Prize competitions and free draws: when is it a lottery?

Lotteries, raffles, competitions and prize draws “might all sound the same, but the way in which they operate is very different”, according to the Gambling Commission (opens in a new tab). The law separates a lottery from a free draw and a prize competition, and the difference matters. Lotteries are gambling and cannot be run for private or commercial gain, while genuine free draws and prize competitions are not gambling and can be run for profit. This guide explains the tests in the Gambling Act 2005, what the Gambling Commission says, and what to check before you pay to enter. It is not legal advice. For charity lotteries and raffles, see lotteries, raffles and scratchcards.

The legal test for a lottery

Section 14 of the Gambling Act 2005 (opens in a new tab) says an arrangement is a lottery, whatever it is called, if it is a simple or a complex lottery:

• a simple lottery: people must pay to take part, one or more prizes are given to one or more members of a class, and the prizes are allocated by a process that relies wholly on chance;
• a complex lottery: the same, except the prizes are allocated by a series of processes and the first of those relies wholly on chance.

The Commission’s guidance on the definition of a lottery (opens in a new tab) explains the second type: if entrants pay and names are then drawn, the arrangement is a lottery even if later stages need skill. The government’s explanatory notes (opens in a new tab) to section 14 add the reverse: where the first process does not rely wholly on chance, the arrangement is not a lottery, even if later processes need no skill at all.

Something that fails any part of the test, for example because there is no payment, is not a lottery. Section 14 also lets the Secretary of State make regulations deciding whether a particular kind of arrangement is or is not a lottery.

What counts as paying to enter

Schedule 2 to the Act (opens in a new tab) defines payment for lotteries. Paying includes:

• paying money;
• transferring money’s worth;
• paying for goods or services at a price that reflects the chance to take part.

It does not matter who receives the payment or who benefits from it, or whether you know that paying enters you. Paying to find out whether you have won, or to claim a prize, counts as paying to take part.

Sending a letter by ordinary first or second-class post, making a phone call or using another method of communication at a normal rate is not payment. A normal rate is one that does not reflect the chance to enter. The explanatory notes (opens in a new tab) say that entry by premium-rate phone line counts as payment. A choice between paying and a premium-rate line is therefore not a free entry route, and the arrangement would be a lottery.

Free draws

Under paragraph 8 of Schedule 2, an arrangement is not treated as needing payment if:

• everyone eligible can choose to take part either by paying or by sending a communication;
• that communication can be a letter by ordinary post, or another method that is no more expensive and no less convenient than entering by paying;
• the choice is publicised in a way likely to come to the attention of everyone who proposes to take part;
• the system for allocating prizes does not treat paid and free entries differently.

The Commission’s guide to free draws and prize competitions (opens in a new tab) describes two types: draws where all entries are free, and draws with both a paid and a free route. For the second type, it says the free route must be promoted and displayed at the same level as the paid routes. It gives an example of what is not allowed: special delivery for the free route when the paid route uses first class.

The Commission says free draws can be run for commercial or private gain, for example to promote a product or to raffle a high-value item such as a car.

Prize competitions and the skill test

Section 339 (opens in a new tab) of the Act says taking part in a competition where you may win a prize is not gambling, unless it is gaming, a lottery or betting.

The skill test is in section 14(5). A process that needs skill, judgement or knowledge is still treated as relying wholly on chance if the requirement cannot reasonably be expected to:

• prevent a significant proportion of people who take part from receiving a prize; and
• prevent a significant proportion of people who wish to take part from doing so.

The explanatory notes say that if either barrier can be shown, the process does not rely wholly on chance. They describe the test as a practical one. A children’s competition should be set at a level suited to the children it is aimed at, and a competition in a specialist magazine needs to be challenging for that magazine’s readers.

The Commission says the organisers of a prize competition must be able to show that the skill, knowledge or judgement required meets this test. It adds that multiple-choice questions, or questions that give you a second chance if your first answer is wrong, rarely meet it. A genuine prize competition does not need a free entry route.

