As a method of fundraising, lotteries have stood the test of time, and online lotteries are now just as popular as the traditional raffle.
However, there's more to organising a lottery than buying a book of raffle tickets or setting up a website, and charities should pay attention to the relevant rules and regulations. Full details can be found in the Gambling Commission's guidance Lotteries and the Law, which is available at www.gamblingcommission.gov.uk.
Small lotteries held at charity fundraising events are exempt from lottery regulations, provided the organisers follow a few simple rules. They should remember that the proceeds of both the lottery and the event should not be used for private gain. All tickets need to be sold at the event and there can be no advance sales. There are also several restrictions on prizes - no more than £250 can be spent on them (although more valuable prizes can be donated) and there should be no cash prizes.
For larger lotteries, where the value of tickets sold for each individual lottery exceeds £20,000, charities will need to register them as 'society lotteries' with the Gambling Commission. This is also the case if total ticket sales of all of the lotteries held by a charity exceed £250,000.
If ticket sales are expected to fall below these amounts (and registration with the Gambling Commission has not previously been required), a charity needs to register with its local authority. Again, there are detailed rules covering the price of tickets, how the proceeds may be split between profits, prizes and expenses, and record-keeping.
Some of the rules will be modernised when the Gambling Act's lottery provisions come into force. Large society lotteries will be able to roll over prizes, unsold tickets will no longer have to be destroyed and society lotteries will be allowed to sell tickets through an automated process.
The Gambling Commission is consulting on the impact of these changes.
One of the pitfalls affects events that look like lotteries, but aren't.
For example, a 'lottery' in which participants predict the outcome of future events would be regarded as an illegal 'prize competition'. The converse is also true: an event referred to as a 'competition' could be a lottery if, for example, the questions asked are so easy that they offer everyone a chance to win.