Research shows £117m was spent on credit cards for entry into big-ticket prize draws and competitions despite a ban on gambling using credit cards.
UK.- The UK government is being urged to regulate prize draws in the same way as gambling as research shows that £117m worth of entries were paid for on credit cards in the last year.
Research conducted by Australian lottery firm Jumbo Interactive, which also owns and manages lotteries in the UK, found that a current loophole allows prize draws to avoid regulations that cover lotteries and raffles.
The research found that nearly one in 10 people who entered ‘big ticket’ prize draws, for example, those that offer the chance to win multi-million pound houses or luxury cars, ended up in debt as a result.
It raises consumer protection concerns over credit card debt and also over a lack of transparency around prizes and charity donations.
Using credit cards to gamble was banned in April 2020, but a loophole in regulation means there are no restrictions on commercial prize draw or prize competition companies.
Prize draws escape regulation because they offer “free” entry through the possibility of playing by post for the cost of a postage stamp. Despite the “free to enter” option, an estimated £860m was spent on entries into prize draws in the last year.
Prize draws and competitions that promise a donation to charity make 45 per cent of participants more likely to enter, the study found, but over half of players (57 per cent) admitted that they didn’t check how much money went to good causes.
Calls for regulation of prize draws
Jumbo Interactive has called on the UK government to introduce regulation for the growing prize draw and competitions market.
It also warned consumers to check terms and conditions since there is little enforcement of minimum donations, as opposed to regulated society lotteries, which give a minimum of 20 per cent of gross ticket sales to good causes.
It said that research shows 72 per cent of people who enter lotteries, draws or competitions think prize competitions and draws should be regulated in the same way as gambling.
Nigel Atkinson, UK general manager at Jumbo Interactive, said: “A huge amount is being spent on credit cards on prize draws, pushing people into debt – despite the free entry option being the reason they are exempt from oversight. With so much money changing hands, the government needs to look at the proper regulation of prize draws and competitions to better protect consumers.
“For many, the fact that some of the cost of entering prize draws and competitions goes to charity is a big part of why they enter. But it remains easy for companies to bury information in the terms and conditions about how much actually goes to charity.
“Society lotteries on the other hand have minimum donation rates and help raise funds for a wide range of important causes, large and small. Public trust is crucial for society lotteries to operate successfully, and increased regulation of the prize draw and competition market will offer that consistency and transparency.”
Tony Vick, chair of The Lotteries Council, said: “The Lotteries Council is increasingly concerned about the use of prize draws operated by commercial gambling companies which are marketing themselves in a similar way to charity lotteries.
“Lotteries face a series of legislative hurdles that restrict our ability to grow and raise funds for good causes while prize draws face no limits on how many tickets they can sell, what prizes they can offer, and choose whether and how much to give to any charity. We hope the government looks at this to ensure a fairer playing field.”