Research and analysis

Online prize draws and competitions market study, assessment of harm and review of potential interventions

Published 26 June 2025

A London Economics report for the Department for Media, Culture and Sport

June 2025

Report authors

• Sam Behrens
• Rohan Jain
• James Suter

Executive summary

Introduction

Online prize draws and competitions

Although the prize draws and competitions (PDCs) industry has grown rapidly in the UK in recent years, little research into this sector has been conducted to date. PDCs are similar to lotteries in that players purchase tickets to participate and prizes are awarded at least partly based on chance. However, they differ from lotteries in (at least) one of two ways: ‘prize draws’ offer a free entry route (often by post) and ‘prize competitions’ have a skill element (e.g. answering a question) meaning that prizes are not allocated entirely by chance. Due to these characteristics PDCs are not regulated under the Gambling Act 2005 (unlike lotteries), meaning that they are not subject to gambling regulatory oversight, may lack protections for players, and are not obliged to follow the rules on identifying and mitigating gambling-related harms.

Like lotteries, some PDCs support good causes by donating a proportion of the funds raised. 

Purpose and objectives of this study

London Economics were commissioned by the Department for Culture, Media and Sport (DCMS) in August 2023 to conduct research to provide DCMS with a better understanding of the PDCs market, with a view to informing consideration of whether any government intervention may be required in this sector and, if so, what form that intervention could take.

This research is structured around three overarching questions: 

1. What is the size and scale of the prize draws and competitions market (both demand and supply)?

2. What evidence is there of negative consequences from these products?

3. If any harm is identified, what would be the most effective and proportionate intervention?

This research focuses on businesses whose primary activity is running online PDCs. Henceforth, when we refer to PDC operators and PDCs in this report, we are referring to these businesses and the prize draws and competitions that they run. Unless explicitly stated to the contrary, the findings in this report relate to all products offered by PDC operators, including any instant win games. It should be noted that marketing promotions and tv/radio competitions are not within the scope of this research. 

Methodology for this study

Four main approaches were used to answer these research questions. 

Firstly, a web crawl carried out by glass.ai was used to identify PDC operators. 

Secondly, surveys were conducted of 22 PDC operators, 764 players of PDCs, 19 charities that have received funding from PDCs and five gambling charities. 

Thirdly, stakeholder interviews were carried out with the Gambling Commission, the Advertising Standards Authority (ASA), Citizens’ Advice, the National Lottery operator and the Lotteries Council. 

Finally, desk research addressed any remaining gaps in the evidence. The survey of players was carried out by YouGov. 

Market for PDCs

Market size, structure and trends

It is estimated that around 7.4 million adults (14% of the adult population) have participated in PDCs in the last year (as of November 2023), spending an estimated total of £1.3 billion (£700 million to £2.1 billion). The size of the PDC industry is much smaller than the National Lottery, which is played by 44% of adults^{[footnote 1]} with an annual spend of £8.2 billion.^{[footnote 2]} However, the market is similar in size to that for other lotteries, which 14% of adults participate in^{[footnote 3]} and which have an annual spend of approximately £900 million.^{[footnote 4]} Although 401 different PDC operators were identified in the market, one operator (Omaze) is estimated to account for more than 60% of the player base.  Although there are also several other relatively large operators, these each account for at most a 5% share of the player base. 

There is evidence to suggest the PDC market is growing. More operators expect an increase in ticket sales (60%) than anticipate a decrease in sales (5%) over the next three years, and more players (22%) have increased their spending than have decreased their spending over the last year (17%). 

Moreover, the fact that most operators have only recently been incorporated (44% were incorporated after 2020 and a further 51% between 2015 and 2020) underlines the emerging nature of the industry.

Operators of PDCs

Business model

Operators make money by selling entries (tickets) for their PDCs. A ticket always provides the buyer with the chance to win a prize in a ‘main’ draw, which takes place after ticket sales have closed. Additionally, in the case of some operators, the same PDC ticket may also provide the buyer with a chance to win an ‘instant win’ prize, at the point of purchase. Data from the operator survey suggests that average ticket prices are slightly more than £3. 

The operator survey also suggests that prize values on average equate to just under half (47% to 49%) of the total value of ticket sales. Two thirds of operators only offer prizes of less than £10,000 in value, and only 5% offer prizes with a value in excess of £100,000. Common types of prizes offered include cash, electronic equipment, motor vehicles, clothing and accessories and household appliances. 

One of the key distinguishing features of PDCs in comparison to lotteries is that PDCs often (88% of operators) offer a free entry option. However, this option is not frequently used as operators report that on average only 6% of total entries they receive are free. This may be in part because the most common form of free entry route offered is postal entry. Given postage costs and the associated inconvenience, for many people it is not practical to enter for free. 

The other key distinguishing feature of PDCs relative to lotteries is the inclusion of a ‘skill element’, which is done by 90% of PDC operators. Typically, participants must answer a multiple-choice question to enter. However, usually the answers to these questions are straightforward or can be easily obtained through a web search. 

Around 40% of operators offer ‘instant win’ prizes, in which players who enter a PDC also have the chance to instantly win a prize at the point of purchase. For example, entrants in a competition to win a car may be provided with a chance to instantly win £100 cash. In contrast to traditional PDCs, where participants typically must wait days or weeks for winners to be drawn, instant win games can provide instant gratification. For this reason, these products can be more addictive to consumers and pose heightened risks of gambling harm as highlighted by GambleAware.^{[footnote 5]}

Furthermore, in many cases instant wins are marketed very prominently and make up a large proportion of the total prize pot offered by operators in their draws. For more than half (69%) of operators offering instant win prizes, the combined value of instant win prizes on offer is at least of a similar magnitude to the combined value of main draw prizes on offer.   

Operators who offer instant win prizes do not differ substantially in profile from other operators. It is not the case, for example, that operators in a particular category of prize size are much more likely to offer instant win prizes. Nonetheless, it is worth noting that 53% of operators without any age restrictions on their websites offer instant win products (compared to 41% of operators overall). One potential explanation for this fact is that operators who take fewer steps to mitigate risks of harm to players are both more likely to allow children to play and to offer instant win products. Furthermore, PDC websites do not always make clear whether or not instant win prizes are accessible to consumers via free entry routes. 

Charity associations

Many operators also donate some of their proceeds to charity, on an entirely voluntary basis. The web crawl identified links to charities on 35% of operators’ websites and typically operators offering larger prizes are more likely to have such links. Data from the operator survey suggests that around 10% of all PDC ticket sales are donated to charity. 

Relationships between charities and PDC operators can take many forms. In some cases, there is a formal relationship and operators make payments to charities on an ongoing basis whereas in other cases donations from PDC operators form part of the general donation pool of the charity and some charities are even unaware that they have received donations from PDC operators. Donations from PDC operators are highly appreciated by charities that receive them, although typically make up less than 4% of the total donations received by these charities. 

Charities highlighted that the advantages of receiving funds from PDCs include the fact that it is a cost-effective method of fundraising as well as the largely unrestricted nature of such donations and the opportunity to potentially attract new donors who the charity would not otherwise have access to.  On the other hand, some charities reported that some members of the public associated PDCs with scams and others had concerns about the fact that PDCs may be perceived as a form of gambling. 

Players of PDCs

The player base of PDCs is fairly diverse across demographic characteristics. However, participation is highest in the 45 to 54 age range (18% have participated in the last year) and lowest in the 18 to 24 age range (11%). Participation is also higher in England than the rest of the UK, particularly in London (17%). 

The most common way consumers learn about PDCs is through social media adverts (45% of players). However, a substantial minority also reported that they learned about PDCs from various kinds of other sources (both online and offline).

As would be expected, the opportunity to win prizes was the primary motivator for entering PDCs. 37% of players also reported that the fact that PDCs support good causes was a reason for playing. However, just 2% said that this was their ‘main’ reason for playing. 

Players of PDCs are far more likely to participate in commercial gambling activities and lotteries (hereafter referred to as ‘other gambling’) than the average adult. 12% of PDC players reported that they had not undertaken any other form of gambling in the last 12 months, compared to 39% of the general population in a comparable survey.^{[footnote 7]}

PDC players are particularly likely to also participate in lotteries, with 59% of players having participated in the National Lottery in the last year (compared to 44% of the general population). PDC players perceive several advantages of PDCs compared to lotteries, including the fact that they can participate for free, the prizes are more exciting and their chances of winning are higher.  

Regulatory environment

As discussed previously, PDC operators are not licenced under the Gambling Act 2005 in the same way as society lotteries^{[footnote 8]} (and other types of lotteries). PDCs operators, however, have a range of obligations under the consumer protection framework in the UK that apply to all businesses and are also subject to the Advertising Standards Agency (ASA) CAP Codes which cover all UK businesses’ marketing activities, and some are registered with the Fundraising Regulator. 

During interview the ASA argued that the existing CAP Codes provide a robust means of addressing potential harm in the market for online PDCs. Furthermore, they shared several examples of rulings they have made against operators of online PDCs and noted that general compliance rates with ASA rulings are over 90%. Rulings against online PDC operators include rulings related to complaints about free entry routes and changes to the advertised prizes.

Potential harm associated with PDCs

Transparency and player protection

The level of transparency of PDCs was found to be mixed, based on the web crawl. Overall, 69% of operators displayed the likelihood of winning on their websites, 62% the method for selecting winners and 94% gave some indication of the rules of play. There was also a strong correlation between having age restrictions and higher transparency standards. Indeed, among operators with age restrictions, 75% displayed the likelihood of winning, 66% the method for selecting winners and 99% the rules of play. In contrast, among those without age restrictions, only 12% displayed the likelihood of winning, 18% the method for selecting winners and 35% the rules of play. Consumers generally thought that transparency was reasonable among PDC operators. However, only a minority thought that the chances of winning and how much money will be donated to charity are made clear, which suggests there is room for improvement.  

Furthermore, marketing of the free entry route is very poor, despite the ASA’s CAP Codes stating that ‘any free-entry route should be explained clearly and prominently’. Based on a random sample of 30 operator websites plus Omaze, only one marketed the free entry route in the same way as paid options. 

Transparency from operators is particularly lacking in relation to instant win products. Operators often do not distinguish between instant win products and main draws when providing information about likelihood of winning a prize, the method of selecting winners, rules of play, and free entry routes. This is despite the fact that all of these features are likely to differ markedly between instant win products and main draws. Under 10% of operators offering instant win products make specific reference to instant win products in their terms and conditions. In our view, information about the interaction between instant wins and free entry routes is unclear, with most operators failing to explain whether, and if so how, free postal entries are able to obtain instant win prizes.  

In terms of player protection, the web crawl identified that 92% of operator websites reference age restrictions. However, these are only made clear on the home page of 23% of operator websites. This is broadly consistent with the fact that 75% of consumers reported that they saw reference to age restrictions when they entered PDCs. This is also consistent with the findings of the operator survey, where all operators surveyed report that they do not allow under-18s to play. However, 90% of operators report that they rely on self-certification of their age by the player. Age restrictions were also found, in the web crawl, to be less common among operators offering large prizes (over £100,000) than those only offering smaller prizes. 

The web crawl suggests that the proportion of operators with safer gambling measures in place is relatively low, with just 7% of operator websites found to have links to gambling charity websites, 17% self-exclusion mechanisms and 7% reminders to play responsibly. 

Operators who offer instant win prizes are no more likely than other operators to provide the player protection measures considered above. For example, the proportion of operators implementing age restrictions for participation is slightly lower among operators who offer instant wins (89%) than amongst those who do not (93%). It should be noted for comparison that lottery operators that offer instant wins are required to implement more player protection measures than lottery operators that do not. 

40% of operators responding to the survey reported having safer gambling messages and 45% that they allow individuals to self-exclude from playing. However, while some of the self-exclusion measures described are likely to be effective (players can prevent themselves from playing by contacting the operator), others were more basic (players can self-exclude by closing their account). On the other hand, some operators, when prompted to describe their self-exclusion measures, reported that they are proactive in trying to detect individuals at risk of gambling harm and that they have strict spend limits on individual accounts. For comparison, the National Lottery offers irreversible lifetime self-exclusion. Society lotteries are required to participate in the industry-wide self-exclusion scheme, GAMSTOP, but only for their instant win games.  

Gambling harm

According to the consumer survey, the typical player of PDCs spends on average around £175 per year doing so (equating to just under five entries per month). As discussed above, players of PDCs usually also engage in other gambling activities, and on average their spend on other gambling activities amounts to £468 per year. Most players participate in PDCs fairly infrequently, with two thirds of players participating once a month or less.

PDC players are significantly more likely to be experiencing gambling harm than both the general population and the typical person who participates in other gambling activities. In particular, 12% of PDC players gamble with negative consequences and a possible loss of control according to the Problem Gambling Severity Index (PGSI), compared to just 3% of the general population and 5% of all gamblers, according to a similar survey.^{[footnote 9]} Furthermore, there is a clear association between gambling harm and frequency of participation in PDCs. Indeed, among PDC players, 35% of those who are experiencing gambling harm play PDCs multiple times a week, compared to 4% of non-gamblers and 10% of those who are experiencing non-harmful gambling. Similarly, individuals experiencing gambling harm spend on average far more (£712 per year) on PDCs than non-gamblers (£59 per year) and non-harmful gamblers (£90 per year). This may be in part explained by the fact that PDC players generally think that PDCs are addictive. In particular, when asked whether PDCs are addictive, 21% strongly agreed and 46% agreed, while just 7% disagreed and 2% strongly disagreed. 

However, the association between PDC participation and harmful gambling does not necessarily mean that PDC participation causes harmful gambling. Indeed, gambling charities suggested that PDCs may often be the first exposure that some people get to gambling and may be a ‘springboard’ to other gambling activities but are rarely the only gambling activity undertaken by individuals experiencing gambling harm. This is backed up by the consumer survey, which suggests that people who do not participate in any other gambling activities and experience harmful gambling make up just 1% of the PDC player base.   

There is also some evidence that certain groups of people are more susceptible to harm from PDCs. In particular, harmful gambling rates are higher among male PDC players (17%) than female (8%) and players aged 18 to 34 (28%) than those aged 55+ (1%). Additionally, harmful gambling rates are higher among ethnic minority PDC players (35%) than white players (9%), and those on incomes of £19,999 per year or less (15%) than those on incomes above £60,000 (10%). Higher than average rates of harmful gambling were also observed among men, the young and ethnic minorities in the general population as part of the GambleAware Annual GB Treatment and Support Survey 2022. That young people, ethnic minorities and individuals on low incomes are particularly susceptible to harm from PDCs was also suggested by the results of the gambling charities survey.

Consumer harm

The evidence suggests that consumers generally have mixed views about the way that PDC operators advertise and their treatment of players. 61% of players thought that advertisements accurately describe the prizes and conditions of PDCS compared to 8% who disagreed, and 49% agreed that they have generally been treated well by PDC operators compared to just 2% who disagreed. Given the concerns around transparency discussed above, this suggests that these transparency issues are not necessarily a priority for consumers. 

Stakeholder consultations with the ASA and Citizens Advice revealed that there are often complaints made against PDC operators. However it was suggested that the amount of complaints is not especially large given the size of the market. These complaints typically relate to the free entry route, scams or the fact that the prize was changed or not awarded on time. 

Impact on the lottery industry

As part of this research, the National Lottery operator and Lotteries Council were also consulted to understand the impact of PDCs on the lottery industry. It was clear that PDCs are considered by the lottery industry to be a major competitive threat, and both the National Lottery and Lotteries Council consider that the current regulatory regime is not fair and favours PDC operators. Relative to PDC operators, operators of (large) society lotteries and the National Lottery must, among other requirements, limit prize sizes and ticket sales (in the case of society lotteries); abide by ASA rules on advertising for lotteries; fulfil transparency and audit requirements; and, in the case of society lotteries, make minimum charitable contributions of around 20%.

