Omaze gives away houses. That Prize Guy gives away cars. Neither holds a gambling licence, and neither needs one.
That surprises people, and the usual reaction is to assume somebody is getting away with something. Nobody is. The answer sits in two parts of the Gambling Act 2005, and once you have read them the whole sector makes sense.
It also explains something more useful: exactly which consumer protections you have when you enter one of these, and which you do not.
What Makes Something a Lottery
Section 14 of the Gambling Act 2005defines a simple lottery with two conditions. Both have to be true:
- "persons are required to pay in order to participate"
- "prizes are allocated by a process which relies wholly on chance"
Read the word "and" into that. A paid competition decided by chance is a lottery and needs a licence. Take away either half and it is not a lottery at all.
Which means there are exactly two ways to run a big prize giveaway in the UK without a licence. Remove the requirement to pay, or remove the reliance on chance. Every operator you have heard of uses one of these, and almost all of them use the first.
Route One: The Free Entry Route
This is the one in use across the sector, and it is why the small print on these sites always mentions a postal address.
Schedule 2 of the Act sets out what a free entry route has to look like. Each participant must have the choice of entering either by paying or by sending a communication, and that communication can be "a letter sent by ordinary post" or "another method of communication which is neither more expensive nor less convenient than entering the lottery by paying".
Then two conditions that do the real work:
- "the choice is publicised in such a way as to be likely to come to the attention of each individual who proposes to participate"
- "the system for allocating prizes does not differentiate between those who participate by paying and those who participate by sending a communication"
The second is the important one. A free postal entry has to go into exactly the same draw, with exactly the same odds, as a paid entry. It cannot be a lesser ticket. If the promoter's system treated them differently, the whole arrangement would collapse back into being an unlicensed lottery.
There is also a provision that stops the obvious objection. Schedule 2 says that "a reference to paying does not include a reference to incurring the expense, at a normal rate, of ... sending a letter by ordinary post ... making a telephone call". A stamp is not a payment. If it were, no free entry route could exist.
The Gambling Commission's guide to free draws and prize competitionsadds the practical gloss: the free route must be no more expensive, no less convenient, and promoted at the same level as the paid routes.
So Why Does Anybody Pay?
Because almost nobody posts a letter.
That is the entire commercial model, stated plainly. The free route has to exist, has to be genuine, and has to carry the same odds. It also has to be found, read, written out and stamped, and the paid route is two taps on a phone. The gap between those two experiences is where the revenue lives.
If you enter these draws regularly and have never used the postal route, you are paying for convenience rather than for odds. Worth knowing before the next entry.
Route Two: The Skill Question
The other way out is to make the competition turn on skill, so that prizes are not allocated wholly by chance. This is where the multiple-choice question at the end of some entry forms comes from.
The bar is higher than most people assume. Section 14 says a process involving skill or judgement is still treated as relying wholly on chance if it "cannot reasonably be expected to prevent a significant proportion of persons" from winning a prize or from participating at all.
The Commission is specific about what that means in practice: "for the skill test to apply, a significant proportion of people should be unable to enter because they did not have sufficient skill or knowledge to meet the challenge of entering."
A question anyone can answer, or anyone can look up in five seconds, does not pass. That is why the token general-knowledge question has largely disappeared from serious UK operators, and why the free entry route is the dominant structure instead. A skill question that was hard enough to be lawful would be hard enough to shrink the entry list, which is the opposite of what the promoter wants.
What You Give Up By Entering
This is the part worth more than the legal mechanics, and it is not usually spelled out.
A free draw promoter is not a licensed gambling operator. That is not a loophole, it is the point of the structure. But licensing is where most of the consumer protection in UK gambling lives, so sitting outside it has consequences.
| UKGC licensed casino | Free draw or prize competition | |
|---|---|---|
| Gambling Commission licence | Yes | No, and none required |
| Licence conditions and code of practice | Applies | Does not apply |
| GAMSTOP self exclusion covers it | Yes | No |
| Mandatory dispute resolution body | Yes | No |
| Rules on how the product is advertised to you | Gambling advertising rules apply | General advertising and consumer law only |
| Protection if the operator fails | Licence conditions on customer funds | Ordinary creditor position |
| Who you complain to | The operator, then its ADR provider, with the Commission supervising | The operator, then Trading Standards or the courts |
Some of those gaps matter more than others. The two to pay attention to are self exclusion and dispute resolution.
If you have registered with GAMSTOP, that registration blocks you from gambling sites licensed in Great Britain. A prize draw promoter does not hold that licence, so it is not in the scheme, and a GAMSTOP registration will not stop you entering. For somebody who has excluded themselves deliberately, that is a real hole in the wall they built.
And if a draw goes wrong, there is no gambling regulator to escalate to. You are a consumer with a contract, which is a genuine legal position but a much slower one than a licensed operator's complaints route.
Consumer law still applies. The Advertising Standards Authority still takes complaints about how these are promoted. Fraud is still fraud. The protections are not absent, they are just the general ones rather than the gambling-specific ones.
How to Check a Promoter Before You Enter
Four things, in about three minutes:
- Find the free entry route. It has to be publicised. If you cannot find it in the terms, that is a serious flag, because the promoter is either hiding a legal requirement or does not have one.
- Check the free route goes in the same draw. The terms should say so. Anything describing a separate or smaller prize pool for postal entries is a problem.
- Check who the promoter is. A named UK company with a company number you can look up, not a trading name with no entity behind it.
- Check whether the prize is guaranteed or conditional. Many draws reserve the right to substitute a cash alternative, or to not award the headline prize if entry numbers fall short. That is lawful if disclosed, and it changes what you are buying.
We have looked at several of these in detail: Omaze, That Prize Guy and Win a Million each handle the free entry route and the prize guarantee differently, and the differences are the whole story.
If you also play at licensed sites, the contrast is instructive. The affordability rules we covered in UKGC financial risk checks exist precisely because the operator is licensed. None of that machinery applies to a prize draw, which is a selling point for the promoter and a blind spot for the entrant.
The Short Version
A lottery needs you to pay and needs chance to decide it. Prize draws break the first condition by offering a genuine free postal route with identical odds, which the law requires them to publicise and almost nobody uses. That is legal, deliberate, and the basis of the whole sector.
The trade is that you step outside the gambling licensing regime, and with it GAMSTOP and the regulated complaints route. If you treat these as a bit of fun with a small ticket price, the structure is fine. If you are entering them the way somebody would play a casino, the protections you are used to are not there.
Spend what you would be happy to lose, and if gambling has stopped being fun, the support links in the footer of this page are the right place to start.
