Why World Cup sweepstakes can be illegal

It seems that football lovers all over the UK could be breaking the law without even knowing it!

It’s that time again. The first match of the 2010 World Cup kicks off this Friday (June 11th) and all over the country, England fans are dusting off the St George’s flags, getting the beers in and hoping that somehow, this will be our year.

Whichever team you’re rooting for, there’s likely to be a World Cup sweepstake taking place near you. However, it turns out that if you get involved, you may be breaking the law!

It’s complex

According to experts at the law firm Pinsent Masons, many workplace and club sweepstakes are actually illegal, because they fall foul of the Gambling Act 2005.

Certain types of sweepstake are exempt from these regulations. However, most people aren’t aware of the relatively subtle distinctions involved. Technically, you could be committing a criminal offence even if you donate the final ‘pot’ to charity.

As with many legal issues, the regulatory framework is very complex and rather difficult to explain. I’ll try to summarise the fundamentals as simply as possibly, so you can run your World Cup sweepstake and still stay on the right side of the law.

I’m going to deal with two of the most popular types of World Cup sweepstake:

1.) Where an entrant pays a certain amount and is allocated a team completely at random, based on chance;

2.) Where an entrant pays a certain amount and chooses to back a particular team, guessing the result of the tournament.

Random chance - the rules

Sweepstakes allocating teams purely through the operation of chance are likely to be defined as a ‘lottery’ under the Gambling Act.

Essentially, they will be deemed a ‘lottery’ if there is at least one prize; people have to pay to participate; and the prizes are allocated by chance. So for example, if you all pay £1 to enter, you pull teams out of a hat, and the person with the winning team wins the total ‘pot’ of money.

The problem is, it’s a criminal offence to ‘promote’ a lottery unless either the promoter has a lottery operating licence, or it is classed as ‘exempt’.

Random chance - staying legal

Getting a licence for a workplace lottery is generally not an option (licences are only available to local authorities, charities and those operating lotteries on their behalf).

In practical terms therefore, you need to make sure your lottery falls into the ‘exempt’ category.

A ‘work lottery’ can be exempt from the Gambling Act, if all the following criteria apply:

• No profits can be made - all the proceeds must be paid out as prizes (less reasonable administration costs). That means a ‘work lottery’ can’t be used to raise money for charity (although in practice, the winner/s could choose to donate their winnings to charity).

• The sweepstake must be promoted on a single set of premises, each entrant must work on those premises, and the sweepstake can’t be advertised elsewhere. This means that a firm with several offices nationwide isn’t allowed to run a single sweepstake across these different offices.

• Sweepstake entry tickets must state the following: The name and address of the promoter; the group of eligible entrants; the fact that the ticket (and the right to any winnings) is not transferable; and the ticket price.

If you’re running a ‘random chance’ sweepstake and you do want the money to go to charity, there’s another way to claim ‘exempt’ status: The ‘incidental non-commercial lottery’.

For this sort of sweepstake to fall within the rules, all the following criteria must apply:

• The sweepstake must be incidental to a connected non-commercial event, where all the money raised goes to a purpose other than private gain. For example, the sweepstake could be run at a charity dinner.

• Not more than £500 may be spent on prizes; the promoter can’t take more than £100 as ‘expenses; and the rest of the money must go to the nominated ‘good cause’.

• All the tickets must be sold on the premises where the connected event takes place; and the tickets must be sold (and result announced) while that event is taking place.

This last criterion makes it very difficult for an ‘incidental non-commercial lottery’ to work in the context of the World Cup: It would be very difficult to organise any event which lasted through all the various rounds of the tournament!

So, in a nutshell - the first sort of exempt sweepstake ‘lottery’ makes it difficult to donate the winnings to charity, and the second is impractical in a World Cup context. But what about sweepstakes where guesswork is involved?

Guesswork - the rules

Sweepstakes involving guesswork - or prediction using skill and judgement - are likely to be classed as ‘betting’ under the Gambling Act.

In this context, ‘betting’ includes making or accepting a bet on:

 - The outcome of a race, competition or other event or process;

 - The likelihood of anything happening or not happening;

 - Whether or not something is true.

Unfortunately (you’ve guessed it) it’s an offence to operate a betting sweepstake without a betting operating licence, unless it’s classed as ‘exempt’.

Guesswork - staying legal

Getting a betting operating licence for the occasional office betting sweepstake would probably cost more time and money than it’s worth.

Practically speaking, it’s usually much easier to make sure your sweepstake is exempt from the regulations.

A ‘workers’ betting’ sweepstake can fall into this category, if you abide by the following rule:

• All the people involved in the betting must be employed by the same employer. In theory, this means that anyone in your workplace not employed by that firm (for example, casual temps or external contractors) cannot take part.

Alternatively, you can choose to run a betting sweepstake ‘otherwise than in the course of business’. Unfortunately, the Gambling Act fails to give any guidance on the scope of this last exception, so the boundaries are rather hazy.

However, it seems that in real terms, most workplace betting sweepstakes can be classed as being held ‘otherwise than in the course of business’. This is because:

• The sweepstake is incidental to the normal function of the company. For example, employers may organise the sweepstake, but the normal business of the firm is not ‘bookmaking’.

To be on the safe side, this sort of sweepstake should, again, only be open to ‘employees’. And of course, this exemption won’t apply if your employer is actually a betting shop!

Better safe than sorry

Practically speaking, it’s fairly unlikely you’ll be arrested if you do conduct a small scale, low-profile World Cup sweepstake which goes against the letter of the Gambling Act.

However, it’s better to be safe than sorry. Do think about which ‘exempt’ category works best for you, and try to stay within the rules.

Apart from anything else, this will mean anyone unhappy with the idea of your World Cup sweepstake won’t have any legal ammunition to use against you.

More: How to win more from the lottery | Free online banking tool