The National Lottery highlighted that the fact that PDCs can offer large ‘life-changing’ prizes without facing regulation makes it difficult to compete. Society lotteries are subject to a £500,000 cap on the size of prizes, which is intended to protect the National Lottery’s monopoly on life-changing prizes. PDCs circumvent this cap because they are not regulated as lotteries and are also therefore not subject to any of the regulation and safeguards in place for the National Lottery. The fact that PDC operators can make large sales means that they can spend freely on advertising and therefore grow over time. This idea is supported by evidence from the operator survey, which suggests that while the National Lottery spend approximately 95%^{[footnote 10]} of their revenue on returns to society (including prizes), the corresponding figure for PDC operators is below 60%.

The Lotteries Society have similar views and consider it to be particularly unfair that PDC operators are able to offer larger prizes (above £500,000) with less regulation and also highlighted the advantage that PDC operators have in terms of advertising. They also suggested that if there is no regulatory change, some lottery operators may drop their licence and become PDC operators. They consider that, in order to level the playing field, PDC operators must be regulated in a very similar way to society lotteries.  

Overall, there are good arguments behind the idea that PDCs adversely affect the lottery industry (particularly given the fact that the vast majority of PDC players also participate in the National Lottery or society lotteries), although the impact has not been quantified to date.  

Assessing the case for intervention

Case for intervention

Any potential intervention into this market should be proportionate and acknowledge the fact that consumers clearly derive some enjoyment and satisfaction from participating in PDCs and that there is no direct evidence of a causal relationship between PDC participation and harmful gambling. However, this research has identified several areas related to the PDC market that regulation could improve:

Reducing the risk of gambling harm from PDCs

There is a clear risk of gambling harm from PDCs. PDC players are more likely to be experiencing gambling harm (than either a member of the general population or even a typical gambler) and, among PDC players, those who are experiencing gambling harm play PDCs more frequently and spend more on PDCs than others. While this does not mean that PDCs cause harmful gambling, players who are experiencing gambling harm need help and protection, and it is questionable whether they currently receive this on (all) PDC websites. Moreover, around two thirds of PDC players agree that they are addictive. It should also be noted that many PDC operators offer instant win products without implementing heightened player protection measures that are required of lottery operators offering instant wins. 

Improving the integrity and transparency of PDCs

The consumer survey and stakeholder consultations identified that there is room for improvement in terms of fairness and transparency of PDCs. Currently, there is little information provided by most operators on how winners are chosen and there have been instances where prizes are retrospectively changed due to poor ticket sales. Perhaps the most compelling argument for improvements in this area is that 8% of PDC players (hundreds of thousands of people) believe that PDC operators do not accurately describe the prizes and conditions of their competitions. 

Protecting donations to charities

Donations to charities from PDC and lottery operators are an important aspect of these products. Data from the operator survey has shown that the proportion of sales donated to charity by PDC operators (around 10%) is lower than that donated by lotteries. Therefore, if PDCs take spending away from lotteries this will reduce charitable donations. However, although PDCs might be expected to divert revenue from lotteries, this study does not provide evidence on the extent to which this occurs.  

Changes to gambling regulation

One potential option would be to bring PDCs under the oversight of the Gambling Commission. This would likely include a requirement for PDC operators to have a licence to operate.

As a result, operators of PDCs may be required to implement the following: 

• minimum age for participation
• provision of self-exclusion mechanisms and participation in industry-wide self-exclusion schemes
• safer gambling messaging on websites
• links to charities protecting against gambling harm on websites
• caps on entries and/or spend per player
• limits on promotional offers (e.g. discounts encouraging bulk purchases)
• ban on accepting payment by credit card

They may also separately be made subject to limits on the size of their prizes and ticket sales in the same way as society lotteries or required to pay gambling duty or donate a minimum proportion of their proceeds to charity. 

This form of intervention would be expected to reduce the spending of individuals experiencing gambling harm on PDCs. It may also give the Gambling Commission an opportunity to regulate the instant win games offered by operators to reflect the increased gambling risk of these products. Furthermore, given this intervention would somewhat level the playing field between lotteries and PDC operators it would likely also ensure that charity donations are protected. This may be through mandatory donations from PDC operators (if this were part of the changes to gambling regulation) or simply by providing a boost to the lottery industry. It should however be noted that this intervention would likely require changes to primary legislation, which means it would take a significant amount of time to implement. 

However, there may also be some unintended consequences as a result of this intervention. The vast majority of operators reported that a licence requirement with gambling harm measures would be very damaging due to the additional costs it would impose. Related to this, of particular concern was the idea that operators may have to donate 20% of their proceeds to charity. 

Operators argue that their margins are already quite small, and as such their businesses would not be viable financially if their costs were increased substantially by being brought under gambling regulation. Furthermore, some operators described their growth model as being based on using profit from one PDC in order to be able to offer a larger prize in their next draw and over time attract a larger player base. Therefore, this intervention could reduce entry and/or induce exit from the market, reducing the choice available to consumers and potentially entrenching the market power of large operators. Additionally, regulation-induced cost increases may be passed on to consumers in the form of increased prices or reduced quality. Finally, PDC operators are unlikely to have an incentive to offer free entry routes if regulated by the Gambling Commission, meaning consumers who use these will no longer be able to do so. 

Greater enforcement of consumer protection rules

An alternative intervention option would be to pursue more assertive enforcement of existing consumer protection rules. Such an intervention could include a piece of ‘sector compliance’ work by consumer protection bodies such as the ASA. The ASA’s sector compliance efforts typically involve monitoring of advertising in the sector and, potentially, issuance of an ‘Enforcement Notice’ informing operators of changes they may need to make to their advertising practices. According to the ASA, compliance rates with its enforcement action are above 90%.

The ASA has previously taken action against potentially harmful advertising by PDC operators, for example related to the free entry route or retrospective changing of prizes, so there is precedent that this intervention would reduce the prevalence of harmful practices by operators. This intervention would also likely increase the level of transparency in the market. 

It is also possible that this intervention may induce operators to offer more attractive (i.e. more convenient and accessible) free entry routes. Indeed, many previous enforcements by the ASA have revolved around free entry routes and so operators may adapt their free entry offering to avoid facing potential enforcement action. However, given the competing priorities of the ASA there are limits in terms of the extent to which they can monitor the sector on an ongoing basis. 

The potential unintended consequences of this approach include that additional costs incurred by operators to comply with enforcement may be passed on to consumers in the form of increased prices or reduced quality. Moreover, it also needs to be considered that strict interventions related to free entry routes may undermine the entire business model of PDC operators, as if an unlimited and truly ‘free’ entry route was available there would be no incentive for players to purchase entries. 

Voluntary code of conduct

The final intervention option considered in this report is the introduction of a voluntary code of conduct, similar to what has been implemented for ‘loot boxes’.^{[footnote 11]} Such a code of conduct would likely include many of the measures discussed above in the context of changes to gambling regulation, including a potential minimum threshold for charity donations, but without enforcement from a legal perspective or any limits on sales and prizes. 

If adoption of and adherence to the code of conduct was widespread it would likely result in many of the benefits of changes to gambling regulation, although perhaps to a slightly lesser extent. In particular, it would be expected to reduce the prevalence of harmful conduct by operators and increase transparency. The code of conduct could also be devised to reduce gambling harm by increasing adoption of player protection measures (e.g. spending limits) already in place with some operators and moderating instant win products. 

Surveyed operators argued in favour of this type of intervention. The key reasons for this were that it would give consumers confidence that they are entering competitions that meet industry standards and that it may ensure a level playing field. Many operators also expressed an interest in being involved in the development of such a code as part of a Working Group. 

The only major concern with this approach is that the code of conduct may have poor take-up and/or adherence. It is also possible that there may be a small impact on the costs of operators meaning they may be unable to provide as good an offering for consumers. There is precedent that this approach can be implemented for similar products (the loot box case). As of yet, it is too early to judge the success of the loot box intervention, but any future evaluation of this case may provide evidence relevant to the PDC case. However, there are also reasons to believe it could be more challenging to implement such an intervention in the PDC space given the large number of operators and the lack of an established industry body.

Conclusion

The expected impacts (and unintended consequences) of these interventions are summarised in the table below.

Table 1: Impacts and unintended consequences of possible government interventions

Impact/unintended consequence	Intervention: changes to gambling regulation	Intervention: greater enforcement of consumer protection rules	Intervention: voluntary code of conduct
Reducing the risk of gambling harm from PDCs	Significant positive impact	No impact	Slight positive impact
Improving the integrity and transparency of PDCs	Moderate positive impact	Moderate positive impact	Slight positive impact
Protecting donations to charities	Significant positive impact	No impact	Slight positive impact
Reduced competition and consumer choice due to a decline in the PDC industry	Significant negative impact	Moderate negative impact	Slight negative impact
Increased prices and reduced quality of PDCs	Significant negative impact	Moderate negative impact	Slight negative impact
Removal of free entry routes	Moderate negative impact	No impact	No impact

Changes to gambling regulation offer a more comprehensive solution to address a wider range of issues in the market. This is also the only option which somewhat aligns the regulation of PDCs with that of lotteries. However, this approach is also most likely to lead to unintended consequences that may impact consumer choice and the viability of some operators. Furthermore, it would also be the most time consuming of the three intervention options considered, in the sense that it would likely require changes to primary legislation. 

Greater enforcement of consumer regulation and a voluntary code of conduct are comparatively more moderate options but may not have a significant impact in terms of reducing gambling harm. Moreover, more assertive enforcement is not mutually exclusive with other options. 

Ultimately, which intervention option(s) should be implemented depends on policymakers’ assessment of the trade-offs discussed above. Furthermore, it may require further research on the specifics and feasibility of implementation of any intervention. It should also be noted that there is some evidence that supports the idea of separate regulation focussed specifically on instant wins. However a full assessment of this would require further primary data collection on the extent to which the presence of instant win games drives spending and gambling harm in the PDC industry, which is beyond the scope of this research. Such further research would provide valuable evidence on the impact of instant wins on player behaviour and detriment.

The most proportionate response may be to begin with a light touch approach (e.g. a voluntary code of conduct), with the option to amend gambling regulation if such a code proves problematic to develop or take up and adherence to the code is inadequate. This is because there is clear evidence that consumers enjoy participating in PDCs and so it is worth exploring whether the major issues present in the PDC market can be addressed in a light touch way that avoids severe unintended consequences.  Furthermore, this research has not established evidence of a causal link between PDC participation and harmful gambling that would indicate an urgent need for gambling regulation. 

1. Introduction

1.1 Online prize draws and competitions

Although the prize draws and competitions (PDCs) industry has grown rapidly in the UK in recent years, little research into this sector has been conducted to date. PDCs are similar to lotteries in that players purchase tickets to participate and prizes are awarded at least partly based on chance. However, they differ from lotteries in (at least) one of two ways. Specifically, ‘prize draws’ offer a free entry route (often by post) and ‘prize competitions’ have a skill element (e.g. answering a question) meaning that prizes are not allocated entirely by chance. Like lotteries, some PDCs support good causes by donating a proportion of the funds raised.

As they do not meet the criteria to be a lottery, PDCs are not regulated under the Gambling Act 2005. This means that they are not subject to gambling regulatory oversight, can lack protections for players, and operators of PDCs are not obliged to follow the rules on identifying and mitigating gambling-related harms which apply to lottery and other forms of gambling operators. Nor, in contrast to regulated lotteries, is it currently possible for the government to mandate minimum charitable contributions by PDC operators or to set limits on annual proceeds or prizes. Rather, PDCs are subject only to consumer protection regulations that are applicable to all businesses and oversight from bodies such as the Advertising Standards Authority (ASA). 

1.2 Purpose and objectives of this study

London Economics were commissioned by the Department for Culture, Media and Sport (DCMS) in August 2023 to conduct research to provide DCMS with a better understanding of the PDCs market, with a view to informing consideration of whether any government intervention may be required in this sector and, if so, what form that intervention could take. 

This research is structured around three overarching questions: 

1. What is the size and scale of the prize draws and competitions market (both demand and supply)?

2. What evidence is there of negative consequences from these products?

3. If any harm is identified, what would be the most effective and proportionate intervention?

This research focuses on businesses whose primary activity is running online PDCs. Henceforth, when we refer to PDC operators and PDCs in this report, we are referring to these businesses and the prize draws and competitions that they run. Unless explicitly stated to the contrary, the findings in this report relate to all products offered by PDC operators, including any instant win games. It should be noted that marketing promotions and tv/radio competitions are not within the scope of this research.

Sections 2, 3 and 4 of this report correspond, respectively, to the three research questions above. The Annexes then provide further detail on the methodology and data collection methods used to conduct this research.

1.3 Methodology for this study

This study draws upon information from a variety of sources to answer the research questions. Data has been collected from operators and players of PDCs, as well as other stakeholders who may be affected by government intervention. This latter group includes the lottery sector and charities who receive donations from PDCs. The research also incorporates insights from other organisations with knowledge of the PDC market, its possible negative consequences and options for government intervention. These include various statutory and non-statutory bodies working to prevent gambling harm and consumer harm. 

4 main approaches were used to collect data:

*1. Web crawl to identify websites of PDC operators. The web crawl also recorded certain information about websites that is relevant to answering the research questions, for example, whether they mention age limits for participation in PDCs. *2. Surveys of: * 22 operators of PDCs * 764 players of PDCs * 5 gambling charities; and * 19 charities that have received funding from PDCs *3. Stakeholder engagement interviews with: * The Gambling Commission * Consumer protection organisations (the ASA and Citizens Advice); and * Representatives of the lottery industry (the National Lottery operator and Lotteries Council) *4. Desk research to address any gaps in the coverage of the data above, including: (sub bullets) * Basic manual review of all operator websites identified by the web crawl * Detailed review of 31 operator websites to assess transparency around key features ^{[footnote 12]} * Detailed review of 200 operator websites to assess the prevalence and nature of instant win products^{[footnote 13]}

2. Market for PDCs

This section provides an overview of the size and scale of the PDC market, from both a demand and supply side perspective. It also provides detail on operators and players (consumers). 

2.1 Market size, structure and trends

Here we explore the size and structure of the market for PDCs, based on evidence collected from the web crawl and the consumer survey. We also discuss how the market may evolve going forwards. 

2.1.1 Market size and structure 

It is estimated that there are approximately 7.4 million adults in the UK that have participated in a PDC in the last 12 months (as of November 2023, with a 95% confidence interval of 6.6 to 8.2 million), spending £1.3 billion per year on PDCs. The lower bound estimate for the size of the market is £700 million, while the upper estimate is £2.1 billion (see Annex 4 for details on how the market size estimate is calculated). 

The size of the PDC industry is much smaller than the National Lottery, which is played by 44% of adults^{[footnote 14]} and has an annual spend of £8.2 billion.^{[footnote 15]} However, the market is of a similar size to that of other lotteries, which are participated in by 14% of adults^{[footnote 16]} and have an annual spend of approximately £900 million.^{[footnote 17]}

We have identified (through the web crawl) that this activity is split across at least 401 operators. However, it is likely that there are further operators that have not been detected. Despite this, it appears as though the market is highly concentrated. Indeed, the evidence suggests that one operator (Omaze) has a very sizeable market share. Given the large number of operators in the market, it was not possible to construct market shares for the whole market, however the consumer survey and TrustPilot reviews do provide some insight. 

In terms of the former, consumers were asked whether they have participated in a PDC with any of eleven different operators, which were identified as likely being the largest based on the number of TrustPilot reviews or previous DCMS analysis. Market shares in the table below are based on the proportion of respondents that had participated in PDCs run by each operator. 

