different permutations of sweepstake which may be possible, and variations on the themes may require different considerations in the terms of the Act.
Sweepstakes based on chance can be lotteries
Where an entrant in a sweepstake is allocated, for example, a horse or a football team purely by the operation of chance, this is likely to fall within the definition of a "lottery" under the Gambling Act.
Under section 14 of the Gambling Act an arrangement is a "lottery" if:
- there is at least one prize;
- people have to pay in order to participate; and
- the prize(s) are allocated by chance.
It is a criminal offence to "promote" a lottery unless the lottery falls within one of the statutory exemptions or the promoter has a lottery operating licence. "Promotion" of a lottery is very widely defined, and includes selling lottery tickets and advertising a lottery.
Lottery operating licences are only available to local authorities, charities and those operating lotteries on their behalf, so getting a licence for a workplace sweepstake will not be an option for other businesses.
For an office sweepstake, there are two exemptions which may be relevant:
- the "work lottery"; and
- the "incidental non-commercial lottery".
No profits can be made from a workplace lottery – all the proceeds must be paid out as prizes, less any reasonable administration expenses. This means that a sweepstake which relies on the work lottery exemption cannot be used for charitable purposes. Winners could of course choose to donate their winnings to charity.
In order for a workplace sweepstake to be classed as a "work lottery" the promoters must work on a single set of premises (other than a boat), each person to whom a ticket is sold must work on those premises, and the sweepstake cannot be advertised anywhere other than those premises.
The Gambling Act does not explain what is meant by a single set of premises, but Gambling Commission guidance indicates this was intended for the situation where there are multiple buildings on a single site, and that it is not meant to cover multiple sites. So if you have premises on more than one site, you would not be able to run a single sweepstake across more than one of your sites.
Any ticket for this kind of sweepstake must be in the form of a document and state:
- the name and address of the promoter;
- the group of people who are eligible to buy tickets;
- that the ticket (and the right to any winnings) is not transferrable; and
- the price of the ticket.
If you want to use the sweepstake to raise money for charity, the exemption for "incidental non-commercial lotteries" may be helpful. In order to fall within this exemption, the sweepstake must be incidental to a connected non-commercial event, that is an event where all the money raised by the organisers (such as entrance fees or sponsorship) goes to a purpose other than private gain. A typical example might be a sweepstake at a dinner.
In order to be classed as an "incidental non-commercial lottery":
- not more than £500 may be spent on prizes (but other prizes may be donated);
- the promoter may not deduct more than £100 from the proceeds in respect of the expenses of organising the lottery such as printing tickets; and
- the rest of the proceeds must go to the nominated "good cause" (not private gain).
- all the tickets must be sold on the premises where the connected event takes place; and
- the tickets must be sold, and the results announced, while the connected event is taking place.
These last two restrictions make it difficult to use this exemption for a sweepstake run over a period, for example a sweepstake based on the different rounds of the World Cup.
Sweepstakes involving guesswork can be betting
Where a sweepstake involves the entrant guessing the outcome of an event, this is likely to fall within the definition of "betting" under the Gambling Act.
Betting includes making or accepting a bet on:
- the outcome of a race, competition or other event or process;
- the likelihood of anything occurring or not occurring; or
- whether or not something is true.
It does not matter whether the event in question has already taken place. "Guessing" for these purposes includes predicting using skill or judgment.
Where a sweepstake involves betting, it is an offence to operate that sweepstake without a betting operating licence unless a statutory exception applies. Whilst a betting operating licence may be available in theory, an occasional internal sweepstake may well not justify the cost or administration involved in obtaining a licence.
There are two statutory exceptions which may be relevant to this type of sweepstake:
- "workers' betting"; and
- the exception for "making or accepting a bet… otherwise than in the course of business".
To fall within this exception the betting must take place between people who are all employed by the same employer.
In some workplaces, it may be that the employees are employed by a number of different employers, for example different group companies or because some services have been outsourced. Where this is the case, any sweepstake open to employees of different employers will not fall within this exception.
Betting "otherwise than in the course of business"
Neither the Gambling Act nor the Gambling Commission has to date given any guidance on the scope of this exception. However, it would seem probable that an internal workplace sweepstake should fall within this exception: although people are eligible to participate in the sweepstake because they are employees of the business organising the sweepstake, the employer is not in the bookmaking business – i.e. the sweepstake is incidental to its business.
The Gambling Act 2005 includes several exemptions which may apply to internal workplace sweepstakes. However it is not always easy to fall within the detail of these exemptions, even if you are trying to raise funds for charity.
If you are thinking about running a sweepstake at work, you need to think carefully about how it is constructed to ensure that you do not inadvertently fall foul of the provisions of the Act and open yourself up to criminal prosecution.
If none of the lottery or betting exemptions is available to you, one option may be to run a "skill competition" rather than a sweepstake. See OUT-LAW's guide to Running a competition.
See also: Gambling Commission info about lotteries