lotteries in great britain

GAMING LAW REVIEWVolume 1, Number 4, 1997Mary Ann Liebert, Inc.

Lotteries in Great Britain

TONY COLES

BACKGROUND

ALTHOUGH IT is SAID that lotteries have beenaround since the mists of time, they began

to appear in England in the late sixteenth cen-tury, under the auspices of raising money forthe state. The earliest proceeds were (adoptingthe old English wording of the time) to be". . . converted towardes the reparation of thehavens and the strength of the realme and to-wardes other such publique good workes."

Lotteries were lawful at common law, and itwas not until the Lotteries Act of 16981 thatstatute provided all lotteries were "commonand public nuisances except for those autho-rised by by statute."

The 1698 Act (which actually remained inforce until the 1930's) laid down the principle,still applicable in Britain, that lotteries are un-lawful unless expressly authorized by statute.This principle is embodied in the current leg-islation, such as the Lotteries and AmusementsAct 1976 ("the 1976 Act"), as expanded by theNational Lottery etc. Act 1993 ("the 1993 Act").The 1993 Act, as well as liberalising the 1976Act, introduced (or perhaps re-introduced) anational lottery.

Because lotteries have been held to be law-ful under common law it seems to be the casethat, as long as a lottery is lawful, its winnercan sue for his winnings, unless the contractunder which he enters prohibits him from sodoing.2 It does, however, appear that, becausean entry into a lottery is not a contract by way

Tony Coles is a senior lawyer with Jeffrey Green Russell,one of the leading firms of London solicitors dealing withleisure, gaming, and related activities. He is an activemember of the International Association of Gaming At-torneys (IAGA).

of wagering, the prohibitions in the GamingAct of 1845 do not apply.3

DEFINITION OF A LOTTERY ANDITS ELEMENTS

There is no statutory definition of a lottery.It has, however, been held by a majority of theHouse of Lords4 that the definition formulatedby Lord Widgery CJ sitting in the DivisionalCourt is correct. According to this definition, alottery is:

. . . the distribution of prizes by chancewhere the persons taking part in the op-eration, or a substantial number of them,make a payment or consideration in re-turn for obtaining their chance of a prize.There are really three points one mustlook for in deciding whether a lottery hasbeen established: the distribution ofprizes; operation by means of a chance;and actual contribution made by the par-ticipants in return for their obtaining achance to take part in the lottery.5

This working definition of lottery is nowwidely used, and it is notable that even wherea scheme is not expressly set up as a lottery,the law will regard it as such so long as it bearsthe three relevant characteristics. Indeed, it hasbeen held6 that there is " . . . no limit to the in-genuity of the devisers of projects . . . and thereis accordingly, no end to the variety of schemeswhich may constitute a lottery."

In its simplest form, participants in a lot-tery contribute to a fund which they agreeamong themselves will be divided unequallyupon the happening of an agreed upon event;

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this scheme is similar to that of an ordinarysweepstake. The organizer of a lottery may ormay not be a participant, and it is not neces-sary that he makes a profit out of the scheme.7

Before considering in turn each of the threeelements of a lottery, it is worth noting that,on their particular facts, the following have allbeen held by the courts to be lotteries:

• a random distribution of gifts by a theatreimpresario to a paying audience;8

• coupons giving an entitlement to gifts ofdiffering values distributed in packets oftea sold to the public;9

• coins of different values enclosed in pack-ets of confectionery;10

• a newspaper "missing word" competi-tion;11

• a newspaper "limerick" competition;12

• a competition to detect a match with agreen flame sold in an ordinary box ofmatches;13 and

• a competition to select the order of meritof 13 named dog foods;14

Thus, for a lottery to exist, there must be:

(a) A distribution of prizesThe "prize" element of a lottery will normallybe the chance to win cash, but money is notessential. The prize can be anything said tobe of value.15 Indeed, one scheme providedfor participants to win, by pure chance, theright to compete in a second scheme in whichprizes were to be won by the exercise of skill.It was held that the right to join in the secondelement was a valuable prize in and of itself,thereby rendering the whole scheme a lot-tery.16 A scheme will also be held to be a lot-tery if it involves the distribution of prizesto all participants if the items obtained areof different values, so that there is, in theend, a chance as to what will be the valueof the prize won.17

(b) An element of chanceFor a scheme to be a lottery, the distribu-tion of prizes must depend wholly uponchance.18 Thus, if the chance of success de-pends upon the exercise of skill by the par-ticipant, the scheme is not a lottery eventhough chance may play some part in it. On

this principle, the following has been heldnot to constitute lotteries:

• correct predictions as to the results ofhorse races (it should be noted that thiskind of gamble is not considered bettingin a traditional sense);19