Table 2: Estimated approximate market share among eleven large operators

Operator	Market share
Omaze UK	61.4%
Best of the Best	4.7%
Aspire Competitions	4.4%
Bounty Competitions	4.3%
Elite Competitions	4.3%
Raffle House	4.2%
Lucky Day Competitions	3.7%
Tramway Path	3.7%
Pristine Competitions	3.6%
Nitrous Competitions	3.4%
Storm Competitions	2.4%

The number of reviews operators have on TrustPilot also supports the finding that Omaze is by far the largest operator. The table below presents the number of TrustPilot reviews (as well as the corresponding shares) of the top 10 operators as well as the rest of the operators combined. 

Table 3: Trustpilot reviews for 10 most reviewed operators and all others

Operator	No. Trustpilot reviews	Share of industry Trustpilot reviews
Omaze UK	354,055	62.8%
Storm Competitions	28,326	5.0%
Pristine Competitions	17,000	3.0%
Aspire Competitions	14,491	2.6%
Nitrous Competitions	13,576	2.4%
Bounty Competitions	11,605	2.1%
Lucky Day Competitions	8,022	1.4%
Elite Competitions	7,749	1.4%
Best of the Best	7,349	1.3%
Dream Car Giveaways	6,737	1.2%
Other	94,792	16.8%

Source: London Economics analysis of web crawl data

There is evidence to suggest that some of the 401 operators identified in the web crawl may be owned by the same holding companies and/or managed by the same individuals. During manual review of the web crawl data, we identified several clusters of operators located on a single street (often at a single address), with the largest of these clusters consisting of 8 to 10 operators. This suggests that the PDC sector may be somewhat less fragmented than the proliferation of smaller operators initially suggests. 

2.1.2 Market trends

There is some evidence to suggest that the market for PDCs is growing. As part of the consumer survey, consumers were asked how the amount of money they have spent on PDCs has changed over the past year. While only 17% indicated that their spending had decreased, 22% suggested that their spending has increased.

The idea that the market is growing is also supported by evidence from the operator survey. Operators were asked how they think the number of entries they sell for their competitions will change over the next 3 years, and 60% suggested that they thought the number of entries would increase in comparison to just 5% suggesting that the number of entries will decrease. 

Furthermore, it is also noteworthy that most operators in the market have only been established very recently. The table below provides further detail on when operators were incorporated.

Table 4: Operator incorporation dates

Incorporation date	Proportion of operators
Before 2015	5%
2015 to 2020	51%
After 2020	44%

Note: Incorporation dates were only available for 51 operators.

Source: London Economics analysis of web crawl data

2.2 Operators of PDCs

This section discusses the evidence collected on PDC operators’ business models and their associations with charities. 

2.2.1 Business model

Operators make money by selling entries (or tickets) to their PDCs. A ticket always provides the buyer with the chance to win a prize in a ‘main’ draw.  The main draw is held after ticket sales have closed, and the prize for the main draw is awarded to the holder of the winning ticket at this point. Additionally, in the case of some operators, the same ticket may also provide the buyer with a chance to win an ‘instant win’ prize. Instant win prizes are awarded to buyers at the point when they complete their ticket purchase, should their ticket number match a number pre-determined to win an instant win prize.

Operators reported in the survey that the cost of an individual entry is on average a little more than £3.^{[footnote 18]} These findings must be caveated with the fact that the sample of 20 operators who responded to our survey seems to be skewed towards the larger end of the market. This is because, if the 300,000 monthly entries at more than £3 per entry were representative, this would imply a far larger market than the £1.3 billion per year discussed in Section 2.1.1.  With this in mind, it is likely that across all PDC operators either the number of entries received or the average cost per entry (or both) is lower than that suggested by the survey.

Evidence on the number of people employed by operators is somewhat limited. Web crawl data on the number of employees was obtained for less than 10% of the identified operators. This data suggests that the majority (76%) of operators have between 2 and 10 employees, with just 5% of operators being run by a single person. In contrast, the operator survey suggests that over half (55%) of operators are run by a single person but that 25% of operators have more than 10 employees. Given that (as discussed above) operators responding to the survey are likely to be larger than average, it is likely that the size profile of the typical operator is smaller than suggested above. 

The operator survey suggests that, on average, prize values make up just under half (47 to 49%) of the total value of entries sold. This is based on operators selling an average of £25,000 worth of entries with an average prize value of around £12,000. This is broadly consistent with the results of the manual review of prizes on offer on operator websites, shown in the table below. 

Table 5: Largest prizes available (November 2023)

Largest prize value	Proportion of operators
More than £1 million	<1%
More than £100,000 but less than £1 million	5%
More than £10,000 but less than £100,000	28%
Less than £10,000	67%

Source: London Economics analysis of web crawl data

While most operators offer only relatively small prizes, a significant majority offer prizes that are in excess of £10,000 in value and a small proportion offer prizes valued above £100,000. The operator survey provides some insight into what kinds of prizes are on offer. As discussed above, when interpreting this data, it should be noted that the operators in the survey are likely to be larger than average. 

Table 6: Types of prizes offered in PDCs

Prize	Proportion of operators
Properties (e.g. houses, apartments) under the value of £1m	5%
Properties over the value of £1m	5%
Motor vehicles under the value of £20k	20%
Motor vehicles over the value of £20k	30%
Cash under the value of £100k	65%
Cash over the value of £100k	15%
Holidays	25%
Event tickets	25%
Entertainment electronics (e.g. TVs, games consoles)	70%
Household appliances	55%
Clothing and accessories (e.g. jewellery, watches)	65%
Other	30%

Source: Operator survey

There are two distinguishing features of the business model of PDCs that mean they are not captured under gambling regulation in the way that lotteries are. The first is that PDCs often have an option to enter for free. The web crawl identified that 88% of all operators offer a free-entry route on at least some of their competitions. This is consistent with the results of the operator survey, in which 90% of respondents indicated that they offer a free entry route in at least some of their competitions. The operator survey also suggests that, among operators offering a free entry route, this is typically available for over half of their competitions.  

Despite this, operators report that they receive relatively few entries via the free entry route. In particular, they report that on average less than 6% of entries are free. This may be because free entry is normally only possible by post. Indeed, all of the operators who offered free entry said that the free entry option included a postal route and only a small minority said it was possible to enter for free by other means. 

It is also worth noting that most operators (75%) run competitions that can only be entered for free. However, in all cases this was less than half of the competitions that the operator runs. Given they are not profit making, it is likely that these competitions are used by operators to attract players to their other competitions. 

The other major distinguishing feature of PDCs is the existence of a ‘skill element’. This means that, in order to participate in the PDC players must successfully pass some kind of test or quiz. The web crawl identified that 90% of operators offer a skills question in at least some of their competitions. 

It is our view that the ‘skill element’ often does not provide a significant barrier to participation for most players. It typically consists of a multiple-choice question for which, even if it is not already known to the player, the answer can be easily obtained through an internet search. While reviewing operator websites, we encountered ‘skill’ questions such as ‘What is the capital of the United Kingdom?’ and ‘Which day comes after Tuesday?’ Of the surveyed consumers, 75% agreed that tests that must be passed to enter PDCs (e.g. answering a question) are usually easy (compared to only 4% who disagreed). 

The results of the web crawl suggest that free entry routes and skill elements are more commonly found on the websites of the operators that offer small prizes, as shown in the table below.

Table 7: Prevalence of free entry routes and skill elements by size of largest prize

Size of largest prize (number of operators)	Free entry route only	Skilled element only	Both	Neither[footnote 19]
More than £100,000 (21)	10%	14%	52%	24%
More than £10,000 but less than £100,000 (113)	4%	7%	84%	5%
Less than £10,000 (267)	2%	4%	88%	6%

Source: London Economics analysis of web crawl data

Around 40% of PDC operators offer instant win products according to a review of a representative sample of 200 operator websites. For example, entrants in a main draw to win a car may be provided with a chance to instantly win £100 cash.  

In contrast to the main PDC, where participants typically must wait days or weeks for winners to be drawn, instant win products provide instant gratification or loss. For this reason, these products can be more addictive to consumers and pose heightened risks of gambling harm as highlighted by GambleAware.^{[footnote 20]} The instant gratification these products provide make them, in our view, similar to gambling products such as slot machines.

The table below shows the proportion of operators with different characteristics who are offering instant win games. In most of these subgroups of operators, the proportion offering instant win games is similar to that in the overall sample – 41%. In other words, there do not appear to be any particular operator characteristics that make them more or less likely to offer instant wins. However, it is worth noting that a higher than average proportion (53%) of operators without any age restrictions on their websites offer instant win products. One potential explanation for this fact is that operators who take fewer steps to mitigate risks of harm to players are both more likely to allow children to play and to offer instant win products. This possibility is particularly concerning in light of the findings presented in Section 3.1.2 about the lack of appropriate player protections on PDC websites.

Operators with a low-medium number of Trustpilot reviews (11 to 100) are also marginally more likely to offer instant win than larger or smaller operators. One possible explanation for this is that larger, more established operators are more careful to avoid products which may constitute illegal lotteries or gambling. As discussed below, the status of PDC operators’ instant win games vis-à-vis gambling regulation is somewhat unclear.

Table 8: Operators offering instant win products

Operator characteristic (number of operators)	Proportion offering instant win products
Overall (401)	41%
Age restrictions – No (34)	53%
Age restrictions – Yes (367)	40%
Largest prizes – Small (267)	44%
Largest prizes – Medium (113)	36%
Largest prizes – Large (21)	45%
Charity associations – No (260)	34%
Charity associations – Yes (141)	38%
Trustpilot reviews – None (91)	39%
Trustpilot reviews – 1 to 10 (79)	39%
Trustpilot reviews – 11 to 100 (125)	48%
Trustpilot reviews 101 to 1000 (70)	39%
Trustpilot reviews 1000+ (36)	38%

Source: London Economics manual review of 200 operator websites from web crawl data

The role that instant win products play in operator business models can be interpreted in different ways. One possibility is that instant wins give consumers an added incentive to buy tickets, while the possibility of winning the main draw prize remains their primary reason for buying the ticket. Consumers who are unwilling to buy tickets for a draw several days in the future may be induced to do so if the tickets instead also provide some instant gratification. It should be noted that assessing the motives for participation in instant win games specifically is beyond the scope of this research.  

An alternative interpretation is that, at least in some cases, instant win prizes may themselves be the main attraction, in which case the main draw could be seen as being, essentially, a vehicle to sell chances to win instant win prizes. If that is the case, instant win products play a much more central role in operators’ businesses. Consistent with this interpretation, the table below shows that, among operators who offer instant prizes, for many operators the total value of instant win prizes on offer is at least of a similar magnitude to that of the main prizes. Evidence on consumer motivations for participating in PDCs, presented in Section 2.3.3, also suggests that instant wins are a motivating factor.

Table 9: Total value of instance win prizes relative to main draw prizes

Total value of instant win prizes relative to main draw prizes	Proportion of instant win operators
Smaller	31%
Similar	39%
Larger	30%

Source: London Economics manual review of 200 operator websites from web crawl data

As is the case for all PDCs, instant win products offered by PDC operators must include either a free entry route, a skilled element, or both to avoid meeting the definition of a lottery. Given that instant win entries are packaged within a ticket which also provides entry to a main draw, it is important to carefully disentangle whether an operator implements a free entry route and/or skill requirement for both their instant win games and the main draw, or just for the latter. The picture is relatively clear in the case of the skill requirement; participants must satisfy a skill requirement for their ticket to be valid and if they fail, they enter neither the main draw nor any instant wins. 

It is less clear, however, to what extent operators are providing free entry for instant win products. An operator who offers a free entry route for their main draws may not necessarily do so for their instant win products. This distinction is not initially obvious. Among operators offering instant win prizes, 98% advertise free postal entry as an alternative to buying tickets online. In all cases, operator terms and conditions make clear that free postal entries will be eligible for the main draw. However, this does not necessarily mean that free postal entries will also be eligible to win instant win prizes. At least one operator’s terms and conditions explicitly state that free postal entries will not be eligible to win instant win prizes.  As discussed in Section 3.1.1, in our view, the vast majority of operators offering instant win prizes do not make clear whether free postal entries to PDCs will be eligible for instant win prizes (or just the main draw prize). 

In summary, although operators may advertise free postal entry as an alternative to buying tickets, instant win prizes may only be accessible to paying customers in some cases. Given that 16% of operators offering instant win prizes implement a free entry route but no skill requirement, these potential gaps in the application of the free entry route could mean that some instant win products may constitute illegal lotteries.

Finally, it is worth noting that instant win prizes that are on offer need not necessarily be won. Typically, instant win prizes are only awarded if a particular ticket number (corresponding to the prize) is drawn. If this ticket number is not drawn, the prize is not awarded. This means that, unlike in the main draw, where the prize must be awarded, instant win games feature a zero-sum dynamic between the operator and player; the player’s gain is the operator’s loss. One implication of this is that, in the context of instant win games, operators may face stronger incentives and opportunities to set the odds of winning specific instant win prizes to disadvantage consumers, although this research has not seen any evidence which suggests that such practices occur. 

2.2.2 Charity associations

An important aspect of the PDC industry is the fact that many operators donate a proportion of their proceeds to charity. The web crawl identified that 35% of operators report donating money to charity. Donations to charity were found to be more common among operators that offer prizes with value in excess of £100,000 (71%) than operators offering smaller prizes. Operators not offering instant wins were somewhat more likely to donate to charities than operators offering instant wins (44% versus 36%). In the operator survey, 60% of operators reported that they donate to charity. 

As part of the survey, operators were also asked about the proportion of their proceeds that they donate to charity. Based on this, it is estimated that around 10% of all PDC ticket sales are donated to charity. 

From our consultations with charities that have been supported by PDCs, it appears that there are a wide range of different arrangements in place. The table below illustrates the arrangements for donations that are in place as reported by charities. 

Table 10: How charities receive funds from operators of PDCs

How charities receive funds	Proportion of charities
Ongoing basis, regular payments	18%
Ongoing basis, irregular payments after certain prize draws or competitions	45%
One-off	36%

Source: London Economics analysis of supported charities survey

However, it should be noted that charities only completed the full survey if they are aware they have received donations from PDC operators. Some charities that have received donations from PDCs have reported to us that they were unaware of having received the donations. This suggests that many operators are making donations to charity without having a formal partnership in place with that charity.

Among the charities surveyed, donations from PDCs were reported to be a small but important source of revenues. In particular, all charities who responded to the survey suggested that donations from PDC operators were ‘quite important’ or ‘very important’. This is despite the fact that on average charities supported by PDCs report that funding from PDCs accounts for less than 4% of the total donations they receive. It also appears that there is a significant overlap between the charities that receive funding from PDCs and those that receive funding from lottery operators, as 63% of charities surveyed reported that they had also received funding from lotteries. 

Charities who have received donations from PDCs reported several advantages of raising funds in this way. However, these advantages are often specific to charities’ partnerships with large PDC operators, rather than applying to PDCs more generally. 

Most charities receiving donations from PDCs emphasised that this represents a valuable method of raising money, with several referring to the cost-effectiveness relative to other methods of fundraising (such as seeking donations from other corporates) and the high return on investment (ROI). In particular, several charities who had partnered with large operators emphasised the fact that the partnership required no investment on their behalf, creating high ROI with low risk of losses.

Furthermore, one respondent stated that donations from lotteries and PDCs are particularly valued by their organisation because they are largely unrestricted and therefore can be used for wider costs such as salaries and overheads, rather than needing to be spent on a particular activity. 

Respondents also reported that this method of fundraising helps them to engage with people who would not otherwise have engaged with the charity. This is partly because the ‘value exchange’ element of PDCs means that they may appeal even to individuals who would not be interested in donating money without receiving anything in return. Several charities also stated that the marketing campaigns associated with PDCs help them to attract new supporters and to raise awareness about their cause. These charities highlighted that the capabilities of large operators (e.g. marketing budget) result in more effective marketing campaigns than they could conduct themselves. Some respondents also reported that, in addition to new supporters, PDCs offer charities a useful means of re-engaging existing supporters. Finally, one respondent stated that increased visibility as a result of PDCs may help signpost potential beneficiaries to their charity’s services. 

