Prize Draw Loophole Remains Open as UK Government Rejects Regulation

Despite intense pressure from licensed lottery operators, the UK government has decided not to put obligatory controls on prize drawings and competitions (PDCs), a decision that ignited considerable dissatisfaction across the gaming industry. Instead, it will introduce a voluntary code later this year, allowing PDC operators to continue operating outside the formal gambling framework.

The decision lands at a tense time for the UK’s gambling and charity lottery sectors, with concerns that PDCs are capitalising on regulatory loopholes that allow them to avoid the stricter controls faced by traditional lotteries and gambling operators.

The gambling minister, Baroness Fiona Twycross, informed Parliament that they will introduce the voluntary code later this year. She explained that the code is designed to improve transparency, strengthen accountability, and establish player protections across the prize draw sector. Twycross emphasised that the aim is to give participants confidence that adequate safeguards are in place. However, she also indicated that the government would evaluate the code’s effectiveness before deciding whether future legislation would be necessary.

Alongside the decision not to regulate PDCs, the government also confirmed it would not increase the annual sales limit for society lotteries, despite internal research indicating that an increase could generate an additional £175 million for UK charities over the current parliamentary term.

Why Prize Draws Are Under Scrutiny

Prize draws and competitions, often branded as sweepstakes or raffles, are structured around chance but escape gambling regulations thanks to the inclusion of a “no purchase necessary” clause. While players can often pay to enter, the availability of a free entry route keeps these products outside the jurisdiction of both the Gambling Act and the National Lottery Act. This means they avoid oversight by the UK Gambling Commission.

Operators like Omaze run high-profile campaigns offering lavish prizes while raising money for charity. However, critics from within the lottery sector argue that these models blur the lines between gambling and charitable fundraising, all while operating without the same financial, social responsibility, and advertising restrictions faced by regulated lotteries.

The government’s own research flagged concerns, noting that prize draws can pose gambling harm risks comparable to traditional betting. A study involving 22 PDC operators and 764 players found that 12% of participants experienced negative consequences or potential loss of control, highlighting the vulnerabilities in this unregulated sector.

This decision not to regulate them aligns with the preference of prize draw operators, who had pushed back against full regulatory oversight. Meanwhile, the UK Lotteries Council and other stakeholders in the regulated gambling space have criticised the move, viewing it as a missed opportunity to bring fairness to a rapidly growing segment of the gaming industry.