• the correct prediction of the number ofbirths and deaths in London during anamed week;20 and

• composing the best short sentence hav-ing some appropriate bearing on a se-lected word.21

However, a lottery described as a com-petition of skill remains a lottery as, for ex-

1 An Act for the Suppressing of Lotteries, 1698, 10 Will.3.2 There appears to be no express decision on the point,but see Jones v. Carter, 8 Q.B. 134 (1845); Barclay v. Pear-son 2 Ch: 154 (1893) and Simpkins v. Pays, 3 All E.R. 10(1955).3 Under §18 Gaming Act 1845, contracts by way of wa-gering and gaming contracts are void and unenforceable,but other betting transactions are binding. See also ToteInvestors v. Smoke, 1 Q.B. 509 (1968).4 See Imperial Tobacco Limited v. Attorney-General, A.C.718 (1981).5 Readers' Digest Association v. Williams, 1 WLR 1109,1113 (1976).6 Barnes v. Strathern, SLI37 (1929).7 See Allport v. Nutt, 1 C.B. 974 (1845).8 See Morris v. Blackman, 2 H.&C. 912 (1864).9 See Taylor v. Smetten, 11 Q.B.D. 207 (1883).10 See Hunt v. Williams, 52 J.P. 821 (1888)." See Barclay v. Pearson, 2 Ch. 154 (1893).12 See Blyth v. Hulton & Co Ltd., 72 J.P. 401 (1908).13 See Andren v. Stubbings. (1924) Times, 16 October14 See Hobbs v. Ward, 92 J.P. 163 (1929).15 See DPP v. Bradfute & Associates Limited, 2 Q.B. 291(1967).16 See id. It should be noted that it is possible that freecompetition/prize draw schemes which have becomevery attractive, and the legality of which is based on thedecision in Bradfute, may be at some risk. The case of R.v. Interactive Telephone Services Limited, decided beforea Stipendiary Magistrate in August 1995, has underminedsuch legality. The decision in question, being only at Mag-istrates Court level, is not of any binding authority, butit may be that further more authoritative cases will fol-low.17 This derivation, while not expressly stated in Taylor v.Swetten, 11 QBD 207 (1883), was treated as part of the ra-tio in Re International Securities Corporation Limited 99L.T. 581 (1909), 25 TLR 31 on appeal.18 See Caminada v. Hulton, 60 LJMC 116 (1891).19 See id.20 See Hall v. Cox, 1 Q.B. 198 (1899).21 See Scott v. DPP, 2 ILB 969 (1914).

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ample, where entries in a crossword com-petition were not judged on merit, but cho-sen as winners because they coincided"most nearly with the set of words chosenbeforehand by somebody not known, by amethod, if any, not stated, that person be-ing at liberty to act in an arbitrary, capri-cious or even malicious manner."22 Themerit or skill must be real skill which hassome effect. But if there are two separatecauses, one being skill and the other beingchance, no lottery exists.23

It should be noted that a competition inwhich success depends on some skill, butnot to a substantial degree, will not be a lot-tery, but may constitute an unlawful prizecompetition,24 since it is illegal to conductin or through any newspaper, or in con-junction with any trade or business or thesale of any article to the public, either:

(i) a competition in which prizes are of-fered for forecasts of the result eitherof a future event or of a past event theresult of which is not yet ascertained ornot yet generally known; or

(ii) a competition in which success doesnot depend to a substantial degree onthe exercise of skill.

It should be noted that this prohibitiondoes not apply to sponsored pool betting orin relation to pool betting operations carriedon by a person whose only trade or busi-ness is book making.25 However, the re-strictions outlaw competitions which seekto evade the prohibition on lotteries by in-corporating some element of skill. To belawful, prize competitions must include a"substantial" degree of skill.

Thus, an activity may be:

• a lottery, and therefore only lawful if op-erated under one of the alternatives setforth below; or

• a prize competition which is not a lotterybecause it involves an element of skill,but is unlawful because the degree ofskill is not "substantial;" or

• a prize competition which is not a lotterybecause it involves an element of skilland is lawful because the degree of skillinvolved is "substantial."