On the other hand, several respondents reported that a disadvantage of receiving funds from PDCs is the potential for negative public perception. Respondents reported that the public may associate PDCs with scams (particularly older demographics). It was suggested that the public may also question how a charity can afford a £2 million house and so much marketing or may have concerns about their link to gambling. Other respondents stated that this method of raising funds can yield variable and unpredictable results. One respondent felt that the long-term future of lottery and PDC donations is uncertain, given the possibility of regulation in the market, and one expressed concern that the growth of ‘give to receive’ fundraising models may undermine ‘pure altruism’ as a driver of donations. 

It should also be noted that, given PDCs and lotteries may be viewed as substitutes by consumers and lotteries also donate to charities, it is possible that funds raised for charities through PDCs are at the expense of funds raised through lotteries. This idea will be explored in more detail in Section 3.4. 

2.3 Players of PDCs

This section discusses the evidence collected on the PDC player base. This includes their demographic make-up as well as how and why they participate in PDCs. It also covers their participation in commercial gambling activities and lotteries (hereafter referred to as ‘other gambling’).^{[footnote 21]}

2.3.1 Consumer base and demographics 

The player base of PDCs is fairly diverse in terms of gender, age, social grade, region and employment status. Women are more likely than men to have participated in PDCs in the last 12 months (16% compared to 12%). This is the opposite to participation in gambling more generally (45% of men participated in gambling in the past four weeks compared to 42% of women as of March 2023). There is evidence that men are more likely to have participated in the National Lottery in the last 12 months (48%) than women (41%), but not other lotteries, which have been participated in by 13% of men and 15% of women.^{[footnote 23]} 

PDC participation rates are highest in the 45 to 54 age range (18%) and lowest in the 18 to 24 age range (11%), mirroring the age profile of participants in gambling more generally. (In the year to March 2023 participation rates in gambling were highest in the 45 to 54 age bracket (49%) and lowest in the 16 to 24 age bracket (31%)^{[footnote 24]}. This also mirrors the trend in participation in the National Lottery by age, which is highest in the 45 to 54 age group (55% in the last 12 months) and lowest in the 18 to 24 age group (18% in the last 12 months).^{[footnote 25]} Participation in other lotteries is highest in the 65+ age group.^{[footnote 26]}

Participation also appears to be higher in England than the rest of the UK, particularly in London (17%). Participation is also higher among those that are working than other segments of the population. The table below presents a full breakdown of participation in the last 12 months according to these characteristics.

Table 11: Proportion of people participating in PDCs in the last 12 months

Characteristic type	Participation rate
Overall	14%
Gender – Male	12%
Gender – Female	16%
Age - 18 to 24	11%
Age - 25 to 34	14%
Age - 35 to 44	13%
Age - 45 to 54	18%
Age - 55+	13%
Social Grade - ABC1	15%
Social Grade - C2DE	13%
Region – North	15%
Region – Midlands	13%
Region – East	14%
Region – London	17%
Region – South	15%
Region – Wales	6%
Region – Scotland	10%
Region - Northern Ireland	5%
Working Status - Working full time	17%
Working Status - Working part time	16%
Working Status - Full time student	9%
Working Status – Retired	12%
Working Status – Unemployed	7%
Working Status - Not working/Other	8%

2.3.2 How consumers learn about PDCs

Consumers gave a wide range of sources as to how they found out about the PDCs they participate in. As would be expected given the high profile and large reach of operators on social media, the primary source is social media advertising. However, other sources of advertising, both online and offline, were also highlighted by players. The table below presents the full breakdown of how consumers learn about PDCs. 

Table 12: Ways in which consumers learn about PDCs

Channel	Proportion of consumers that have learned about a PDC through this channel
Online searches	17%
Social media adverts	45%
Other online adverts (not social media)	29%
Blogs or online recommendations	10%
PDC aggregator sites (e.g. superlucky.me and theprizefinder.com)[footnote 27]	14%
Offline adverts (e.g. in shops or newspapers)	24%
From friends and family	15%
Other	2%
Don’t know/can’t remember	5%

Source: Consumer survey

2.3.3 Consumer motivations for participating in PDCs

There are a wide range of reasons as to why consumers participate in PDCs. They are primarily motivated by the possibility of winning prizes, but 37% of players suggest that the fact that PDCs support good causes is a motivator. However, only 2% of respondents suggested that this was the main reason they play. The table below sets out the reasons people play, as well as the main reason. More broadly, most of the reasons why consumers play are fairly unproblematic. However, the fact that 4% of players participate to recoup money they have already spent is indicative of potential harm.

Table 13: Reasons why consumers play PDCs

Reason	Any reason	Main reason
The possibility of winning life-changing prizes	55%	30%
The possibility of winning prizes I couldn’t otherwise afford	51%	10%
They support good causes	37%	2%
The possibility of winning small prizes	32%	4%
To try to make money through them	17%	8%
They are exciting	15%	1%
When I feel lucky	14%	8%
When I have money to spare	13%	11%
To improve my mood	9%	4%
To escape boredom	7%	3%
As a hobby	6%	6%
Because it’s something I do with my friends or family	4%	3%
To recoup money I have already spent on them	4%	1%
To compete with others	3%	1%
Other	1%	1%
Don’t know	1%	1%
Prefer not to say	0%	0%
N/A- I don’t have a main reason	-	5%

Source: Consumer survey

As discussed in Section 2.2.1, players may also elect to enter PDCs for free. The survey suggests that the majority of players (62%) enter for free over half of the time. The table below indicates the proportion of players of PDCs that pay to enter as opposed to usually entering for free. 

Table 14: Proportion of players paying to enter as opposed to entering for free

Method of entering	Proportion of players
Only enter for free	31%
Usually enter for free but sometimes pay to enter	31%
Enter for free about half the time and pay to enter about half the time	9%
Usually pay to enter but sometimes enter for free	13%
Only enter when I am paying	15%
Don’t know	1%

Source: Consumer survey

When players who pay to enter at least some of the time were asked why they sometimes pay to enter, a majority indicated that this is because they want to support good causes. However, many respondents also indicated that they pay to enter because of drawbacks of the free entry route, such as entries being limited, or additional effort being required to use this entry route.

Table 15: Players’ motivations for paying to enter

Motivation for paying	Proportion of players
I didn’t know that I could enter prize draws and competitions for free	5%
Entering for free would be more effort/complicated	18%
You still need to pay for a stamp so it’s not free	15%
I do not always know how to enter for free	17%
I like to pay so that I am supporting good causes	52%
The number of entries I can make via the free entry route is limited	23%
None of the above	10%
Don’t know	1%

Source: Consumer survey

2.3.4 Participation in other gambling

The consumer survey suggests that players of PDCs are also heavily involved in other commercial gambling activities as well as lotteries. The table below presents the proportion of players of PDCs who have participated in various different kinds of gambling in the last month and the last 12 months. The final column of the table also compares this to the general population. 

Table 16: Participation in other gambling

Type of gambling	Players of PDCs (last month)	Players of PDCs (last 12 months)	General population – November 2022 (last 12 months)
Tickets for the National Lottery Draw, including Thunderball, EuroMillions and tickets bought online	51%	59%	44%
Tickets for any other lottery, including charity lotteries	24%	35%	14%
Scratch cards	16%	25%	17%
Gaming machines in a bookmakers	3%	4%	1%
Fruit or slot machines	3%	8%	3%
Bingo (including online)	4%	9%	4%
Gambling in a casino (any type)	1%	3%	2%
Online casino games (slot machine style, roulette, instant wins)	6%	10%	4%[footnote 28]
Online poker	3%	3%	-
Betting on horse or dog races – online	7%	13%	6%
Betting on horse or dog races – in person	3%	8%	1%
Betting on football – online	11%	13%	8%
Betting on football – in person	3%	5%	1%
Betting on other sports – online	6%	12%	4%
Loot boxes	2%	3%	1%
Any other type of gambling (not prize draws and competitions)	3%	6%	1%
None of the above	18%	12%	39%

The data suggests that, for all of the different kinds of gambling asked about in the survey, players of PDCs were more likely to have participated in the last 12 months. The difference is particularly noticeable for lotteries, and especially society lotteries for which players of PDCs were approximately two and a half times as likely to have participated relative to the general population. This perhaps suggests that the opportunity to win prizes (the major motivation for participation in PDCs as discussed in the previous section), also motivates PDC players to participate in lotteries.

The consumer survey also explored what the perceived advantages of PDCs are over lotteries. The possibility of participating for free was highlighted by a plurality (44%) of players, but more exciting prizes, a higher chance of winning and the possibility of winning instant win prizes were also highlighted by a substantial minority of players. Furthermore, almost a quarter of players suggest that they prefer the causes supported by PDCs to those supported by lotteries. The full set of perceived advantages of PDCs over lotteries is presented below.  

Table 17: Perceived advantages of PDCs compared to lotteries

Advantage	Proportion of players
I can participate for free	44%
The prizes are more exciting	29%
My chances of winning a prize are higher	29%
There are instant win prizes available	17%
I trust them more	7%
I prefer the causes they support to the causes lotteries support	23%
I already buy a lot of lottery tickets, so buying more would be boring	10%
Other	2%
Don’t know	9%

Source: Consumer survey

2.4 Regulatory environment

Operators of PDCs are primarily constrained by two types of laws and regulations. Firstly, they are subject to consumer protection laws which apply to all UK businesses. Secondly, although they are not regulated by the Gambling Act 2005 (henceforth, ‘the Act’), which applies to UK businesses selling ‘gambling’ and ‘lottery’ products, the Act constrains the actions operators can take without facing regulation. This section outlines these two aspects of the regulatory landscape operators face.

2.4.1 Consumer protection

Operators of PDCs are subject to the same statutory consumer protection rules as all UK businesses. Like all UK businesses, they also have obligations under the ASA’s UK Code of Non-broadcast Advertising and Direct and Promotional Marketing (CAP Code) and UK Code of Broadcast Advertising (BCAP Code). 

Statutory regulations

Key pieces of UK consumer protection legislation are summarised below. Jointly, these provide the legal framework for consumer protection in the UK. 

• The Consumer Rights Act 2015 sets out minimum standards of quality and functionality that goods, services, and digital content provided must meet, with particular emphasis on the requirements that goods must be: of satisfactory quality; fit for particular purpose; and as described. The Act contains rules against ‘unfair terms’ in contracts such as hidden fees or terms which seek to limit consumers’ legal rights.^{[footnote 29]}
• The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCRs) set out requirements traders must fulfil in relation to contracts made with consumers – including transparency requirements in online marketplaces. The CCRs require that various information be made clear to the consumer directly before they place the order, including the main characteristics and price of goods being purchased.
• The Consumer Protection from Unfair Trading Regulations 2008 (CPRs) lie behind large parts of the CAP Codes – in particular rules relating to misleading marketing of products. The CPRs include a list of blacklisted practices regarding the marketing of products to consumers. These include several practices which, as discussed below, have appeared in ASA rulings against operators of PDCs, e.g. ‘falsely stating that a product is only available for a very limited time in order to make the consumer make an immediate decision’ and ‘describing a product as ‘free’, ‘gratis’, ‘without charge’ or similar if a consumer is going to have to pay more than the cost of responding to the advertisement and collecting or paying for delivery of the item.’^{[footnote 30]}

CAP codes

The ASA’s CAP codes are a set of rules pertaining to all UK businesses’ marketing activities. The ASA is not a statutory body and its CAP codes are not statutory regulations. Nonetheless, the ASA holds certain enforcement powers, such as the ability to issue fines to members. Furthermore, the CAP codes are largely based on statutory consumer protection regulations, meaning that if businesses are in breach of the CAP Codes they are also likely to be in breach of statutory regulations.

The ASA CAP Codes are split into 22 chapters, some of which contain rules applying to all UK businesses and some of which are sector-specific. Amongst the sector-specific chapters of the CAP Codes, PDCs are subject to Chapter 8, on ‘Promotional Marketing’. They are not subject to Chapters 16 and 17, on ‘Gambling’ and ‘Lotteries’ respectively, since the CAP Codes define these activities as per the Gambling Act 2005. Chapter 8 sets out rules for operators of PDCs regarding, among other topics ‘administering the promotion’; ‘terms and conditions’; ‘selecting winners’; ‘awarding prizes’; and ‘exaggerating luck, gifts v prizes’.^{[footnote 31]}

Chapter 8 of the CAP Codes sets out various transparency and integrity requirements for PDC operators which are comparable to – although in some cases not as stringent as – requirements set out for lottery operators under gambling regulation. For example, under the CAP Codes, PDC operators ‘must not exaggerate consumers’ chances of winning prizes’ and ‘must ensure that prizes are awarded in accordance with the laws of chance’. Unlike lottery licensing conditions, the chapter does not explicitly require that information about the likelihood of winning and the method of selecting a winner be made available to consumers prior to their ticket purchase. The CAP Codes also set out rules for PDC operators who are ‘claiming that participation [in a PDC] will benefit a registered charity or cause’.^{[footnote 33]} One such rule is that operators must ‘name each charity or cause that will benefit and be able to show the ASA or CAP the formal agreement with those benefiting from the promotion’. Another is that operators must ‘specify exactly what will be gained by the named charity or cause and state the basis on which the contribution will be calculated’. 

Importantly, the CAP Codes state that ‘significant conditions’ in marketing materials – i.e. ones which are ‘likely to affect a consumer’s understanding of the advertised offer’ – ‘must be clearly stated in the initial promotional material.’^{[footnote 34]} It is not sufficient for significant conditions to only be expressed in  wider terms and conditions, even if the terms and conditions are clearly stated to apply in the advertising material. Significant conditions around promotions include: ‘how to participate; any free entry route explanation; start date (if applicable); closing date.’ 

Regarding free entry routes – the provision of which is a key distinguisher of PDCs from regulated lotteries – the CAP Codes state that ‘any free-entry route should be explained clearly and prominently’. Furthermore, as reflected in the ruling discussed in Box 1, the ASA holds that entrants who use paid entry routes should not enjoy any advantages relative to entrants who use a free entry route. For example, if paying entrants can purchase multiple tickets for a PDC, then entries via the free entry route should not be capped at one per person. Such differences in treatment of paying and non-paying entrants are understood to breach the rule that operators ‘must conduct their promotions equitably, promptly and efficiently and be seen to deal fairly and honourably with participants and potential participants’ and ‘must avoid causing unnecessary disappointment’.

During engagement with London Economics, the ASA suggested that the existing CAP Codes provide a robust means of curbing consumer harm in the market for PDCs. The ASA shared several examples of rulings they have made against operators of PDCs and noted that general compliance rates with ASA rulings are over 90%. Trading Standards Services (TSS) serves as a ‘statutory backstop’ for ASA enforcement activities. Rulings against PDC operators generally relate to Chapter 8 of the CAP Codes, with a few relating to Chapter 3, on ‘Misleading advertising’. Complaints are discussed in more detail in Section 3.3, on consumer harm, and include complaints about free entry routes and changes to the advertised prizes. 

While the CAP Codes may provide a robust framework for preventing consumer harm in the market for PDCs, the same may not be true of gambling harm. Chapter 8 of the CAP Codes, which sets sector-specific rules for advertising of PDCs, does not contain rules explicitly concerned with the potential for advertisements to facilitate gambling harm. This is in contrast to Chapter 17, on lotteries, and Chapter 16, on gambling products.

