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Its time for a regulatory revolution for charity lotteries-By Joe Saxton

Charity lotteries are a really important part of the fundraising landscape for charities and other non-profits. Put alongside the money raised by the National Lottery and prize draws like Omaze, they are a critical part of income generation for good causes – in very difficult times. But they could raise even more money if there were deregulation and standardisation  between all these games of chance. Here are three ideas for a regulation revolution.


Revolution 1: allowing charities to claim gift aid on tickets

It is a regulatory anomaly that lottery tickets, run by charities, are not eligible for gift aid. They are specifically excluded from the gift aid legislation. The logic is presumably that a lottery ticket which had high marketing and prize costs shouldn’t be eligible for a tax relief when so little of the donation goes to the cause. The problem with this argument is that there is no equivalent restriction on other types of fundraising. It costs a large amount to recruit a face-to-face donor making monthly donations, but those donations are still eligible for gift aid. Donations already have the 25% rule – a donor shouldn’t get a benefit which is more than 25% of the value of the donation, which could act as a way of keeping lottery prizes down to 25% of the total income and still allow them gift aid.


The absurdity is highlighted when some charity lotteries have a contribution rate is around 80% (ie, their costs are only 20% of their lottery income). Why on earth shouldn’t those lottery tickets get gift aid when so much goes to the cause?


It would be possible to provide some restrictions on gift aid eligibility for lotteries:


·It would only be available to those charities and donors already eligible for gift aid


·Only when the contribution levels exceeded a certain level/percentage, eg 50%, goes to the cause, rather than the mandatory 20%


·Only for the first £100,000 of each lottery so that all lotteries get a benefit, but the cost to the government is capped, and small charities benefit disproportionately.

 

Revolution 2: A single regulator for non-profit games of chance

The current regulatory approach for games of chance that benefit good causes is fractured and disjointed. The four types of games of chance that benefit good causes (National Lottery, large-scale charity lottery, small-scale charity lottery, and prize draws) all have different regulatory regimes, or in the case of prize draws, none at all.


The National Lottery and large-scale charity lotteries are both regulated by the Gambling Commission. However, their base in legislation and the approach to their regulation are very different. For example, The National Lottery has no 20% contribution rule, their turnover is not limited, nor are their prizes, and nobody has to win a prize advertised for any one particular draw (hence roll-overs).


Small-scale lotteries (less than £20k a draw or a cumulative £250k a year) are regulated by the local authority where the lottery is taking place. And there is no regulator of commercial prize draws.


It is time for a new approach for ‘games of chance raising funds for good causes’ with a unified regulatory approach and a single regulator. This could either be through a new regulator or a dedicated section within the Gambling Commission, better able to respond to the needs of operators that clearly differ from commercial sports betting and gaming operators. Then all four regulatory regimes could be rolled into one, with the same regulator and the same regulations.

 

Revolution 3: Regulate charity lotteries (and prize draws) in the same way as the National Lottery

The regulation for charity lotteries is absurd. There are restrictive rules that no business would tolerate or accept. The most restrictive is that every individual lottery draw has to make a 20% contribution to the cause. Imagine a business being told it can only exist if it makes a 20% profit from day 1 on every activity. But that is not the only absurd restriction – the size of prizes is limited, the size of the individual draws is limited, the annual size of the draws is limited, and different types of marketing require additional licences.


These regulations are designed to give the National Lottery a monopoly. Yet there is no evidence that charity lotteries have any impact on the National Lottery (nfpResearch wrote an entire report on the subject).  Yet despite these regulatory shackles, incredibly and wonderfully,  charity lotteries have grown dramatically in the last decade or so. In 2008/09 the contribution to good causes from charity lotteries was just under £100 million. By 2022/23 the contribution to good causes was £460 million[1], an increase of nearly  500%.


Imagine how they would do if the regulatory shackles were lifted. It would mean more money for good causes when it is desperately needed.



These three ideas show that, in these times when fundraising is getting ever harder in all sorts of areas, games of chance from lotteries to prize draws, need a regulatory revolution to help them raise even more.

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