When a competition is betting

Some paid competitions are betting rather than prize competitions. Under section 11 (opens in a new tab), you are making a bet if you pay to take part in an arrangement where you must guess, or predict using skill or judgement, the outcome of a race, competition or other event, the likelihood of something happening, or whether something is true, and an accurate guess wins a prize or puts you among those who may win one. Schedule 1 sets out when you are treated as paying, in much the same way as Schedule 2 does for lotteries.

Why the difference matters

The Commission says all lotteries are regulated under the Gambling Act 2005 and cannot be run for commercial or private gain. In a 2019 article on raffling big-ticket items (opens in a new tab), it says you cannot run a lottery to raffle a house unless the profits go to a good cause and the organiser is a non-commercial society. The only formats that might be suitable are a free draw or a prize competition.

If a free draw or prize competition does not meet the requirements, the organiser may be running an illegal lottery, and the Commission may act. In the same article, the Commission said its Intelligence Unit received 43 reports about 26 house “lottery” competitions in 2017, and that only six of them needed no further action.

Who regulates these competitions

• The Gambling Commission says it does not approve free draws or prize competitions or help develop them, though it may raise concerns. It cannot say whether a competition is safe or legitimate to enter.
• The Advertising Standards Authority applies the CAP Code rules on promotional marketing (opens in a new tab) to promotions. These say promoters must not exaggerate your chances of winning. Prize draws must be decided by chance, either by an independent person, under one’s supervision, or by a computer process that produces verifiably random results. Where a competition is judged subjectively, an independent judge or a panel with an independent member is needed. Promotions must state significant conditions where leaving them out is likely to mislead, such as any limit on the number of entries, whether a cash alternative may be substituted, and how and when winners will be told.
• The government has published a voluntary code of good practice for prize draw operators, including an 18+ age limit. Our lotteries guide summarises what it asks of signatories.

Before you pay to enter

The Commission advises you to satisfy yourself that a competition complies with the law, and that you are happy with its terms and conditions, before entering. It says to be especially cautious if you plan to pay. Based on the rules above, things you can look for include:

• a free entry route shown clearly, if the result is decided by a draw;
• a question or challenge that is genuinely hard, if the organiser calls it a skill competition;
• clear terms on the closing date, number of entries, prizes, any cash alternative and how winners are chosen and told;
• any charge to find out if you have won or to claim a prize. Under Schedule 2, this counts as paying to take part.

The Commission says it regularly hears from people frustrated that competitions have been extended, prizes have differed from those advertised, or competitions have closed because of compliance issues. For problems with a competition you have entered, it points people to Citizens Advice and Trading Standards.

How many people take part

The Commission’s report Understanding the consumer landscape in free draws and prize competitions (opens in a new tab) (published 22 January 2026) used Gambling Survey for Great Britain answers from 13,049 adults who responded online between April 2024 and April 2025. The Commission notes these are not its official statistics. It found that:

• 8% had spent money on an online draw or competition to win a large prize, such as a luxury house, in the past four weeks, with men and women equally likely to have done so;
• participation was concentrated among 25 to 64-year-olds and was highest among 45 to 54-year-olds;
• 80% of those who had entered had also gambled in the same period, most often on lottery draws (68%), scratchcards (25%) and online instant win games (23%).

Using open banking data from 2,678 users who paid at least one of 20 providers, the report found they spent £75.38 on average over the year across 9 transactions. Users of the highest-spending quarter of providers averaged £141.85 across 14 transactions.

Northern Ireland and getting help

The tests in this guide come from the Gambling Act 2005, which applies in England, Wales and Scotland. Northern Ireland has its own gambling law: see gambling law in Northern Ireland.

If you are worried about how much you spend on competitions or gambling, free, confidential support is available from the National Gambling Helpline on 0808 8020 133 (England and Scotland) and the NHS All-Wales Gambling Helpline on 0808 2819 265. See gambling and debt if spending has left you in debt, or gambling scams and fraud if you think a competition was not genuine.

Related guides

• Lotteries, raffles and scratchcards: the rules in Great Britain — The National Lottery, charity lotteries, raffles and prize draws: ages and limits.
• Gambling scams and fraud — Fake prize wins, phishing and unlicensed sites: the warning signs and where to report.
• How to stop gambling marketing — Consent, per-product opt-ins, STOP and unsubscribe, and fewer gambling adverts on social media.

All guides