Chapter 17 opens with the rule:

17.1 Marketing communications must not portray, condone or encourage gambling behaviour that is socially irresponsible or could lead to financial, social or emotional harm.^{[footnote 35]} 

In a similar vein, Chapter 16 opens with the rule:

Marketing communications for gambling must be socially responsible, with particular regard to the need to protect children, young persons and other vulnerable persons from being harmed or exploited.^{[footnote 36]}

2.4.2 Gambling regulation

The Gambling Act 2005 does not regulate PDCs or provide a legal definition for these. As regards PDCs, the Act is solely concerned with delineating the boundary between these on the one hand and regulated gambling and lottery products on the other hand. Of particular relevance to operators of PDCs, the Act clarifies when an arrangement would not meet certain criteria for being defined as a ‘lottery’; namely, the criteria that ‘persons are required to pay in order to participate’ and that ‘the prizes are allocated by a process which relies wholly on chance’. As noted in Section 1, PDCs avoid regulation as lotteries by not meeting one or both of these criteria.

Schedule 2 of the Act specifies the conditions under an ‘arrangement shall not be treated as requiring persons to pay in order to participate’ when both paid and unpaid entry options are available (henceforth in this report, the ‘free entry route’ requirement):

1. ‘each individual who is eligible to participate has a choice whether to participate by paying or by sending a communication,
2. the communication mentioned in paragraph (a) may be—
   1. a letter sent by ordinary post, or
   2. another method of communication which is neither more expensive nor less convenient than entering the lottery by paying,
3. the choice is publicised in such a way as to be likely to come to the attention of each individual who proposes to participate, and
4. the system for allocating prizes does not differentiate between those who participate by paying and those who participate by sending a communication.’^{[footnote 37]}

Section 14(5) of the Act defines the conditions under which a process for awarding prizes will be treated as ‘relying wholly on chance’.^{[footnote 38]} 

By extension, a process which does not meet this definition will not be understood as relying wholly on chance (henceforth in this report, the ‘skill requirement’). So, an arrangement which awards prizes by that process will not be treated as a ‘lottery’. According to Section 14(5), ‘a process which requires persons to exercise skill or judgment or to display knowledge shall be treated for the purposes of this section as relying wholly on chance if—

1. the requirement cannot reasonably be expected to prevent a significant proportion of persons who participate in the arrangement of which the process forms part from receiving a prize, and
2. the requirement cannot reasonably be expected to prevent a significant proportion of persons who wish to participate in that arrangement from doing so’^{[footnote 39]}

The Gambling Commission, which is responsible for enforcing the Gambling Act 2005, occasionally issues warnings to operators of PDCs that their activities may fall under the definition of ‘gambling’ or ‘lotteries’ and that they may therefore be in breach of the Act. However, the Commission has not prosecuted any such cases to date. The relatively subjective definitions the Act provides for a ‘requirement to pay’ and prizes being awarded ‘wholly by chance’ mean that the Commission is not confident of securing convictions when prosecuting on these grounds.^{[footnote 40]}

The Gambling Act distinguishes between several types of legal lottery operator, some requiring a licence and others which are exempt from this requirement. Amongst these lottery operators, the most comparable to commercial PDCs are operators of ‘society lotteries’, which are ‘lotteries promoted for the benefit of a non-commercial society’.^{[footnote 41]} 

Although, as discussed in Section 3.4.1, the National Lottery also sees PDCs as competitors. Society lotteries are similar to PDCs in that they need not have any association with the government (unlike the National Lottery and local authority lotteries) and they are marketed to the general public (unlike incidental lotteries, and private lotteries). Society lotteries are classified as ‘large’ or ‘small’ depending on their ticket sales, with the former requiring a licence to operate.^{[footnote 42]} The National Lottery, on the other hand, is operated under a fixed-period concession by a licensee chosen via a competitive bidding process.  

Since they are not regulated under the Gambling Act 2005, operators of PDCs are not subject to any of the rules and licensing conditions set under the Act for lotteries, including large society lotteries and the National Lottery. These include, but are not limited to, rules around the points below (where there is a notable difference in rules for large society lotteries versus the National Lottery, this is detailed in sub-bullets):^{[footnote 43]}

• Who can participate (e.g. age restrictions)
  • The minimum age for participation in society lotteries is 16. 
  • The minimum age for participation in the National Lottery is 18. 
• Minimum charitable donations.
  • Society lotteries must contribute a minimum of 20% of proceeds to good causes.  
  • Minimum contributions to charities and other good causes for the National Lottery are determined under its operating licence. They are a share of the proceeds net of operator costs, prizes, lottery duty and retailer commission and also a small, fixed contribution paid by the operator.  In 2023, under the previous lottery licence, contributions amounted to 23% of proceeds.
• Maximum values of prizes and ticket sales. 
  • Large society lotteries are allowed to offer prizes up to a value of whichever is greater between £25,000 and 10% of ticket sales (which are capped at £5 million, meaning a maximum prize of £500,000 can be offered). 
• Transparency and auditing. 
  • An independent auditor must be present at all National Lottery draws.
• The manner in which tickets can be sold (e.g. ban on bulk discounts).
• Accepting payment by credit card.
• Self-exclusion from instant win games (lottery operators are required to register these with the GAMSTOP cross-operator self-exclusion scheme). 

Generally, rules for lotteries are set out in legislation (as opposed to just in the licensing conditions for lotteries). Age restrictions, for example, form a part of primary legislation. The requirement for a 20% minimum charity contribution is also set out in primary legislation, with the Secretary of State for Culture, Media and Sport having the power to amend the percentage via secondary legislation. Similarly, maximum values of prizes and ticket sales are set out in primary legislation, with flexibility to amend these via secondary legislation. 

It is worth reiterating here that the definitions set out in the Gambling Act 2005 for ‘gambling’ and ‘lotteries’ also have implications for consumer protection rules. For example, the ASA’s CAP Codes contain chapters specific to both ‘gambling’ and ‘lottery’ products, with these being defined as per the Gambling Act 2005. Both society lotteries and the National Lottery must abide by Chapter 17 of the CAP Codes, on lotteries. 

3. Potential harm associated with PDCs

This section reviews the evidence about whether there is any harm arising from PDCs. This includes both gambling harm and non-gambling harm, as well as the impact on the lottery industry. To assess harm across these different elements, we first assess the level of transparency and player protection measures in place for PDCs. 

3.1 Transparency and player protection

Here we provide an overview of the transparency and player protection measures in place in PDCs based on evidence from the web crawl of operator websites as well as the views of players and operators. 

3.1.1 Transparency

Full transparency from PDC operators would entail that consumers can easily access any information about particular PDCs which could influence their decision to participate. An operator website can be described as ‘transparent’ if this information is available on the website and is clearly signposted for consumers. Relevant information includes information about likelihood of winning a prize, the method of selecting winners, rules of play, free entry routes, and operators’ charitable contributions. This study first checks for the presence of such information on operators’ websites and then considers consumers’ perceptions about the accessibility of the information. 

Likelihood of winning, winner selection, and rules of play

Most operator websites among the 401 reviewed by the web crawl present some information about participants’ likelihood of winning a prize (69% of operators), the method of selecting winners (62%), and the rules of play (94%). However, as discussed below, this information typically concerns operators’ main draws, rather than covering instant win products as well. Informing consumers about the likelihood of winning a prize and method of selecting winners is a minimum transparency requirement imposed on licensed lotteries.^{[footnote 45]} Therefore, the absence of such information from many PDC websites is concerning.

Table 18 shows the proportion of operators (grouped by characteristics) displaying certain types of information anywhere on their website. It should be noted that these figures capture any mention of each piece/type of information on operators’ websites, even if the detail provided is limited. A manual review of operator websites found that even when a topic such as the likelihood of winning is addressed on a PDC website, the information provided rarely extends beyond an explanation that the chances of winning vary between competitions depending on the number of entrants.  

Table 18: Percentage of operator websites displaying transparency information

Operator characteristic (number of operators)	Likelihood of winning	Method of selecting winners	Rules of play
Overall (401)	69%	62%	94%
Age restrictions – No (34)	12%	18%	35%
Age restrictions – Yes (367)	75%	66%	99%
Largest prizes – Small (267)	69%	63%	95%
Largest prizes – Medium (113)	73%	64%	93%
Largest prizes – Large (21)	52%	38%	81%
Charity associations – No (260)	70%	61%	92%
Charity associations – Yes (141)	67%	62%	97%
Trustpilot reviews – None  (91)	57%	52%	92%
Trustpilot reviews – 1 to 10 (79)	63%	51%	90%
Trustpilot reviews – 11 to 100 (125)	77%	62%	95%
Trustpilot reviews 101 to 1000 (70)	77%	77%	99%
Trustpilot reviews 1000+ (36)	72%	78%	92%
Instant win prizes – No* (119)	57%	67%	95%
Instant win prizes – Yes* (81)	59%	72%	90%

Source: London Economics analysis of web crawl data

Note: Rows with * were computed using data from the instant wins manual review sample of 200 operators.

Some differences between operators with different characteristics are noteworthy. Among those who do not display age restrictions (8% of the sample) only a minority present any of the three pieces of information considered here. The proportion of operators displaying these pieces of information is also relatively small among those with fewer Trustpilot reviews. For example, 57% of operators with no reviews display information on likelihood of winning, compared to at least 70% of operators with 11 or more reviews. This suggests that transparency may be lacking among smaller PDC websites which also lack age restrictions (as discussed further below). It is also of note that operators offering large prizes are less likely to display all of the likelihood of winning, method of selecting winners and rules of play. 

Free entry route

Manual review of operator websites found limited evidence of transparency around the free entry route to enter PDCs. Out of operators in the manual review sample (a random sample of 30 operators plus Omaze) that offer a free entry route, only 1 marketed the free entry option identically to paid options. In most cases, the free entry route was marketed in a less salient format than paid options (e.g. in a smaller print), with consumers being directed to the wider Terms and Conditions for further information on how to enter for free. When consumers who pay to enter PDCs at least sometimes were asked why they pay (instead of entering for free), 17% reported that this is because they do not always know how to enter for free. Furthermore, as discussed below, most operators offering instant win products provide little transparency regarding whether free postal entries are eligible to win instant win prizes. 

It is plausible that many operators are in breach of the ASA’s transparency requirements concerning free entry routes, which are discussed in Section 2.4.1. These requirements include that ‘any free-entry route should be explained clearly and prominently’.

Charitable contributions

While most of the surveyed operators reported making donations to charity, there is some evidence that operators are not particularly transparent regarding the details of their charitable donations. The manual review of a sample of operator websites found that, among the 26% of operators in the sample who mention charity associations, 75% provide some detail about specific charity partners and past donations, but only 38% state fixed percentages of their proceeds to be donated to charity.

It is plausible that some operators are in breach of rules set out in the CAP Codes for charity-linked promotions. As discussed in Section 2.4.1, under these rules, operators claiming that a PDC will benefit charities or good causes must name each charity or cause that will benefit and specify exactly how contributions will be calculated, which few operators do. Whether or not operators are in breach of these rules may ultimately depend on whether they are seen to advertise that specific PDCs will benefit charities, as opposed to simply stating that their organisation donates money to charity (which is less likely to breach the CAP Codes).  

Instant win products

Transparency related to instant wins is particularly lacking. Operators often do not distinguish between instant win products and main draws when providing information about likelihood of winning a prize, the method of selecting winners, rules of play, and free entry routes. This is despite the fact that all of these features are likely to differ markedly between instant win products and main draws given that the way in which the prizes are won is completely different. Under 10% of operators identified during manual review as offering instant win products make specific reference to instant win products in their terms and conditions. 

There is particular ambiguity with regard to free entry routes. Out of the 81 PDC websites for which their offering related to instant wins was reviewed in detail, only 5 operators’ terms and conditions explicitly state whether free postal entries are eligible for instant win prizes. Among these five operators, two treat postal entries identically to online entries; two email postal entrants site credit which they can then use to buy instant win entries online; and one does not provide any mechanism for free postal entry to instant win games. This range of approaches used by operators illustrates the ambiguity that consumers may face when operators do not specify how free postal entries are treated with regard to instant win products. 

Consumer perceptions

Respondents to the consumer survey generally reported that they have a good understanding of the characteristics of PDCs they participate in. 61% of respondents agreed that ‘advertisements for these PDCs accurately describe the prizes and entry conditions’, while only 8% disagreed. 77% of respondents agreed they ‘have a good understanding of the rules (e.g. cost, prizes, closing dates and odds of winning)’, while only 6% disagreed. 

The table below shows the percentage of consumers reporting that information about different details of PDCs is ‘very clear’ or ‘quite clear’ on operators’ websites (as opposed to ‘quite unclear’, ‘very unclear’, or ‘don’t know’). 

Table 19: Consumer perceptions of PDC transparency

Feature	Feature is ‘very’ or ‘quite’ clear
Entry conditions (e.g. price, number of entries)	83%
The prizes available	94%
Terms and conditions	68%
Chances of winning	46%
Time at which winners will be chosen	76%
Method by which winners will be chosen	56%
How much money (if any) will be donated to charities	49%
Contact details for the operator	51%

Source: Consumer survey

These responses suggest that most consumers do not have concerns about the transparency of PDCs. This may be partly explained by the fact that (as discussed in Section 2.1.1) most players only participate in PDCs run by a relatively small number of larger operators and perhaps do not engage much with the smaller operators with (typically) poor transparency standards. However, consumers’ responses show clear scope for improvements in transparency in some areas. For example, less than half of consumers reported that information about chances of winning or charity donations were ‘very clear’ or ‘quite clear’ on operator websites. 

3.1.2 Player protection

In this study, player protection refers to measures taken by operators of PDCs to mitigate the risk of gambling harm for participants, especially children. Age restrictions for participation are seen here as a key aspect of player protection. Other safer gambling measures include reminders to play responsibly, links to sources of help for individuals experiencing gambling harm, limits on spending by individuals and self-exclusion mechanisms. 

Age restrictions

Among the operator websites reviewed during the web crawl most mention a minimum age for participation – in most cases 18 and in a few cases 16. However, a substantial number of operators do not mention a minimum age requirement. These include some of the most widely used operators (i.e. those with the highest numbers of Trustpilot reviews). 

The table below shows the proportion of operators (grouped by characteristics) displaying minimum age requirements for participation firstly on any page on their website and secondly on the homepage. Whereas 92% of operators display a minimum age requirement on any page, only 23% display this on their homepage. These figures are relatively consistent across subgroups of operators. 

Table 20: Percentage of operator websites displaying age restrictions

Characteristic type (number of operators)	Age restrictions on any page	Age restrictions on homepage
Overall (401)	92%	23%
Largest prizes – Small (267)	94%	24%
Largest prizes – Medium (113)	90%	23%
Largest prizes – Large (21)	71%	10%
Charity associations – No (260)	89%	22%
Charity associations – Yes (141)	96%	24%
Trustpilot reviews – None  (91)	93%	21%
Trustpilot reviews – 1 to 10 (79)	85%	15%
Trustpilot reviews – 11 to 100 (125)	93%	30%
Trustpilot reviews 101 to 1000 (70)	96%	23%
Trustpilot reviews 1000+ (36)	89%	22%
Instant win prizes – No* (119)	93%	28%
Instant win prizes – Yes* (81)	89%	29%

Source: London Economics analysis of web crawl data

Note: Rows with * were computed using data from the instant wins manual review sample of 200 operators. 

Of the operators surveyed, none reported that individuals under the age of 18 are allowed to participate in their PDCs. However, of 20 operators who specified the age-verification process they use, 18 reported that they rely on entrants to self-certify their age, while only two reported that they require proof of age. By contrast, all online gambling companies are required to ask players to prove their age and identify before they gamble.^{[footnote 46]}

The evidence presented here suggests that minimum age restrictions are declared on most PDC websites, but that these are rarely rigorous. Indeed, the opinion of the vast majority of gambling charities surveyed is that PDCs do not do well in preventing children from playing. It should be noted, however, that there is no legal requirement for PDC operators to age restrict their products, which underlines the fact that some PDC operators are acting as if they have licence style obligations to some degree. 