Since a lottery may also be gaming, an au-tomatic machine or, indeed, the playing ofbingo, will be both. However, lotterieswhich also constitute gaming are dealt withunder gaming law, which provides thatthey are not unlawful per se.26

(c) A payment or some other consideration from theparticipants

The third essential element of a lottery is,as we have seen in the judicially approveddefinition, ". . . some actual contributionmade by the participants in return for theirobtaining a chance to take part. . . ." Anyform of contribution, whether money orother valuable consideration, will be suffi-cient. It is not, however, essential that theprizes should be paid from the participants'contribution27, for a lottery will exist even ifthe prizes have been donated by a thirdparty.28 Furthermore, where a person buystwo items for one price it is impossible tosay that he paid only for one of them andnot for the other; therefore, "free" lotterytickets enclosed within packets of cigarettessold to the public at their normal retail priceshave been held not to be "free" for lotterypurposes. Rather, the price paid for the cig-arettes represents a contribution for the rightof the purchaser to take part in the lottery,thus rendering the scheme unlawful.29

It should be noted that the promotion ofa truly free lottery has never been illegal aslong as it does not breach the restrictionsagainst unlawful prize competitions.30 Thepurpose of anti-lottery legislation was al-ways twofold: first, to protect state lotteriesfrom competition (an objective whichlapsed with their discontinuance in 1826,but has been reborn with the recent intro-

22 Coles v. O d h a m s Press Limited, 1 K B . 416 (1936).23 See Moore v. Elphick, 2 A l l E.R. 155 (1945).24 See Lotteries a n d Amusement s Act, 1976, §14.25 See Id. §14(2).26 See Lotteries a n d Amusement s Act, 1976, §1 .27 See Atkinson v. Murrell , A.C. 289 (1973).28 See Imperial Tobacco Limited v. Attorney-General , A.C718 (1981).29 See id.30 See Lotteries a n d Amusemen t s Act, 1976, §14.

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duction of the UK's National Lottery); andsecond, to seek to prevent members of thepublic from losing their money. Obviously,neither of these objectives is in the least af-fected by a truly free lottery.

LEGAL LOTTERIES

Once the scheme is found to be a lottery, the1976 Act makes it unlawful unless it falls withinone of the exceptions created by that statute orby the 1993 Act. These lawful lotteries are:(a) GamingA lottery which is also gaming and which ispromoted wholly within Great Britain is per-mitted.31 Thus, the playing of bingo, which isboth a lottery and gaming, is not illegal if un-dertaken pursuant to the regime set out in the1968 Gaming Act.(b) Small LotteriesA small lottery fulfilling certain conditions andbeing promoted incidentally to an exempt en-tertainment is lawful.32 To fit within this ex-emption, the following conditions must be ful-filled:

(i) the whole proceeds of the entertainment(including the proceeds of the lottery),after deducting permitted expensesmust be devoted to purposes other thanprivate gain;

(ii) there can be no money prize,(iii) the tickets and chances must be sold and

the result declared as a part of and at theexempt entertainment; and

(iv) the lottery must not be the only sub-stantial inducement to people to attendthe entertainment.

This exemption allows lotteries to be run at,for example, dances, sales of work, charita-ble bazaars, and the like.

(c) Amusements with PrizesA lottery which is an amusement with prizesand is provided at an exempt entertainment isallowed.33 The promoters of an exempt enter-tainment (again, a bazaar, sale of work, fete,dinner, dance etc.) may lawfully provide, aspart of the entertainment, amusements withprizes, even though they constitute a lottery orgaming or both. The phrase "amusement withprizes" is not defined in the 1976 Act,34 but

whatever it means, the promoters can provideit as long as:

(i) the whole proceeds of the entertainment,after deducting expenses, are devoted topurposes other than private gain; and

(ii) the prospect of winning prizes at theamusement must not be the only or theonly substantial inducement to people toattend the entertainment.

A lottery which is an amusement with prizescan also be provided at certain commercial en-tertainments, such as a travelling showmans'pleasure fair, so long as it is not held on thesame site for more than 27 days in any year.35

(d) Private LotteriesA Private Lottery is lawful36 if promoted:

(i) for members of one society, establishedor conducted for purposes not connectedwith betting, gaming or lotteries;

(ii) for people who all work on the samepremises; or

(iii) for people who all reside at the samepremisesand:(I) if promoted by somebody who is one

for whom the lottery is promoted (i.e.,listed in paragraphs (ii) and (iii)above); or (in the case of a lottery pro-moted for members of a society under(i) above) is promoted by somebodyauthorized in writing by the govern-ing body of the society; and

(II) the sale of tickets or chances is limitedto people for whom the lottery is pro-moted (in the case of (ii) and (iii)above) or (in the case of (i) above) tomembers of the society or to otherpeople who are actually on that soci-ety's premises.

However, the following conditions mustalso all be observed for the promotion of aPrivate Lottery to be lawful:

• The whole proceeds, after deducting ex-penses incurred for printing and sta-

31 See id. at §1 .32 See id. at §3.33 See id. at §15.34 But see Fox v. A d a m s o n , A.C. 552 (1970).35 See Lotteries a n d A m u s e m e n t s Act, 1976, §16.36 See id. at §4.

