New Gambling Commission guidance fails to resolve house competition confusion

The Gambling Commission came under pressure last year when a series of one-off lotteries run by individuals trying to sell their houses by raffle emerged, and claimed that Gambling Commission guidance gave them the green light.

The schemes claimed to be prize competitions, which are not regulated, but they were often illegal lotteries according to Antoinette Jucker, a gambling law expert at Pinsent Masons, the law firm behind OUT-LAW.COM.

The Gambling Commission refused to make public statements about whether the schemes were allowed under 2005's Gambling Act and its guidance was relied on by competition operators but disputed as a full and accurate reflection of the law by legal experts.

It has produced revised guidance which it hopes will "clarify" the law, but Jucker has responded to an informal consultation on the changes by saying that the guidance does not clear up some of the misunderstandings that led people to think they could raffle their houses legally.

Much of the confusion centred on a prize competition's requirement that it involve an exercise of skill or judgment so difficult as to discourage a "significant proportion" of people from entering or to disqualify a "significant proportion" of those who did – a test set out in section 14(5) of the Gambling Act, and sometimes known as the "skill test".

The house competitions were marked by the ease of their questions, which could often be answered in seconds with the aid of an internet search engine.

"Clearly the Commission cannot foresee what ingenuity may be deployed by organisers in creating prize competitions. It may be, therefore, that the Guidance should be much less specific, or more heavily caveated, if it is not to undermine the effectiveness of the Gambling Act," said Jucker in her note. "The Commission has a duty as regulator to enforce the Act and it should be careful that it is not hobbled in doing so by giving Guidance which inhibits its ability to prosecute. Where there is doubt, judicial interpretation can only be obtained through test cases brought by the Commission."

The Commission's response to OUT-LAW.COM's enquiries about whether questions were difficult enough to qualify a scheme as a legal prize competition were often met with the response that only a court can decide.

But, as Jucker points out in her response to the consultation, that judicial decision can only be
made if the Commission actually brings a prosecution.

"We think the Commission should acknowledge that responsibility for enforcing the Act lies with it and that it will use its powers of prosecution where it thinks it appropriate and in the public interest to do so," she said. "While it is true that it is for the courts to provide the definitive interpretation of the test in section 14(5) of the Act, they cannot do so unless a case is prosecuted by the Commission. That responsibility lies with the Commission."

Jucker said in her response that the new Guidance does not help to clear up the central uncertainty at the heart of the question of what does and what does not qualify as a prize competition.

"Given the internet and Google, almost any knowledge-based question or questions is likely to be correctly answerable with the minimum of effort," said Jucker. "The Commission should at least acknowledge that prize competitions which are information-based, posing questions which can be answered remotely, are extremely unlikely to satisfy section 14(5) of the Act."

The Commission said that its guidance was designed "to make information on lottery law accessible to fundraisers and those without specialist knowledge of gambling law".

"In providing authoritative advice on the implications of gambling law and its regulation we aim to help those considering organising competitions, draws and lotteries. As ever, we seek to keep our advice up to date in the light of experience," said the Commission’s deputy chief executive Tom Kavanagh.

Jucker questioned how authoritative the guidance was, though. "Our sense is that private promoters of prize competitions are puzzled and confused by the Commission's apparent ambivalence in seeking to raise concerns, without ultimately indicating whether or not it intends to prosecute," she said.

Jucker said that in order to have clarity and to stop a rash of unregulated lotteries springing up, the Commission needs to take decisive legal action and shoulder its responsibilities as the prosecuting authority for the Act.

"We do question the Commission's approach to compliance," she said. "Where the prizes are of substantial monetary value … we think the Commission should always apply a rigorous legal analysis to such competitions which come to its notice and, where appropriate, prosecute in order to deter the proliferation of copy-cat schemes."