Safer gambling measures

Evidence from the web crawl suggests that the usual types of safer gambling measures are absent from the websites of most operators. Table 21 shows the proportion of operators (grouped by characteristics) displaying certain player protection measures on their websites. 

Table 21: Percentage of operator websites with player protection measures

Characteristic of PDC website (number of operators)

Links to gambling charity websites

Self-exclusion mechanisms

Reminders to gamble responsibly

Overall (401)	7%	17%	7%
Age restrictions – No (34)	0%	3%	6%
Age restrictions – Yes (367)	7%	19%	7%
Largest prizes – Small (267)	5%	16%	5%
Largest prizes – Medium (113)	10%	21%	11%
Largest prizes – Large (21)	7%	19%	9%
Charity associations – No (260)	5%	16%	3%
Charity associations – Yes (141)	5%	10%	10%
Trustpilot reviews – None  (91)	10%	18%	7%
Trustpilot reviews – 1 to 10 (79)	5%	19%	10%
Trustpilot reviews – 11 to 100 (125)	4%	16%	4%
Trustpilot reviews 101 to 1000 (70)	9%	17%	7%
Trustpilot reviews 1000+ (36)	8%	19%	11%
Instant win prizes – No* (119)	7%	18%	6%
Instant win prizes – Yes* (81)	10%	18%	6%

Source: London Economics analysis of web crawl data

Note: Rows with * were computed using data from the instant wins manual review sample of 200 operators.  

17% of operator websites in the overall sample were found to mention self-exclusion mechanisms, while only 7% were found to mention links to gambling charity websites and reminders to gamble responsibly. Presence of these protection measures is notably low among operators not imposing age restrictions (0%, 3%, and 6% respectively). As in the earlier discussion of transparency, this suggests the existence of a group of operators lacking transparency and player protection measures across the board. 

Operators were also asked about some of the player protection measures above, as well as other measures such as limits on individuals’ entries and spending. Table 22 shows the percentage of operators that reported using each protection measure. 

Table 22: Operator use of player protection measures

Protection measure	Proportion of operators
A protocol for allowing individuals to self-exclude from playing	45%
A limit on overall expenditure per customer across draws/competitions	50%
A limit on overall entries per customer across draws/competitions	95%
A process for receiving and reviewing customer complaints	90%
Safer gambling messaging on website	40%

Source: London Economics analysis of operator survey

Roughly half of operators reported having a self-exclusion mechanism and safer gambling messaging on their website, while almost all operators reported having limits on entries per customer across PDCs. As a reference point, the National Lottery offers irreversible lifetime self-exclusion. Furthermore, society lotteries are required to participate in GAMSTOP, which enables players to self-exclude from gambling for a period of time. Differences between the web crawl data and operators’ self-reports of using self-exclusion mechanisms and safe gambling mechanisms could be explained by the fact that operators that responded to the survey were typically larger than average, but also by limitations in the web crawl’s ability to capture all evidence of protection mechanisms.^{[footnote 47]}

Among the 45% of operators surveyed that indicated they have protocols for players to prevent themselves from playing, a wide range of different kinds of mechanisms are in place. Some operators highlight that players can directly stop themselves from playing through the operator website. Others suggest that this can be done by contacting the operator (e.g. via email, social media or telephone). Additionally, some operators highlight that the possibility of self-exclusion is implicitly available as players can shut their account at any time. 

10% of the surveyed operators report that they actively monitor the spending level of accounts. One of these operators highlighted that they contact players who have spent large amounts of money to ensure that they are comfortable with how much they are spending. A different operator implements strict spend limits such that a player will be excluded from playing once that limit is reached. 

There is also evidence that operators in a small number of cases take steps to prevent players from playing again once they have been excluded. In particular, accounts which might be held by the same individual as an excluded player (e.g. based on name, sign-up time or pay-out address) are blocked. 

Nine out of ten operators indicated that they have a procedure for receiving and reviewing customer complaints. These processes involve a wide range of different channels, including email, TrustPilot, social media, telephone, live chat and post. A minority of operators also identified that they have a fixed time scale for acknowledging and/or responding to complaints, which ranged from 24 hours to 10 business days. 

It should be noted that, as PDCs are not legally classified as gambling, it is not necessarily to be expected that the majority of PDC operators would have these kinds of player protection measures in place.

Instant win products

Operators who offer instant win prizes are no more likely than other operators to provide the player protection measures considered above. Table 20 indicates that the percentage of operators implementing age restrictions for participation is slightly lower amongst operators who offer instant wins (89%) than amongst those who do not (93%). Similarly, Table 21 indicates that operators offering instant wins are no more likely than other operators to provide links to gambling charities on their website; self-exclusion mechanisms; or safer gambling messaging.

This is potentially a cause for concern, given that lottery operators offering instant wins are required to have more player protection measures in place than lottery operators which do not. 

Consumer perceptions

Broadly in keeping with the results of the operator survey, data from the consumer survey suggests that consumers often do not encounter the usual gambling type of player protection measures on operator websites. Table 23 shows the percentage of consumers who reported ‘always’ or ‘often/sometimes’ seeing certain protection measures on PDC websites (as opposed to ‘rarely’, ‘never’, or ‘don’t know’). 

Table 23: Percentage of consumers reporting seeing protection measures on operator websites ‘always’ or ‘often/sometimes’

Protection measure	Always seen	Often or sometimes seen
A reference to a minimum age requirement (e.g. 18+ or 16+)	31%	44%
Reminders to play safely and responsibly	20%	43%
Information on where to get help if you have a gambling problem	16%	40%
Limits on number of entries an individual can make in a particular competition	18%	37%

Source: Consumer survey

The relatively low level of awareness among consumers of these player protection measures suggests that improvements could be made in this area. For example, almost half of consumers rarely or never see messaging on PDC websites about where to seek help if they have a gambling problem (and only 16% report always seeing such messaging). 

3.2 Gambling harm

This section assesses whether or not participation in PDCs is causing gambling harm for consumers. Gambling harm, as per the Gambling Commission’s definition, consists of ‘adverse impacts from gambling on the health and wellbeing of individuals, families, communities and society.’^{[footnote 48]} Firstly, a brief overview of the level of participation (of players in PDCs) in these products as well as other gambling is provided. Then, the evidence of gambling harm is assessed. 

3.2.1 Spending and consumption habits

The consumer survey suggests that the typical player of PDCs spends around £175 per year doing so. As shown in Table 16, players of PDCs also engage in other gambling activities with higher incidence than the average adult in the general population. Therefore, this should be put into the context of the amount PDC players spend on other gambling activities, which is on average £468. Among players of PDCs, participation in PDCs makes up a significant minority of total spend on these kinds of products. 

In terms of frequency of play, the table below presents how often players participate in PDCs. 

Table 24: Participation in PDCs

Frequency of participation	Proportion of players
Every day/ 6 to 7 days a week	3%
4 to 5 days a week	3%
2 to 3 days a week	6%
About once a week	12%
About once a fortnight	8%
About once a month	22%
Every 2 to 3 months	16%
At most once or twice a year	29%

Source: Consumer survey

For approximately two thirds of players, participation is fairly infrequent at once a month or less often. However, there is a segment of the player base (12%) that play very frequently (multiple times per week at least). It is also of note that there is very little variation observed across different demographic characteristics (e.g. gender, age, socioeconomic background) in terms of the frequency at which people play. 

3.2.2 Evidence of gambling harm from PDCs

This section assesses whether this level of participation in PDCs is indicative of any gambling harm. As part of the consumer survey, the level of harmful gambling in the player base of PDCs was discerned. The table below presents the levels of harmful gambling among players of PDCs, and also compares this to harmful gambling among gamblers in general and among the general population based on the GambleAware Treatment and Support survey. This comparison is based on the PGSI (Problem Gambling Severity Index). This is the gold standard measure of harmful gambling based on individuals self-reported experience with gambling.^{[footnote 49]}

Table 25: Harmful gambling among players of PDCs, all gamblers and the general population

Level of harmful gambling (PGSI)	Players of PDCs	All gamblers (November 2022)	General population (November 2022)
Non-gambler/ Non-harmful gambling (0)	74%	78%	87%
Low level of harm (1-2)	9%	13%	8%
Moderate level of harm (3-7)	5%	5%	3%
Gambling with negative consequences and a possible loss of control (i.e., harmful gambling) (8+)	12%	5%	3%

Source: Consumer survey and GambleAware Treatment & Support Survey

The level of harmful gambling is clearly significantly higher among the player base of PDCs than both the general population and the population of people that gamble. It is of note that these results should be highly comparable, as both the GambleAware Treatment and Support survey and the consumer survey for this study were conducted using YouGov’s online panel. 

It may be the case that individuals experiencing gambling harm are more likely also to play PDCs alongside actual gambling than other people. However, there is other evidence that suggests that participation in PDCs is correlated with harmful gambling. Indeed, the table below shows that individuals experiencing gambling harm are more frequent participants in PDCs than non-gamblers and individuals not experiencing gambling harm. 

Table 26: Frequency of participation in PDCs by level of harmful gambling (PGSI)

Frequency of participation	Non-gambler	Non-harmful gambling (0)	Low level of harm (1 to 2)	Moderate level of harm (3 to 7)	Harmful gambling (8+)
Every day/ 6 to 7 days a week	0%	4%	2%	7%	5%
4 to 5 days a week	1%	1%	4%	5%	13%
2 to 3 days a week	3%	5%	3%	5%	17%
About once a week	5%	11%	13%	25%	17%
About once a fortnight	4%	6%	3%	10%	28%
About once a month	24%	25%	27%	21%	6%
Every 2 to 3 months	18%	17%	22%	10%	4%
At most once or twice a year	46%	31%	27%	14%	11%
Prefer not to say	0%	0%	0%	3%	0%

Source: Consumer survey

While only 4% of non-gamblers and 10% of individuals engaged in non-harmful gambling play multiple times a week, the corresponding proportion for individuals engaged in harmful gambling is 35%. The figure below presents information on the frequency of participation of non-gamblers and individuals engaged in harmful gambling in PDCs. It is clear that non-gamblers (blue bars) are clustered at lower frequencies of participation than individuals engaged in harmful gambling (grey bars). 

Figure 1: Frequency of participation in PDCs – comparison between harmful gamblers and non-gamblers

Use zoom on your browser to view.

Source: Consumer survey

The table below shows that as well as participating more frequently, individuals engaged in harmful gambling typically spend more on PDCs than individuals engaged in non-harmful gambling and non-gamblers. 

Table 27: Average annual spend on PDCs and other gambling by level of harmful gambling

Level of harmful gambling (PGSI)	Spend on PDCs	Spend on other gambling
Non-gambler	£59	£0
Non-harmful gambling (0)	£90	£207
Low level of harm (1 to 2)	£168	£549
Moderate level of harm (3 to 7)	£459	£1,395
Harmful gambling (8+)	£712	£2,100

Source: London Economics’ analysis of consumer survey

As the level of harmful gambling increases, the level of spending on other gambling increases. However, the level of spending on PDCs also increases in roughly similar proportion. This supports the idea that PDCs are driving gambling harm to some degree, even if the evidence is not conclusive on whether they are the root cause. This is because those who are the most vulnerable in terms of harmful gambling are spending the most money on PDCs. The consumer survey also contained an adapted version of the PGSI questions asking specifically about potential harm arising from PDC participation. The results from this question further support the idea that there are harmful aspects to participation in PDCs, as shown in the table below. While the rates of harmful gambling are lower than those from the general PGSI questions, there is still evidence of harmful gambling correlated specifically with players’ participation in PDCs.^{[footnote 50]}

Table 28: Level of harmful gambling specifically related to participation in PDCs

Level of harmful gambling associated with participation in PDCs (PGSI)	Proportion of players
Non-harmful gambling (0)	79%
Low level of harm (1 to 2)	7%
Moderate level of harm (3 to 7)	5%
Harmful gambling (8+)	9%

Source: Consumer survey

3.2.3 Potential causes of gambling harm from PDCs

The fact that there may be gambling harm associated with participation in PDCs may be in part due to the fact that players consider them to be addictive. The table below illustrates the degree to which players of PDCs see them as addictive and shows that two thirds of players broadly agree that they are. 

Table 29: Player views on whether PDCs are addictive

Extent to which players agree that PDCs are addictive	Proportion of players
Strongly agree	21%
Agree	46%
Neither agree nor disagree	21%
Disagree	7%
Strongly disagree	2%

Source: Consumer survey

Responses to the gambling charities survey also shed light on the nature of possible gambling harm caused by PDCs. All four respondents who commented on the nature of harm indicated that participation in PDCs alone rarely explains the harm experienced by some participants. Instead, PDCs (and lotteries) can serve as a ‘springboard’ for individuals to other more harmful gambling activities. One respondent summarised: ‘Prize draws might be their first introduction to gambling but it’s rarely the only form or the one causing harm.’ Although, another respondent felt that the large jackpots offered in some PDCs can encourage risk-taking and lead to harm. The harm caused can be both financial and emotional. This is backed up by the consumer survey, which suggests that people who do not participate in any other gambling activities and experience harmful gambling make up just 1% of the PDC player base.   

Elaborating on the mechanisms by which PDCs can act as a ‘springboard’ to other forms of gambling, respondents highlighted the importance of advertising. One respondent thought that PDC operators’ mass-marketing campaigns can have the effect of normalising gambling. Individuals who are responsive to PDC advertising may also face lots of advertising for other gambling products. The Gambling Commission reported to us that anecdotal evidence exists of harm resulting from irresponsible marketing practices by operators of PDCs involving, for example, time-limited offers, countdown clocks, and two-for-one deals on entries. 

One gambling charity also pointed out that PDCs may create potential for harm because they do not participate in banning tools which many licensed gambling and lottery operators must subscribe to. Individuals who seek to self-exclude from gambling products using industry-wide banning tools may still be able to access and purchase PDC products. Operators of PDCs are not, for example, required to participate in GAMSTOP for any of their products (even instant win games). 

Furthermore, there is some evidence from the consumer survey that participation in instant wins has a strong association with harmful gambling. In particular, respondents were asked whether the possibility of winning instantly (instead of having to wait to find out if they have won) is a big reason they enter PDCs. 40% of individuals experiencing a high level of gambling harm (8+ on PGSI) strongly agreed with this statement, compared to just 6% of those with a PGSI score of 0.  

3.2.4 Prevalence of harm among different groups

There is also evidence to suggest that certain groups of people may be particularly susceptible to harm from PDCs. As shown in the table below, there is greater evidence of harm from gambling amongst men, young people, ethnic minorities and those on lower incomes. 

Table 30: Levels of harmful gambling by gender, age, ethnicity and income (PGSI)

Characteristic	Non-gambler	Non-harmful gambling (0)	Low level of harm (1 to 2)	Moderate level of harm (3 to 7)	Harmful gambling (8+)
Gender - Male	11%	56%	10%	7%	17%
Gender - Female	14%	66%	8%	4%	8%
Age – 18 to 34	16%	37%	11%	7%	28%
Age – 35 to 54	13%	61%	10%	6%	10%
Age – 55+	11%	80%	6%	2%	1%
Ethnicity - White	13%	65%	9%	4%	9%
Ethnicity – Ethnic minority	19%	24%	11%	11%	35%
Income - up to £19,999	12%	55%	7%	11%	15%
Income - £20,000 to £34,999	10%	59%	12%	4%	14%
Income - £35,000 to £59,999	14%	60%	6%	4%	16%
Income - £60,000 +	13%	60%	11%	6%	10%

Source: Consumer survey

The idea that young people, ethnic minorities and individuals on low incomes are particularly susceptible to harm from PDCs was also the view supported by multiple organisations in the gambling charities survey.^{[footnote 51]} Higher than average rates of harmful gambling were also observed among men, the young and ethnic minorities in the general population as part of the GambleAware Treatment & Support Survey 2022.