LOTTERIES IN GREAT BRITAIN 4 7 9

tionery only, must be devoted to the pro- son only that in achieving that purposevision of prizes, or (in the case of a lottery the members of the society receive a ben-promoted under (i) above) to the provi- efit.38

sion of prizes and for the purposes of thesociety or part for one and part for the The whole proceeds of the lottery, after de-other; ducting sums lawfully appropriated on ac-

• There can be no written notice or adver- count of expenses and the provision of prizes,tisement of the Lottery other than on the must be applied for the purposes of the soci-tickets (if any) themselves, or on the ety.39

premises of the society (paragraph (i)above) or on the premises where the par- A Society's Lottery must:ticipants work or reside (paragraphs (ii) (i) be promoted in Great Britain;and (iii) above); (ii) be promoted by a society registered ei-

• The price of each ticket or chance must be ther with the Gaming Board for greatthe same and the price must be stated on Britain or with the relevant local author-the ticket (if any). Every ticket must be ity (municipality); andsold at its full face value, and no part of (iii) be promoted in accordance with athe purchase price can be refunded; scheme approved by the society in ques-

• Tickets cannot be sent through the mail; tion.40

and Thus, before being permitted to promote a• Certain information regarding the pro- Society's Lottery, a society must be registered

moter of the lottery and the distribution either with the local authority (municipality)of prizes must be stated on the tickets. or, as is more often the case, with the Gaming

Board. Reference is made below to the over-So long as these conditions are satisfied, Pri- riding function of the Gaming Board in relation

vate Lotteries are regularly operated for the to lotteries but, with regard to a Society's Lot-benefit of charitable (and other) societies, such teries, it is the registration authority for the so-a working mens' clubs, British Legion ciety in question if:branches, youth organizations, church organi-zations and the like. Indeed, an industry has • the total value of tickets or chances sold orgrown up which devotes itself to supplying to to be sold in the lottery is more thanthe promoters of Private Lotteries the para- £20,000;phernalia necessary for conducting them and, • the total value of tickets sold or to be soldso long as the cost of this paraphernalia is paid in the lottery and the tickets or chancesother than out of the proceeds of the Private sold or to be sold in all earlier lotteries pro-Lottery concerned, all is well. moted by the same society in the same(e) Society's Lotteries year is more than £250,000; or

A Society's Lottery is lawful37 if promoted • either of the above apply to any earlier lot-on behalf of a society which is established tery promoted by the same Society in thewholly or mainly for one or more of: same year or in any of the three proceed-

ing years.41

• charitable purposes;• participation in or support of athletic The registration authority (whether it be the

sports of games or cultural activities; and local authority (municipality) or the Gaming• purposes not described above, but which

do not involve private gain nor the pur-poses of any commercial undertaking. It "is noteworthy that any purpose for which 37 See id. at §5.a society is established and conducted 3* £ee'.d-at fjjU).

D€€ id 3LI §5(4)

and which is calculated to benefit the so- 40 See y" a t §5(3)'ciety as a whole is not private gain by rea- 41 See id at §5(3AM3C).

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Board) may, after giving the society an oppor- not exceed 55% of the proceeds. Furthermore,tunity to be heard, refuse registration if: there are currently the following limits:

• any person connected with the lottery inquestion has been convicted of one of thenumber of specified offenses;

• the society does not satisfy the require-ments of the 1976 Act;

• false information has been given in con-nection with the application; or

• the society has failed to comply with re-quirements in regard to the inspection ofdocuments or other information in rela-tion to lotteries previously run by it.42

The society can appeal to the Courts againsta refusal to register, but once granted, the reg-istration (unless revoked) remains in force un-til the society applies for its cancellation.

When making application for registration,the society must specify the purposes for whichit is established and must also supply a copyof the "Scheme" approved by the society andas mentioned above.

Such a scheme must, in addition to specify-ing the name and address of the society, andidentifying its relevant registration authority:

• state the maximum number of lotterieswhich are intended to be promoted underit in any 12 month period;

• state the proportion (not exceeding 55%)of the proceeds of the lottery which can beappropriated to prizes.43 This proportionmust not be exceeded except in "specialcircumstances,"44 namely, that the pro-ceeds of the lottery have fallen short ofwhat was reasonably estimated, that aclear and unconditional undertaking as tothe prizes was given in connection withsale of the tickets/chances and that theamount required to provide the prizes of-fered does not exceed the amount whichcould have been provided if the proceedshad been what was reasonably esti-mated.45

The legislation itself46 specifies rules as to theprizes which may be awarded in a Society'sLottery. Those prizes must comply with thescheme mentioned above, and must therefore

• no one prize may exceed the greater of£25,000 or 10% of the total value of the tick-ets/chances sold;

• the total value of the tickets/chances soldin any one lottery cannot exceed £lm; and

• the total value of the tickets/chances soldin any one year and promoted by the samesociety cannot exceed £5m.47

