Society lotteries are intended to be primarily a means of raising money for charities and other good causes. The vast majority are small, often local, and raise sums of money that, though not substantial, are vital for the work of the organisations they support. The Gambling Act 2005 relaxed some of the restrictions on such lotteries. This was not a cause of concern until the recent launch of some larger, 'umbrella' lotteries, advertised nationally, run by commercial operations and giving close to the statutory minimum percentage of the proceeds of ticket sales to the good causes they supported. These are controversial in part because they are alleged to stretch the definition of a society lottery as primarily intended to raise money for good causes, and in part because they are seen by some as direct competitors to the National Lottery. As a result, there have been calls for restrictions to be imposed on large society lotteries, while others have suggested the success of the umbrella lotteries could be replicated elsewhere if regulations on society lotteries were relaxed.
We have been guided in our approach by the principle that the regulatory regime governing society lotteries should encourage the maximum return to good causes and, provided that the lottery remains focused on its primary purpose, the licensing regime should be light, including continued exemption from gambling and lottery taxes.
Accordingly, we recommend greater differentiation between the regulations applied to the great majority of lotteries, which are small and local, and those applied to larger ones, especially those run on behalf of the good causes by commercial organisations, which tend to return smaller proportions of their funds to the charity than single-cause lotteries.
We recommend an amendment to legislation to recognise a class of umbrella lotteries, with its own set of limits on individual draws, annual sales and prizes. A number of options are possible: setting overall limits on the amounts that may be raised or paid out in prizes, limiting the number of individual society lotteries that may join together under an umbrella lottery (and thus limiting the multiplier effect) or stipulating different 'large society lottery' limits on the constituent societies. We suggest that the limits on the single society large and small lotteries should be raised, following research by the Gambling Commission into what might be the appropriate limits, and that the limits should be reviewed every three years by the Government, on the basis of information about the market supplied by the Gambling Commission.
We wish to see a lifting of burdens on the smallest lotteries, so we recommend that, for new lotteries, the current requirement for at least 20% of the ticket receipts from each lottery to be given to good causes (rather than allocated to prizes or operating expenses) should be spread over an extended period, perhaps three years, to help lotteries to cope with high start-up costs. On average, lotteries are able to return about 45% of their ticket receipts to good causes, many make much greater returns. It would be a disincentive to innovation to increase the requirement for the minimum return of 20%, but we do not think it appropriate that large, well-established lotteries should provide only the minimum return to good causes. We therefore recommend for the largest lotteries the reintroduction of a cap of 35% on operating costs other than prizes and money set aside for roll-overs.
We do not consider that the National Lottery is at risk from any of the lotteries currently functioning, but we accept that the potential for competition remains. While we consider that our recommendations will help to reduce the risk of commercial competition under the guise of a society lottery, we remain particularly concerned about the growth of online betting products linked to UK and multi-national lotteries that give an impression that players are taking part in a lottery but are actually a harder form of gambling. We highlight a number of suggestions for tackling this problem, including restrictions on use of the word 'lottery' or any derivatives of it in the name of any such game, and the option of reclassifying these games as lotteries and therefore bringing them within the lottery regime, and we ask the Gambling Commission to research which would be most effective in reducing customer confusion.