Business development · 6 August 2018

Am I legally required to offer free entry when holding a prize draw?

prize draw entry fee
Are you legally obliged to offer free entry to a prize draw?
Running a prize draw for profit is becoming an increasingly popular marketing strategy among small business owners. But depending on the type of competition you hold, different legal restrictions will apply.

Writing for Business Advice, David Walker, founder of Grid Law, helps one reader understand when a method of free entry could be required by law.

Question

I am exploring the possibility of launching my own prize draw to take place on a regular basis as a way of raising money for charity, but also for it to be a viable business for me so that I could run it full time.

However, there’s one element that makes me nervous in order to stay on the right side of the law.

If I have read your article How to run a successful (and legal) prize drawcorrectly, I must enable a method of free entry.

Are you able to offer any advice on this? For obvious reasons I want to offer enticing prizes but need the raffle/prize tickets to cover the costs for this prize.

By rights could every entrant enter via the free method?

Answer

Thank you for your question.

According to casinositesuk.com, Businesses such as this, where you run regular prize draws or competitions for profit are becoming increasingly popular. This means they’re going to come under closer scrutiny from the likes of the Advertising Standards Authority, Gambling Commission and the Information Commissioner to ensure they are run legally and the entrants? rights are protected.

you’re therefore doing exactly the right thing by asking this question to make sure you stay on the right side of the law.

The first thing we need to do is clarify what type of prize promotion you’re intending to run. The three most popular options are:

  1. A lottery where people pay to enter and then the winner is chosen by chance
  2. A free prize draw where entry is free and the winner is chosen by chance
  3. A prize competition where people pay to enter and the winner is not chosen by chance but must demonstrate a sufficient level of skill, judgement or knowledge to stand a chance of winning
If you run a lottery you must obtain a licence from the Gambling Commission unless you fall within one of the exemptions. From what you have said, I would avoid trying to run a lottery.

As you are aiming to profit from this venture, free prize draws are also ruled out unless you want to use the prize draw as a way of promoting and selling products. Again, Im going to assume this is not the case.


 
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ABOUT THE EXPERT

David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry, advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.

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