There is also an upper limit on the price atwhich a ticket/chance in a Society's Lottery canbe sold. This amount is currently set at 1, butthe figure can be varied by ministerial order.48

Furthermore, the price of every ticket/chancemust be the same and must be stated on it, andit is not possible to sell tickets at a discount, sothat offers such as "five for the price of four"are illegal. Tickets/chances cannot be sold oncredit, and the full amount must be paid "onthe nail." It is illegal to refund part of the pur-chase price to a buyer.49

The law also specifies that the amount of ex-penses (exclusive of prizes) paid out of the pro-ceeds of a Society's Lottery cannot exceed 35%where the proceeds of that lottery do not ex-ceed £20,000; if the proceeds do exceed £20,000,the limit is 15% or a larger percentage (whichagain must not exceed 35%) which the GamingBoard can fix on a case by case basis.

There are strict provisions about what isproperly an "expense" for the purposes of thelegislation, but within an overall combinedlimit of 80% for prizes and expenses (therebyprotecting the minimum of 20% which must goto good causes), up to 35% can be paid in ex-penses, including sales commission.50

42 See id. a t sched. 1 pa ra . 4A.43 See Lotteries (Prizes a n d Expenses: Variat ion a n d Pre-scription of Percentage Limits) Orde r 1997 (SI 43/1997).44 Lotteries Regulat ions 1993 (SI 3223/1993) sched. 2 para .

45 See id. at para 5(2).46 Lotteries a n d A m u s e m e n t s Act, 1976, §11.47 See id.48 See id.49 See id.50 See Lotteries (Prizes and Expenses: Variation and Pre-scription of Percentage Limits) Order 1997 (SI 43/1997).


The Lotteries Regulations 199351 include thefollowing restrictions on Society's Lotteries:

• no tickets/chances can be sold to a buyerunder 15 years of age;

• tickets/chances cannot be sold in thestreet, although a kiosk can be set up inthe street if there is no space inside it fora buyer. Thus, although the seller of a lot-tery ticket can be sheltered from inclementweather, a buyer cannot; and

• certain details must be specified on theticket, and there are controls to ensurearrangements for the supply of tickets insuch a way that winners cannot be identi-fied in advance.

It is not surprising that many charitable andother worthy bodies wishing to promote lot-teries for their own good causes find it conve-nient to employ specialist contractors to man-age lotteries on their behalf. This arrangementis now formalized,52 so that it is possible forany of the following to manage a Society's Lot-tery:

(i) a member of the society;(ii) an employee of the society if acting in

the course of his employment;(iii) a company wholly owned by the society;

or(iv) a person certified by the Gaming Board

as a lottery manager, or an employer ofa certified lottery manager.

The legislation enables the Gaming Board, inconsidering the granting of a certificate, to sat-isfy itself that the applicant is a fit and properperson to manage a lottery; once granted, a cer-tificate has effect until revoked. Revoking oc-curs if, after giving the lottery manager an op-portunity to be heard, the Gaming Boarddecides that he no longer is, or never was, a fitand proper person to manage a lottery.53 Fur-thermore, a certificate may either be refused orrevoked if it turns out that the applicant is act-ing on behalf of a third party who is not a fitand proper person himself, if any informationgiven by the lottery manager is materially false,or if he has failed to comply with any condi-tions imposed on his certificate.

Once appointed as a certified lottery man-ager, the successful applicant may manage lot-teries on behalf of one or more societies and,so long as the expense limits mentioned aboveare not exceeded, may be commercially re-warded for his labours. There are, in fact, anumber of commercial organizations provid-ing this service within the UK.(f) Local Lotteries

A Local Lottery is lawful if promoted inGreat Britain by a local authority.54 The localauthority may promote a Local Lottery for anypurpose, as long as it has the power to incurexpenditure under any enactment.55 In pro-moting a Local Lottery, the local authoritymust:

(i) ensure that it is run in accordance witha scheme registered with the Gamingboard. Essentially, the bases of such ascheme are the same as those applicableto schemes adopted by societies in thepromotion of Society's Lotteries and asset out above;

(ii) give such publicity to the object of theLocal Lottery as will be likely to bring itto the attention of ticket buyers;

(iii) apply the proceeds only to the objects ofthe Local Lottery unless the Governmentagrees otherwise; and

(iv) pay the whole proceeds of the Local Lot-tery (after the expenses of promoting itand providing the prizes) into a separatelottery fund for each lottery.

