Paid-for prize draws

Paid-for prize draws a route to debt

So the other day I set aside some time to catch up on some reading and dipped into Gambling Insider, a publication which describes itself as providing in-depth analysis for the gaming industry. And inside Gambling Insider I saw a story which really piqued my interest.

According to some recent research, UK consumers have accumulated a total of £117 million in credit card debt on unregulated draws and competitions in the last year, with almost one in ten people who have entered so-called ‘big ticket prize draws’ – the kind of draw which you pay to enter and which has a luxury property or vehicle on offer as its top prize – ending up in debt as a result. In total, an estimated £860 million has apparently been spent on paid entries to prize draws in the last year.

Those are big numbers and very concerning. In fact, using credit cards to gamble has been banned in the UK since April 2020 and the overwhelming majority of prize draws in the UK are effectively free to enter, with the only cost being the purchase of a product or the cost of actually entering, ie what you pay for the text.

Paid-for prize draws

However, there has recently been something of a boom in paid-for prize draws, where the revenue from ticket sales funds the prizes. Property raffles, which I’ve blogged about several times, are a common example of this phenomenon and they frequently fall foul of the CAP Code, which is the regulatory framework for prize promotions in the UK (although complaints about property raffles are now being referred to the National Trading Standards Estate and Letting Agency Team).

By the way, I keep specifying ‘UK’, because the rules for running prize promotions can differ enormously from country to country, and indeed the rules for running a prize promotion in Northern Ireland are different from those in places in England, Wales and Scotland, but that’s for another day and another blog.

So, back to the story in Gambling Insider. The research was commissioned by an Australian lottery software company called Jumbo Interactive, which has recently purchased a UK company called Gatherwell and moved into the UK market, and it was carried out by Opinium, which as I understand it polled 4000 UK adults towards the end of October. Apparently the research, so the story says, pointed to the conclusion that all prize competitions and prize draws should be regulated in the same way as gambling.

Consumer protection

Nigel Atkinson, Jumbo Interactive UK’s general manager, commented. “A huge amount is being spent on credit cards on prize draws, pushing people into debt – despite the free entry option being the reason they are exempt from oversight. With so much money changing hands, the government needs to look at the proper regulation of prize draws and competitions to better protect consumers.”

Tony Vick, chair of the Lotteries Council, added: “The Lotteries Council is increasingly concerned about the use of prize draws operated by commercial gambling companies which are marketing themselves in a similar way to charity lotteries.

“Lotteries face a series of legislative hurdles that restrict our ability to grow and raise funds for good causes while prize draws face no limits on how many tickets they can sell, what prizes they can offer, and choose whether and how much to give to any charity. We hope the Government looks at this to ensure a fairer playing field.”

Regulatory awareness

Now I absolutely agree with Nigel that consumers should be protected and understand where Tony’s coming from, because he’s representing lotteries where the profits go to good causes. However, the type of prize draws that Prizeology usually runs – promotions that raise the profile of brands and reward consumers – are currently regulated by the CAP Code and don’t need to be regulated in the same way as gambling. I mean, I’m not sure we need to BePrizeDrawAware in the same way that we are encouraged to BeGambleAware.

Sure, it might be nice to think that the ASA had the power to fine persistent offenders rather than just naming and shaming them, but I don’t believe Prizeology’s clients should have to apply for a licence to run a promotion, as you do if you run a lottery. What is important, though, is that there are some safeguards put in place around these for-profit (whether a good cause also benefits or not), paid-for prize draws, so that people don’t get themselves into debt buying just one more £5 ticket in the desperate hope that they will win the home or car of their dreams.

Incidently, the ASA, which administers the CAP Code, says promoters should take legal advice before embarking on promotions with prizes, including competitions, prize draws, instant wins and premium promotions, to ensure that the mechanisms involved do not make them illegal lotteries – and that’s exactly the kind of advice Prizeology can assist with.

You can contact Prizeology on via hello@prizeology.com or 020 7856 0402 or email us.

Sarah Burns is Prizeology’s Founder and Chief Prizeologist. 

© Prizeology and The Prizeologist Blog, 2021. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited.

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