3.3 Consumer harm

This section assesses the extent to which consumer harm is occurring in the market for PDCs. This is non-gambling related harm which consumers may experience because of being misled about the products they are purchasing or because of unfair treatment by operators. Consumer harm may occur in the market for PDCs both because operators may breach existing consumer protection rules, and because existing consumer protection rules may not be sufficient to prevent harm in this market. This section first considers the general opinion of surveyed consumers and then considers insights from consumer protection bodies. 

3.3.1 Consumer perceptions

Consumers provided largely mixed responses regarding operators’ advertising practices and treatment of consumers. 61% of consumers agreed that advertisements for PDCs ‘accurately describe the prizes and entry conditions’ (compared to 8% who disagreed). 49% of consumers agreed that they have ‘generally been treated well’ by the operators of PDCs (compared to 2% who disagreed). These responses, particularly the low percentages for disagreement, suggest that the majority of consumers in general do not feel they have been misled or mistreated by operators of PDCs. 

This suggests (in light of the similarly mixed evidence around the degree of operator transparency as discussed in Section 3.1.1) that transparency and player protection are not a massive priority for consumers or that they believe PDC operators are transparent enough now. However, this does not mean that transparency and player protection are not important.

3.3.2 Consumer protection bodies

Both the Advertising Standards Agency (ASA) and Citizens Advice (CA) provided examples of consumer harm they have witnessed in the market for PDCs. These examples illustrate that larger operators, as well as smaller ones, can engage in practices which could be harmful for consumers. 

Advertising Standards Agency (ASA)

The ASA has ruled on 11 cases against commercial PDC operators since 2018. These reflect instances in which a complainant felt an operator’s practices to be in breach of the advertising standards set out in the ASA’s CAP Codes. In almost all cases, the complaints were upheld by the ASA. Table 31 shows recurring reasons for (upheld) complaints and examples of cases involving these. 

Table 31: Reasons for complaints to ASA about operators of PDCs

Reason for complaint	Example(s) of case(s)
An insufficiently attractive free entry route	Team HARD Racing Ltd - ASA | CAP (2021)[footnote 52]
Lack of explanation of free entry route (a significant condition)	Omaze Inc - ASA | CAP (2020)[footnote 53] Hydro Solutions Fylde Ltd - ASA | CAP (2019)[^54]
Lack of explanation of closing dates (a significant condition)	Raffle House Ltd - ASA | CAP (2019)[footnote 55]
Exaggeration of customers’ chances of winning	Clarson Ltd t/a Raffleaid (2022)[footnote 56]
Extensions of the closing date	KS Competitions Ltd - ASA | CAP (2020)[footnote 57] Ogilvie Promotions Ltd - ASA | CAP (2019)[footnote 58]]
Changes to the prize originally advertised	Win Your Dream Home UK Ltd - ASA | CAP (2018)[footnote 59]

Source: ASA

These cases indicate the potential for violation of the existing rules and consumer harm in the market for PDCs, which is unsurprising given the inconsistency with which transparency measures are implemented by operators. 

It is also important to note the recurrence of complaints involving operators’ marketing of the free entry route for competitions. As has been discussed, provision of a free entry route is fundamental for operators of PDCs to operate in the manner that they currently do (i.e. to not be subject to regulation under the Gambling Act 2005). Recurring consumer harm could arise from the inherent conflict that commercially minded operators of PDCs may face to, on the one hand, provide a free entry route which satisfies the Gambling Act and CAP Codes’ requirements for the free entry route but, on the other hand, discourage its use. 

This evidence aligns with that presented in the Gambling Commissions 2023 Review of the Gambling Act 2005, which states that ‘intelligence gathered on the reports we have seen/actioned over the last few years shows complaints about free entry routes take up the largest proportion of reports’. According to the Gambling Commission, since 2019 there have been 549 reports about problematic practices by 386 PDC operators.^{[footnote 60]} It is also worth noting that these cases – and the fact that complaints were upheld by the ASA – indicate the capacity for existing consumer protection rules to be used to curb harmful practices by operators of PDCs. This point will be returned to during the discussion of possible government interventions in the market.

Citizens Advice (CA)

The CA consumer rights helpline typically receives tens of complaints per month from the public about PDCs. CA reported to us that 80 to 90% of these are to do with scams – e.g. individuals receiving a notification informing them (falsely) that they have won a prize and that they can claim the prize by submitting a deposit first. In CA’s estimation, the vast majority of scam complaints do not concern scams by businesses who also offer legitimate PDCs and who are the focus of this research. Nonetheless, the existence of scam PDCs, particularly on social media, is relevant to note as a potential source of consumer harm. 

The next most typical type of PDC complaint received by CA is about the prize – either that it was not awarded (on time) or that it was modified unexpectedly. This is somewhat consistent with the experience of the ASA, which has made several rulings against operators on the basis of modifications to the prizes initially advertised. 

Overall, the views of the ASA and CA are broadly consistent with the evidence collected through the web crawl and surveys, in that while in many cases the conduct of PDC operators is fair and consumers are happy with how they are treated, there are practices used by some operators which are harmful for consumers. 

3.4 Impact on the lottery industry

As part of this research, the National Lottery and Lotteries Council (an industry body representing UK lotteries other than the National Lottery) were also consulted to understand their views on the industry. The consumer survey identifies clear links between PDCs and lotteries (even beyond the obvious similarities in terms of the fact that players obtain tickets to win a prize). Firstly, as shown in Table 16, most players of PDCs also participate in lotteries. Furthermore, there are various aspects of PDCs that players prefer to lotteries as shown in Table 17. 

Furthermore, both the National Lottery and Lotteries Council highlighted that they view PDCs as a major competitive threat, particularly given the relative lack of regulation that PDCs face. As discussed in Section 2.4.2, the National Lottery and other lottery operators are subject to various rules and regulations which do not apply to PDCs. This section sets out the concerns of these organisations about the current state of the market for PDCs. 

3.4.1 National Lottery

As part of our consultation, we spoke to both the incoming and outgoing operators of the National Lottery, Allwyn and Camelot. 

It was clear from our consultation with the National Lottery operator that they identify operators of PDCs as key competitors alongside other lottery operators. 

The National Lottery operator was concerned that the largest PDC operators are offering ‘life-changing’ prizes with no limits, and that these firms are mostly unregulated. While society lotteries are subject to a £500,000 cap on the size of prizes – intended to protect the National Lottery’s monopoly on life-changing prizes, given the unique safeguards and charitable obligations which regulation ensures for this lottery – PDCs are not subject to this cap. This means that PDCs pose a unique competitive threat to the National Lottery beyond that posed by society lotteries. It is worth noting for context that Camelot has expressed concern about growing competition from society lotteries.^{[footnote 61]}

PDC operators can make significant profits on draws, which gives them greater ability to advertise and therefore grow quickly. The National Lottery operator is concerned that this runs counter to the principle that lotteries are founded to primarily raise funds for good causes, rather than primarily for the profits of the operator, and this is a fundamental reason why lotteries are regulated. As part of their internal monitoring, Camelot tracked their share of media spend relative to their (perceived) competitors and note that over the last few years their own share of media spend has been declining due to rising spend by competitors. Additionally, the National Lottery is concerned about the protection of young people on social media due to advertising to younger age groups by PDC operators. This idea is supported by the consumer survey, as the proportion of players who found out about PDCs through social media was highest in the 18 to 34 age group (52%).

Evidence from the operator survey supports the idea that the ability of operators of PDCs (like any commercial business) to make large profits (in part aided by the absence of a threshold for donations to charity) gives them greater ability to conduct extensive advertising. In particular, while Camelot highlighted that 95%^{[footnote 62]} of its revenue is returned to society (through prizes or contributions to good causes, lottery duty and retailer commission), the operator survey suggests the corresponding figure for PDCs is below 60%.

Furthermore, they highlighted that the National Lottery are far more restricted in the kinds of advertisements they can run due to the ASA’s CAP codes, whereas (as discussed in Section 2.4.1) there is only a low level of regulation of advertisements for PDCs. 

Additionally, the National Lottery operator also identify that in order to protect the integrity and reputation of the National Lottery, they conduct their draws in the presence of several other parties (including the Gambling Commission and KPMG). Also, they have identified several cases where operators of PDCs are able to change the prizes due to poor ticket sales, which gives them greater organisational flexibility. 

Finally, they also have concerns that there is nothing to stop large operators of PDCs from offering a product even closer to the National Lottery in future (e.g. by increasing the size and frequency of their large cash prizes). 

The National Lottery operator considers that regulation is needed to increase transparency from PDC operators, to restrict their ability to offer life-changing prizes and to provide safeguards for consumers. Such regulation would also protect the National Lottery’s ability to continue to deliver funding for National Lottery good cause projects. 

3.4.2 Lotteries Council

The concerns of the Lotteries Council were along similar lines, in the sense that they feel that PDCs are not competing on a level playing field against society lotteries. In particular, the Council are concerned that, whilst their members can theoretically only offer prizes of up to £500,000 (in practice, the limit for most lotteries is £25,000), PDC operators may offer prizes of any size. They highlighted that society lotteries are regularly advised that they cannot offer higher prizes as these are the province of the National Lottery. In addition, society lotteries face limits on the total value of tickets that can be sold, both per draw and annually, while PDCs have no such limits.

Like the National Lottery, they also highlighted the relative lack of regulation on the advertising of PDCs as a concern. In particular, lotteries are heavily restricted around any possible perception that the advertising of operators has any appeal to children and young people. Lotteries are also required to display safer gambling messaging on all advertising. Additionally, they believe that there are unjustified financial advantages that PDC operators have (the ability to run for profit, to accept payment via credit card, and to operate without a licence from the Gambling Commission or a requirement to donate proceeds to charity). 

Such is the level of concern of the Lotteries Council, they believe that without regulation some of their members may drop their licence and become operators of PDCs. They consider that, in order to level the playing field, operators of large-scale PDCs need to be regulated in the same or a very similar way to society lotteries. 

Overall, it is possible to see how PDCs could adversely affect the lottery industry (particularly given the fact that the majority of PDC players also participate in the National Lottery or society lotteries), although the impact has not been quantified to date.  

4. Assessing the case for intervention

The evidence presented in Section 3 suggests that some PDC players are experiencing gambling and consumer harm and PDCs are competing with lotteries. This section first considers the case for government intervention in the PDC industry and then assesses potential government interventions, including risks and potential drawbacks for each.

4.1 Case for intervention

The case for government intervention in the PDC industry can be framed in terms of the need to mitigate the negative consequences identified in Section 3: gambling harm; consumer harm; and negative impacts on charity donations from competition with the lottery industry. The discussion below builds on Section 3 and Section 2.4 (on the existing regulatory environment for PDCs) to consider the rationale for further government intervention to mitigate each of these types of negative consequences. Any potential intervention into this market should also be proportionate, and acknowledge the fact that consumers clearly derive some enjoyment and satisfaction from participating in PDCs and that there is no direct evidence of a causal relationship between PDC participation and harmful gambling. Furthermore, the case for intervention should also be weighed against the potential (negative) unintended consequences, which are discussed for each possible intervention option in turn in the relevant subsections below.

4.1.1 Gambling harm

The evidence presented in Section 3.2 suggests that there is a strong correlation between PDC participation and gambling harm. While this finding, in and of itself, does not mean that the relationship is causal, it should be noted that some gambling charities suggested that PDC participation may be a ‘springboard’ to other forms of gambling and around two thirds of PDC players agree that they are addictive. 

Unlike gambling and lottery products, PDCs lack consistent measures to protect players from gambling harm; as covered in Section 2.4, PDCs are not regulated by the Gambling Act 2005, meaning there is no legal requirement for operators to implement protection measures. Together, these two points suggest a role for intervention to ensure that all operators of PDCs systematically implement measures (already put in place by some PDC operators) to protect players from gambling harm. 

The similarities between lotteries and PDCs suggest that if there is a rationale for regulating lotteries to mitigate the danger of gambling harm, such regulation should in principle also apply equally to commercially operated PDCs. In practice, free entry routes often have associated costs (including time and effort costs) that make them impractical or unattractive. As a result, almost 95% of entries to PDCs are paid. Furthermore, skills questions pose a very minimal barrier to participation. As discussed in Section 2.2.1, most surveyed consumers agree that tests that must be passed to enter PDCs (e.g. answering a question) are usually easy. This is especially concerning in the context of the roughly 5% of operators who rely solely on a skill question (and not a free entry route) to distinguish themselves from lotteries. As such, commercially operated PDCs are nearly indistinguishable from lotteries in terms of their key characteristics.

The present lack of regulation of PDCs also enables operators to offer potentially harmful instant win products without the requirement to participate in GAMSTOP (as society lottery operators must). As discussed in Section 2.2.1, often tickets for a main PDC are marketed as additionally giving players the chance to win separate prizes instantly. Instant win games offered by licensed lottery operators are subject to a requirement for these games to be included in GAMSTOP. This requirement forms a part of lotteries’ licensing conditions and reflects the increased risk of gambling harm of these products. In contrast, as discussed in Section 3.1.2, PDC operators who offer instant win prizes are no more likely than other PDC operators to provide basic player protection measures. Only 18% of PDC operators offering instant win prizes provide a self-exclusion mechanism for players (the same as the percentage amongst PDC operators not offering instant wins prizes). This is despite instant win products offered by PDC operators being essentially identical to those offered by lottery operators. 

Given this evidence, there is a compelling argument that PDCs should not lie entirely beyond the purview of gambling regulation (as they currently do). This view is supported by the player base of PDCs, with 81% agreeing with the statement that ‘there should be rules that require operators of PDCs to take steps to prevent addiction to gambling’ (compared to 4% who disagreed). In order for the industry to develop in as safe a manner as possible, PDC websites should contain various player protection measures. As discussed in Section 3.1.2, some operators already have some measures in place, but industry-wide adoption of age restrictions, self-exclusion mechanisms and reminders to play responsibly would likely require some form of intervention. 

4.1.2 Consumer harm

The evidence suggests that consumer harm is not uncommon in the PDC market. As discussed in Section 3.3, consumer harm in this market includes outright scams as well as legitimate businesses, including some of the largest operators of PDCs. 

While the existence of such harm may indicate a need for consumer protection intervention, it is important to note that this study has not considered how the extent of consumer harm in the PDC sector compares to harm in other sectors. Such a comparison would be useful for understanding whether PDCs cause an exceptional amount of consumer harm relative to other products. However, certain features of PDCs suggest that the market for these products may require more vigilant consumer protection efforts than other markets. 

As with lotteries, most participants in PDCs will not win a prize; rather, they pay for the chance to win a prize. Consumers who do not win the prize may be unable to verify whether they were simply unlucky, or whether they were not given a (fair) chance to win the prize. Furthermore, there is also scope for operators or to alter the conditions of the draw after consumers have paid for it – for example by changing the closing date or the prize. These features of PDCs may explain the prevalence of scams in this market by operators pretending to offer PDCs to take ‘customers’ money without any real prizes. Furthermore, as discussed above, the finding from the consumer survey that 8% of players think advertisements do not accurately represent the prizes and conditions PDCs means that there are hundreds of thousands of people who feel they are being misled by operators. 

Various stakeholders in the PDCs sector, including operators, indicated support for some form of intervention to prevent this kind of behaviour. When presented with the statement that ‘there should be rules that require operators of PDCs to take steps to ensure that prize draws and competitions are conducted in a fair and transparent way’, 89% of consumers agreed (compared to 2% who disagreed). Similarly, several of the surveyed operators PDCs expressed positive sentiment towards measures to improve transparency standards in the sector. One respondent from a charity which raises funds from PDCs noted that consumer protection intervention could improve the public’s trust in PDC products and thus be beneficial for legitimate operators’ business.

4.1.3 The impact of PDCs on charity donations from lotteries

There is some evidence to suggest that there may be a damaging impact of PDCs on the lottery industry. The evidence presented in Section 3.4 indicates that consumers see lotteries and PDCs as close substitutes. This is unsurprising since, in practice, the two sets of products appear nearly indistinguishable to consumers. Therefore, growth in the PDC industry may have come at the expense of the lottery industry. 

