UK Reviews Risks of Online Prize Draws

An Unregulated but Expanding Industry

Approximately 7.4 million UK adults—14% of the population—participated in online prize draws and competitions in the past year, spending an estimated £1.3 billion. While smaller than the National Lottery, this market rivals other UK lotteries in scale. Despite having more than 400 operators, the market is highly concentrated, with Omaze alone accounting for over 60% of participants.

PDCs are not regulated under the Gambling Act 2005 due to features such as a free entry route or a required skill element. As a result, they operate outside the oversight applied to licensed gambling operators.

Business Models and Prize Structures

Operators typically generate revenue by selling entries priced slightly above £3 each. Survey data indicates that prizes make up just under half of ticket sale value, with most operators offering rewards worth less than £10,000. Only 5% provide prizes exceeding £100,000, and high-value offerings are more likely to be associated with charitable donations.

Despite the availability of free entry routes—offered by 88% of operators—only 6% of entries are submitted for free, mostly by post. The inclusion of a “skill element” is also common, though often minimal in difficulty.

The Rise of Instant Win Games

Instant win products, offered by 41% of operators, have raised particular concern. These games deliver immediate outcomes and are often heavily promoted. For many operators, the total value of instant win prizes equals or exceeds that of the main draw. According to the report, “these products can be more addictive to consumers and pose heightened risks of gambling harm as highlighted by GambleAware.”

Transparency around instant win offerings is lacking. Fewer than 10% of operators specify whether free entries qualify for instant prizes, raising legal questions over compliance with gambling laws.

Limited Consumer Protection Measures

While most PDC websites mention age restrictions, only 23% display them clearly on their homepages. Furthermore, 90% of operators rely on self-certification for age verification. Safer gambling tools are rare—only 7% of sites link to gambling support, and 17% provide self-exclusion options.

Among surveyed operators, 40% report using safer gambling messages, and 45% offer self-exclusion. However, practices vary widely, with some offering robust protections while others rely on minimal account closure options.

Links to Charities and Public Perception

About 35% of PDC operators display links to charities, and around 10% of ticket revenues are donated. Charities view these donations as beneficial but note that they account for less than 4% of total income. Some also expressed concern that public associations between PDCs and gambling or scams could damage their reputations.

Higher Risk of Gambling Harm

The study found that 12% of PDC players meet the Problem Gambling Severity Index criteria for experiencing gambling-related harm—compared to 3% of the general population and 5% of all gamblers. Harms were most prevalent among young adults, men, ethnic minorities, and individuals on low incomes.

Interestingly, while PDCs may not directly cause gambling harm, they often serve as an entry point into broader gambling behaviors. Only 1% of harmed PDC players reported no involvement in other gambling activities.

Impact on Lotteries and Market Fairness

Stakeholders from the National Lottery and Lotteries Council raised concerns that PDCs pose an unfair competitive threat. PDC operators face fewer restrictions on prize values and ticket sales, allowing them to offer “life-changing” prizes. “Society lotteries are subject to a £500,000 cap on the size of prizes… PDCs circumvent this cap because they are not regulated as lotteries,” the report notes.

Some lottery operators warned that they may shift to the PDC model if the regulatory imbalance persists.

Regulatory Options Under Review

The government is weighing three main policy responses:

1. Bringing PDCs under gambling regulation, requiring licenses, player protection tools, and possibly prize or donation limits. This would align them more closely with lotteries but could reduce market diversity and increase costs for consumers.

2. Stricter enforcement of existing consumer protection laws, primarily through agencies like the ASA. While less disruptive, this would likely have a moderate impact on transparency and harm reduction.

3. A voluntary code of conduct, developed with industry input, focusing on best practices without regulatory penalties. Though favored by operators, success would depend on adoption and adherence.