Most of the controls and restrictions on So-ciety's Lotteries apply equally to a Local Lot-tery, with the obvious substitution of the localauthority in question for the relevant society. Itis also open to a local authority to employ a cer-

51 Lotteries Regulat ion 1993 (SI N o . 3223/1993) sched. 2para . 5(1).52 See Lotteries a n d A m u s e m e n t s Act, 1976, §9A.53 See id. at sched. 2A.54 E.g., ei ther a coun ty council , a district council , L o n d o nb o r o u g h council , the C o m m o n Counci l of the City of Lon-don , the council of the Isles of Scilly or a par i sh council;and in Wales, either a county council, a district council,a community council or a county borough council—all ofthese examples being variants of what would , in theUnited States at least, be referred to as a "municipal i ty"55 See Local Government Act, 1972, §137.

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tified lottery manager to run a Local Lottery onits behalf.(g) National Lottery

By the National Lottery etc. Act of 1993, Par-liament created (or, more accurately, recreated)a National Lottery to raise funds for expendi-ture on selected public purposes. Under thisAct a lottery which forms part of the "NationalLottery" is not unlawful,56 and for these pur-poses "National Lottery" means all lotteriesthat form part of the National Lottery taken asa whole.57 At present these comprise the twiceweekly "on line" lottery and the "scratchcards" sold at retail throughout the UK.

The 1993 Act provides that the National Lot-tery is to be run by the private sector operat-ing under license. Thus, the Office of the Na-tional Lottery ("OFLOT") was established as anon-ministerial Government Department andthe Director-General of the National Lotteryappointed by Government.58 The Director-General and OFLOT have a number of statu-tory duties in connection with the supervisionand control of the National Lottery but the dayto day operation is in the hands of a privatesector company authorized by the license("Section 5 Licence") issued under the Act.59

The holder of the Section 5 License is per-mitted to promote lotteries,60 although eachsuch lottery and each separate description oflotteries which the license holder proposes topromote must themselves be sanctioned by li-cense from the Director-General.61 Further-more, the Section 5 Licensee may itself enterinto agreements with other persons underwhich they can promote lotteries under the um-brella of the "National Lottery," but such otherpersons must also be licensed.62

There can only be one Section 5 Licensee atany one time,63 and the 1993 Act contains de-tailed provisions as to the operation of the li-censing system and for the duration of eachSection 5 License. The Director-General haspower, in granting the Section 5 License, to im-pose conditions.

On July 29, 1994, the Director-Generalgranted a Section 5 License to Camelot GroupPic. The License expires on September 30,2001unless suspended or revoked earlier. It runs to64 pages, and its 11 Schedules comprise a fur-ther 91 pages. The License is public document,

and copies may be purchased from OFLOT. Itsprovisions include detailed conditions govern-ing the promotion of the National Lottery,arrangements for retail outlets as to validationfacilities for the instant lotteries ("scratchcards") and as to payments to be made to Gov-ernment, as well as the provision of informa-tion to Government, security matters, baking,record keeping, performance standards, in-spection and review procedures and the prepa-ration of accounts. It provides for an advertis-ing code of practice, a code of practice forcustomer relations, a sales code of practice andarrangements for the use of the National Lot-tery logo.

On November 8,1994, the Director-General,having granted a Section 5 License to CamelotGroup Pic, granted the specific license requiredto promote the "National Lottery Game." ThisGame provides the twice weekly draws inwhich entries consist of a selection made of sixdifferent numbers between 1 and 49 at an en-try price of £1. Again, this license is itself a pub-lic document, and a copy can be obtained fromOFLOT.

Under regulations,64 the following rules ap-ply to the National Lottery:

(i) No ticket may be sold by or to anybodyunder the age of 16;

(ii) No ticket can be sold in the street but, aswith Society's and Local Lottery tickets,sales can take place from a kiosk whichis in the street, so long it has no space forthe accommodation of buyers;

(iii) Tickets must not be sold in a license bet-ting office, on a race course or licenseddog track on days when racing/book-making is taking place, or in amusementarcades, bingo clubs or casinos; and

(iv) Tickets must not be sold by a vendingmachine unless the machine is at all

56 See Na t i ona l Lot tery etc. Act, 1993, §2(1).57 See id. at §1(1).58 See id. at §3(1).59 See id. a t §5.60 See id. a t §1(3).61 See id. at §1(3) a n d s6(2).62 See id. at §2.63 See id. a t §5(2).64 Na t iona l Lot tery Regula t ions , 1994, (SI 189/1994) .


times attended by a person who is in aposition to control its operation.

The 1993 Act provides detailed provisionsfor the distribution of the National Lottery pro-ceeds to selected public purposes and theamount which the Section 5 Licensee can retainas its own reward.

It is illegal for a bookmaker (holding a per-mit under the Betting, Gaming and LotteriesAct of 1963) to receive or negotiate a bet on theoutcome of the National Lottery.65

Finally, since it is not uncommon for groupsof individuals to combine to form a syndicateto purchase one (or frequently many more thanone) National Lottery ticket, the prospect ofsuch a syndicate of co-workers winning anamount sufficiently large enough to enablethem to abandon work has led insurers to coveremployers against the cost of the business dis-ruption which would follow.

