A recent report commissioned by the UK Department for Culture, Media and Sport (DCMS) recommends the formal regulation of prize draw competitions (PDCs) under the Gambling Commission (UKGC). The study, conducted by London Economics, evaluated the size, structure, and risk profile of the PDC market and determined that regulatory action was necessary to address mounting consumer protection and gambling harm concerns.
Users More Often Show Signs of Problem Gambling
PDCs, typically marketed as low-stakes contests with a chance to win luxury cars, cash, or homes, are increasingly operating in a legal gray area. While most offer ways to participate for free, the study shows that these constitute only 6% of total entries. With postage-based free entries being the norm, many view this option as unreasonably complicated and opaque, effectively making these contests pay-to-play.
It is plausible that many operators are in breach of the ASA’s transparency requirements concerning free entry routes.
DCMS report
The study uncovered that 7.4 million UK adults participated in PDCs in the 12 months leading to November 2023, spending around £1.3 billion ($1.78 billion). These figures position the sector on par with society lotteries but far behind the National Lottery. Nevertheless, PDCs have become prominent enough to draw the attention of regulators, particularly given rising consumer harm concerns.
Some of the study’s most troubling findings reveal that 12% of PDC participants displayed signs of problem gambling, as reported by the Problem Gambling Severity Index. This percentage is significantly greater than the 3% seen in the general adult population and even exceeds the 5% average among gambling participants. However, the DCMS acknowledged that PDCs were likely not directly responsible, merely attracting people with addictive tendencies.
PDCs Could Be Regulated as a New Type of Lottery
Despite the sector’s similarities to lotteries, PDC operators fall outside of the scope of the Gambling Act 2005. Instead, they are subject to general consumer protection law and answer to the Advertising Standards Authority (ASA). Although the ASA has intervened in a series of high-profile instances involving PDC operators, the report concludes these interventions are insufficient to address systemic risks.
The present lack of regulation of PDCs also enables operators to offer potentially harmful instant-win products.
DCMS report
Researchers uncovered significant shortcomings in harm-reduction measures. Only a handful of platforms provide responsible gaming links, exclusionary tools, or play limit warnings. Just 23% of the websites displayed age restrictions prominently on their homepage. Some platforms were also concerningly opaque regarding the likelihood of winning a prize.
PDCs do not do well in preventing children from playing. The usual types of safer gambling measures are also absent from the websites of most operators.
DCMS report
According to the report, the legal status of PDCs must change to reflect their evolving market position. Unfeasible free entry options and a lack of skill-based requirements make most prize draws virtually indistinguishable from lotteries. Researchers thus suggested that PDCs could form a new class of “commercial lotteries,” facing similar regulations to society lotteries, such as restrictions on ticket sales and prize values.
Introducing gambling regulations for PDCs would require clear definitions and scope, differentiating between commercial prize draws, charity fundraisers, and promotional giveaways from companies not primarily in the gambling space. However, researchers made it clear that PDCs urgently need the consistency and accountability offered by strict regulations.