GAMING BOARD

The Gaming Board for Great Britain, whichwas established under the Gaming Act 1968,66

is the regulatory body for casinos, bingo clubs,and gaming machines for the larger Society'sand all Local Lotteries in Great Britain. It hasnothing to do with the National Lottery which,as discussed above, is regulated by OFLOT andits own Director-General.

In regard to lotteries, the Gaming Board'sstatutory functions are:

(i) to ensure that those involved in orga-nizing lotteries are fit and proper andthat there is no criminal infiltration;

(ii) to ensure that lotteries are run fairly andin accordance with the law; and

(iii) to advise Government on developmentsin lotteries so that the law can respondto change.

In pursuit of these goals, the Gaming Boarddetermines applications for the registration of so-cieties, while for the requisition of Local Au-thority lottery schemes it determines applica-tions for the certification of lottery managers andsupervises the conduct of registered lotteryschemes, and takes action against those who

have not conducted lotteries properly. It also su-pervises the conduct of certified lottery managersand takes action against those no longer consid-ered fit and proper, keeps under review the ex-tent and character of lotteries in general (includ-ing public attitudes), makes recommendations toGovernment as to requirements for changes inmonetary limits and initiates proposals forchanges in the law and regulation on lotteries, aswell as advising Government on proposals forchange which come from interest groups.67

It is noteworthy that, in addressing the im-pact of the National Lottery on the lotteries forwhich the Gaming Board has a responsibility(that is to say the larger Society's Lotteries aswell as Local Lotteries), the Board has recentlystated:

"As reported in the last two years, manyof the gaming associations and organiza-tions with which the Board deals maderepresentations to it about the adverse im-pact that the National Lottery has had ontheir businesses. They expressed particu-lar concerns about the way in which theNational Lottery is able to promote all itsactivities while they were strictly circum-scribed in what they could do. It seems tothe Board that recent evidence suggeststhat the adverse effects of the NationalLottery on the sectors with which it dealshave at the very lest levelled off and thatthose sectors are benefitting from the var-ious measures to ease the regulations overthe last year or so. Nonetheless, the Boardacknowledges that there will inevitablycontinue to be pressures from the rest ofthe gaming industry seeking parity oftreatment with the National Lottery. TheBoard would repeat what it said last year.It will be important to consider whetherany proposals for change can be justifiedon their own merits, rather than simply bycomparison with the regime applying tothe National Lottery."68

65 See Na t iona l Lottery etc. Act, 1993, §18.66 G a m i n g Act, 1968, §10.67 See Repor t of the G a m i n g Board for Great Britain 1996(H.C112).68 Id. at para . 1.29.

484 COLES

The Board has also reported that at the end of the fate of all the chances purchased byof March 1997 there were 11 Local Lottery those who participate in the distribution,schemes registered with it and 614 societies,69 A ticket bought by someone in Keno rep-and that over the year to March 1997 the total resents a chance valid only for the distri-number of registrations increased by 13% bution of prizes comprised of the nextwhich, although a lower increase than in the draw and once that draw has taken placetwo preceding years, showed an increase in the the holder of the ticket has no interest ataccumulated total of registrations.70 There all in the subsequent draws. The Boardwere, on March 31,1997, five companies regis- does not believe it can sensibly be said thattered with the Gaming Board as lottery man- the purchaser is participating in the sameagers and one application currently under con- distribution of prizes as those who pur-sideration.71 As to the size of the lottery chase tickets for subsequent draws. Theindustry, and in so far as the Gaming Board has Board therefore ruled that for bothresponsibility for it, its 1996/7 Report states schemes each 5-10 minute draw consti-that the proceeds of Society's Lotteries oper- tuted a separate lottery, and it followedated by societies registered with the Gaming that breaches of the maximum prize levelBoard (i.e., lotteries with proceeds of over permitted would occur on a regular basis.£20,000) increased 46% to £115m. The Report It follows that each of the two schemesstates that this is the highest figure recorded by [Keno] was seen to fall foul of section ofthe Board and compares with just £45m in the 1976 Act and were contrary to law.76

1992/3, and that ". . . it appears that the suc-cess of the National Lottery has split over to The Board also reported that it had beenthe society lottery sector, with ever increasing shown " . . . a number of on-line schemes which,sales of scratch cards. The added sales power although on the surface similar in design toand commercial approach of the larger board Keno, work on the basis that prizes are awardedcertified lottery managers . . . have also helped on a parimutuel, as opposed to a fixed odds, ba-to achieve higher ticket sales."72 sis." As a consequence, the promoters can guar-

The Gaming Board has also stated in its antee that the prizes paid out will not breach the1996/97 Report that it has considered the pos- statutory limits and thus, " . . . the Board believessibility of running Keno as a Society's Lottery, that such games meets both the accepted defin-and has reached the view that this game is ition of a lottery as established by case law and". . . unlike a lottery in any traditional or gen- the requirements of the 1976 Act " The Boarderally understood sense."73 The Board reports has also stated that it ". . . retains serious reser-that it has also considered the question of vations about [such games] being played in suchwhether, if Keno is held to be a lottery, it could places as public houses and members' clubs."77

be run as a Society's Lottery,74 and has deter-mined that the crucial issue is whether each Kenodraw should be regarded a separate lottery, or CONCLUSIONwhether the whole scheme for the sale of Kenochances must be regarded as a single lottery. It With a history running back well into thereports that "if the former is held to be the case middle ages, it is not surprising that lotteriesthe schemes would fail to be unlawful as, by the have continued to play a significant part inprocess of probabilities, out goings in prizeswould often exceed proceeds raised from the saleof tickets or chances in [the] 5 to 10 minute pe- 69 See id. at para. 7.1.riods when few tickets were sold to the public "75 Z See id-at Pa r a- 72-Thus, the Board has stated that: 72 ^afpam*™.7'5'

73 Id. at para. 7.11.It is the view of the Board that a lottery is 74 See "*•at Para- 715-a single distribution of prizes. It is com- ll^ a t 7 1 6

plete when there has been a determination ^ id. at para! 7.18.


gambling activities in Great Britain. The adventof the National Lottery appears to have gener-ated an increased public awareness of lotteriesgenerally and, as apparent from the figuresquoted by the Gaming Board, has enabled So-ciety's Lotteries run by Societies (often by theprofessional, commercial certified lottery man-agers) to expand. It remains to be seen how thissector will fare in the future, especially giventhe likelihood that the Government elected topower earlier this year will seek, in due course,some change in the regime under which theNational Lottery operates.

With the certainty that technology will con-tinue to have a profound impact upon the lot-tery industry (it is, after all, inconceivable thatthe UK's National Lottery could have been op-erated in its present manner without the avail-ability of sophisticated technology) it is, at leastin the view of the author, clear that there areinteresting, and possibly exciting, times ahead.

No consideration of British law is completewithout addressing the impact thereon of theTreaty establishing the European Communityand, in particular, whether British law in thisregard accords therewith. It has been held bythe Court of Justice of the European Commu-nities78 that the legislation of a Member Statewould fall within the ambit of Article 59 of theTreaty, even if it were applicable without dis-tinction, if it is liable to prohibit or otherwiseimpede the activities of a provider of servicesestablished in another Member State and wherehe lawfully provides such similar services. Na-tional legislation, like that in Great Britain,which prohibits (subject to specified excep-tions) the holding of lotteries, is an obstacle tothe freedom to provide services.79 However,the Court has also held that the objectives of

British lottery legislation (namely, to preventcrime and ensure that buyers are treated hon-estly, to avoid stimulating demand in thegambling sector and to ensure that lotteriescould be operated not for personal and com-mercial profit, but solely for charitable, sport-ing or cultural purposes) are not precluded bythe provisions of the Treaty. It is also note-worthy that in the Schindler case it is statedthat " . . . in the course of [these] proceedings .. . the [European] Commission has informedthe European Council that in view of the prin-ciple of subsidiarily, as embodied in the newarticle 3b inserted in the EC Treaty by theTreaty on European Union, it has decided notto submit proposals for Community rules inthis field" (i.e. in the field of lotteries and otherforms of gaming).80

It must be noted that this article addressesthe position only in Great Britain, and not inNorthern Ireland, to which different provisionsapply.81

Finally, this article sets out only an overviewof the law. Nobody should venture into thefield of lotteries in Great Britain without verycareful consideration of what is involved andwithout specific advice on his proposals.

78 See Cus toms and Excise Commiss ioners v. Schindlerand another (Case C-275/92) 2 All E.R. 193 (1994).79 See Sager v. Dennemeyer & Co Ltd (Case C-76/90) ECR1-4221 (1991).80 Conclusions of the Presidency of the European C o u n -cil meet ing in Ed inburgh on 11th and 12th December 1992.Annex 2 to Part A: "Subsidiar i ly—Examples of the Re-view of Pend ing Proposals and Existing Legislation,"publ i shed in the BULLETIN OF THE EUROPEAN COMMUNITIESN o 12-1002.81 See The Betting, Gaming , Lotteries and A m u s e m e n t s(Northern Ireland) O r d e r 1985 (1995 N o . 1204) (N.Ir.Stat.ll).

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