Given the similarity between the two sets of products, lottery operators view the difference in regulatory treatment of PDCs and lotteries as arbitrary and unfair. Under the Gambling Act 2005 (and separate regulation, in the case of the National Lottery), lottery operators are subject to various restrictions and requirements. These include caps on ticket sales and prize sizes; restrictions on commercial activities; and a ban on accepting payment via credit card. Both the National Lottery and the Lotteries Council reported to us that these restrictions and requirements represent a substantial burden for lottery operators. The fact that PDCs are subject to none of these burdens creates imbalanced competition between PDCs and lotteries. 

A reduction in sales for the National Lottery and society lotteries directly leads to a reduction in contributions towards good causes supported by these lotteries. Whereas licensed lotteries can only be run for good causes, operators of PDCs can use their profits how they please. Profits which accrue to operators of PDCs instead of lotteries may or may not be donated to charity. While estimates from this study suggest that around 10% of proceeds from PDCs go to charity, society lotteries are required to donate a minimum of 20% of proceeds to good causes. In 2023, the National Lottery donated 23% of proceeds to charity. The corresponding figure for the People’s Post Code Lottery was 33%.^{[footnote 64]}

It should be noted that a quantitative analysis of the impact of PDCs on aggregate charity donations (i.e. including the impact of PDCs on the lottery industry) requires further data collection and is beyond the scope of this research. Indeed, some surveyed charities who have raised funds from PDCs expressed some degree of concern over the potential for increased regulation in this market such that it may make it challenging financially for operators to grow and therefore reduce the amount they would be able to donate in future. 

Despite this, it is highly plausible that intervention could increase the overall level of charity donations. Increased donations may come directly from PDC operators, following the imposition of minimum donations for these operators. Alternatively, donations may increase if tighter regulation for PDCs means that lotteries are able to compete on a more level playing field and increase their sales. This would mean that lottery operators have larger proceeds available to donate to charity. 

4.1.4 Summary of the case for intervention

In summary, there are several areas that any intervention in the market should seek to address. 

These are as follows:

• Reducing the risk of gambling harm from PDCs: There is a risk of gambling harm from PDCs. PDC players are more likely to experience gambling harm (than either a member of the general population or even a typical gambler) and, among PDC players, those who are experiencing gambling harm play PDCs more frequently and spend more on PDCs than those who are not experiencing gambling harm. While this does not mean that PDCs cause gambling harm, players who are experiencing gambling harm need help and protection, and it is questionable whether they currently receive this on (all) PDC websites. Moreover, around two thirds of PDC players agree that PDCs are addictive. It should also be noted that many PDC operators offer instant win products without implementing heightened player protection measures that are required of lottery operators offering instant wins. 
• Improving the integrity and transparency of PDCs: The consumer survey and stakeholder consultations identified that there is room for improvement in terms of fairness and transparency of PDCs. Currently, there is little information provided by most operators on how winners are chosen and there have been instances where prizes are retrospectively changed due to poor ticket sales. Perhaps the most compelling argument for improvements in this area is that 8% of PDC players (hundreds of thousands of people) believe that PDC operators do not accurately describe the prizes and conditions of their competitions. 
• Protecting donations to charities: Donations to charities from PDC and lottery operators are an important aspect of these products. Data from the operator survey has shown that the proportion of sales donated to charity by PDC operators (around 10%) is lower than that donated by lotteries. Therefore, if PDCs take spending away from lotteries this will reduce charitable donations. However, although PDCs might be expected to divert revenue from lotteries, this study does not provide evidence on the extent that this occurs.

The three sections below outline possible government interventions in the market for PDCs based on the case for intervention set out above. The interventions are intended to mitigate negative consequences of PDCs while minimising any unintended consequences and also being proportionate and appropriate. For each intervention, the discussion covers the key characteristics of the intervention, the intended effects, and possible unintended effects. 

4.2 Changes to gambling regulation

4.2.1 Description of the intervention

Changes could be made to gambling regulation to bring PDCs under the regulatory oversight of the Gambling Commission. This would give the Gambling Commission power to enforce a variety of rules and restrictions for PDC operators. Changing the legal status of PDCs with respect to gambling regulation would require definitional clarity about what exactly constitutes a PDC. 

This section firstly discusses rules and restrictions that could be applied to a regulated class of PDC products and then briefly discusses challenges associated with defining such a class of products. It should be noted that providing a definition of PDCs for a legal or regulatory purpose is beyond the scope of this project. 

Rules and restrictions

Regulatory changes could apply a variety of rules and restrictions to PDCs to minimise the risk of potential negative consequences from these products, including a requirement to obtain a licence to operate. Given the similarities between PDCs and society lotteries, it would be reasonable for regulatory and licensing requirements for PDCs to be similar to those for society lotteries. 

Without their free entry routes and skill requirements PDCs would be indistinguishable from lotteries, thus potentially forming a class of ‘commercial lotteries’.

Operators of PDCs could be required to fulfil player protection obligations (similar to those required of lotteries), including, but not limited to, some or all of the below:

• minimum age for participation (with a requirement for proof of age, rather than self-certification)
• provision of self-exclusion mechanisms and participation in industry-wide self-exclusion schemes 
• safer gambling messaging on websites
• links to gambling harm charities on websites
• caps on entries and/or spend per player
• limits on promotional offers (e.g. discounts encouraging bulk purchases)
• ban on accepting payment by credit card

Operators could also be required to fulfil transparency obligations (beyond those in the CAP Codes), including those which society lotteries are subject to:

• provision of information to consumers on how and where proceeds are used
• provision of information to consumers on the likelihood of winning a prize and how prizes are allocated
• reporting of activities to local authorities

Which, if any, of these requirements to introduce is a question for policymakers, with this report intended to provide an evidence base to inform that decision making.

In addition to measures to prevent harm to players, regulation could include measures specifically intended to protect the lottery industry (and charity donations from this industry). For these purposes, PDCs could be made subject to limits on ticket sales and prizes, similar to (large) society lotteries. For example, large society lotteries are allowed to offer prizes up to a value of whichever is greater between £25,000 and 10% of ticket sales (which are capped at £5 million, meaning a maximum prize of £500,000 can be offered). The specific amounts for caps on sales and prizes should be subject to policymakers’ assessment of the relative importance of caps for PDCs relative to lotteries. These could potentially be determined in consultation with a Technical Working Group (a group of experts that meets to achieve a specified goal) of industry stakeholders. 

Requirements could also include mandatory gambling duty and/or minimum charitable donations for operators. Under primary legislation, gambling duty is potentially payable by all licensed gambling products. Lottery duty currently stands at 12% of the price paid or payable on taking a ticket or chance in a lottery; this duty is paid by the National Lottery, although society lotteries are currently exempt. As for minimum charitable donations, society lotteries are required to allocate a minimum of 20% of the gross proceeds of each lottery directly to the purposes of the society. Again, the specific amounts for these mandatory payments are open to determination. 

It should however be noted that this intervention would likely require changes to primary legislation, which means it would take a significant amount of time to implement.

Regulatory definition

Regulating PDCs as a separate class of products would require a complete regulatory definition of which products in the economy constitute PDCs. Such a definition of what to regulate would need to be mindful of the wide range of products which would currently be described as ‘PDCs’. These include PDCs sold by commercial PDC operators, which have been the focus of this research, but also PDCs run as fundraisers by charities and as promotions by businesses whose main activity is selling other products. Any regulatory definition of PDCs should aim to avoid inadvertently taking in products which are beyond the intended scope of the regulation. 

Separately, the Gambling Commission would like to see the Gambling Act distinguish more clearly between lotteries and PDCs. In particular, the Gambling Commission’s 2023 White Paper on the Gambling Act 2005 calls for ‘changes to make clearer what constitutes an illegal lottery, prize competition, betting prize competition or free draw to make it easier for people to understand whether the game they are playing or setting up is legal or not, and for us to take any required action.’ The Gambling Commission highlights that the subjectivity of the regulatory distinction between PDCs and lotteries – which hinges on what qualifies as a free entry route and skill requirement – makes it challenging, in the opinion of the Commission, for them to define and prosecute illegal lotteries, since operators can argue that they are in fact PDCs.^{[footnote 65]}

Amending the regulatory distinction between PDCs and lotteries would not bring PDCs under regulation but could reduce the scope for operators of PDCs to sell products resembling lotteries without being regulated as such. It could also bring other products (such as promotional draws) under regulation. Legislation here could address the Gambling Act’s definitions of a free entry route, a skill requirement, or both. As discussed in Section 2.4.2, the current definition of a free entry route allows this to be a postal entry route, even if this entails postage costs for entrants. A requirement for a free entry route which minimises communications costs (e.g. online entry) could ensure that operators cannot offer a ‘free’ entry route which in fact costs consumers more than paid entry. For example, a ‘free’ entry route could be understood as the entry route which presents the lowest cost to consumers without creating extra costs for operators. The definition of a skill requirement could also be made more stringent, for example to rule out ‘skilled’ questions to which entrants can easily find answers online. However, it is challenging to find a practical definition of ‘skill’ to distinguish competitions requiring skill from others. Notwithstanding accompanying regulatory changes to the status of PDCs, such changes would turn some PDCs into illegal lotteries. 

4.2.2 Anticipated positive impacts of the intervention

The overarching objective of the outlined regulatory intervention is to ensure that PDC operators put in place the same player protection mechanisms required for lotteries. This should help to ensure that sufficient measures are in place across the PDC industry to reduce the severity of harmful gambling among PDC players. 

It is worth noting that introducing licensing requirements for operators of PDCs may also provide an opportunity for the Gambling Commission to regulate higher risk instant win games sold by many of these operators. Newly instituted licensing requirements for PDC operators could, like lotteries’ licensing requirements, include rules specifically focused on instant win games. 

Defining PDCs as a form of gambling that require a licence could also facilitate the development of advertising rules which account for the potential for these products to cause gambling harm. As discussed in Section 2.4.1, such rules are currently in place in the CAP Codes for gambling and lottery products. However, given that the CAP Codes are informed by the Gambling Act 2005 in determining which activities should be subject to rules concerned with gambling harm, currently no such rules are in place for PDCs.

The measures outlined above will also level the competitive playing field between PDCs and lotteries. This is particularly likely to be the case if there are limits on prizes and ticket values for PDCs; requirements to pay gambling duty; and minimum charitable contributions. Either way, it would be expected that there would be a positive impact on charity donations (either directly in the event of mandatory charity donations) or simply by providing a boost to the lottery industry. This is particularly likely to be the case if there are limits on prizes, as this may strengthen the monopoly of the National Lottery in the domain of life-changing prizes. 

4.2.3 Unintended consequences

Consumers play PDCs because they get satisfaction and enjoyment from doing so, meaning that interventions that reduce the options for consumers in terms of PDCs available for them to play, or that make PDCs more expensive, would make some consumers worse off. Moreover, some PDC providers run their operations responsibly and play a legitimate role in fulfilling consumer demand for such games.

Hence, since regulatory intervention may increase costs for operators of PDCs, this may have knock-on effects on consumers and on charities who receive donations from commercial operators or on PDCs themselves. Furthermore, limits on ticket sales and prizes may fundamentally undermine the business model of PDC operators offering large prizes. Regulatory change also carries a certain degree of uncertainty, with a potential for unknowable unknowns – in this case, the potential for regulation to have unanticipated effects in the market for PDCs, or even in other markets. The discussion below considers potential unintended effects of regulation on operators and consumers. 

Operators

Surveyed operators were asked about two possible regulatory interventions (to capture their thoughts on several different features that may be part of changes to gambling regulation). The first intervention considered was for a requirement for operators to have a Gambling Commission licence with player protection and transparency obligations, limits on ticket sales and prizes and a requirement to give 20% of proceeds to charity. The second intervention proposed was similar to the first, except with a liability to pay gambling duty instead of limits on ticket sales and prizes or a requirement to give 20% of proceeds to charity. 

Most operators responded negatively about both interventions. 75% reported that the first intervention would be very damaging for their business and 65% indicated the second intervention would be very damaging (for each intervention a further 10% said it would be ‘somewhat’ damaging).

The most common reason for opposition to these interventions relates to the additional costs they would impose on operators. Some operators suggested that the amount of time it would take to comply with licencing requirements would be a significant burden on their business. However, the requirement to donate 20% of proceeds to charity or to pay gambling duty appears to be more problematic for operators. 

Operators suggest that their margins are quite low as it is. Therefore, the increase in costs associated with donating 20% of proceeds to charity would make trading financially unviable for many operators. This problem appears to be particularly acute for operators that are more recently established and smaller. Several operators suggest that, in their first few years of trading, they are yet to make a profit and already struggle to compete with larger operators with more resources. Indeed, the evidence suggests that the growth model for operators involves a cycle of selling more tickets and as a result being able to offer larger prizes over time. 

Limits on prizes and tickets sales similar to those for large society lotteries would likely only act as a binding constraint on the current activities of a small number of large operators offering prizes valued in the hundreds of thousands of pounds. However, these limits may also affect the ambitions of smaller operators of PDCs who expressed a desire to expand their prize offerings as their resources grow. 

Finally, it should also be noted that there could also be an adverse impact on the ability of businesses that do not even run PDCs but offer other similar products (e.g. promotional draws).

Consumers

The above raises the possibility that regulatory intervention could induce the exit of operators, leading to unintended consequences for consumers. Firstly, consumers will have fewer options to choose from among operators. This may increase the market power of larger players, potentially allowing them to either increase margins or reduce the quality of their offering. Furthermore, given many operators offer quite specialised prizes in their draws, certain kinds of PDCs may disappear completely. Operators who remain in business may pass regulatory costs on to consumers in the form of higher prices.

Finally, PDC operators are unlikely to have an incentive to offer free entry routes if regulated by the Gambling Commission, meaning consumers who use these (roughly 6% of entries per PDC according to the operator survey) will no longer be able to do so. PDC operators’ current incentive to offer free entry routes is that this allows them to avoid being regulated by the Gambling Commission as lotteries – an incentive which may no longer apply if PDCs are regulated in their own right. This in turn makes it more expensive for consumers to participate. 

4.3 Greater enforcement of consumer protection rules

4.3.1 Description of the intervention

More assertive enforcement of consumer protection rules could be an effective way to address consumer harm in the market for PDCs. Such an intervention could rely on the existing framework of rules for consumer protection. An enforcement intervention in relation to the advertising of PDCs could take the form of a piece of ‘sector compliance’ work by consumer protection bodies such as the ASA, which would involve active monitoring of the sector focusing on specific compliance concerns or other intelligence emerging, in addition to passive monitoring via received complaints.

Unlike in the case of gambling harm, existing consumer protection rules and regulations, such as the ASA’s CAP Codes, provide consumer protection bodies with sufficient powers to take action to address many harmful practices used by operators. When engaged for this study, the ASA expressed confidence in the robustness of the CAP Codes to address general consumer harm in the market for PDCs. This suggests that the objective of reducing consumer harm caused by PDCs can be achieved through greater enforcement of existing rules, rather than implementation of new rules. 

As discussed in Section 3.3.2, the ASA has made several rulings against operators of PDCs in recent years. These include rulings concerning topics such as free entry routes; closing dates; and changes to prizes. Importantly, some of these rulings uphold complaints against practices which London Economics’ review of PDC websites indicates are still common in the industry. As an example, Box 1 shows the ASA’s response to a complaint about free (postal) entries to an PDC being limited to one per entrant. Limiting free postal entries in this way remains a standard practice amongst operators of PDCs. The ASA’s willingness to uphold these types of complaints suggests that the body would be willing to make further rulings against harmful practices used by operators of PDCs should these practices come to its attention. 

Box 1: ASA ruling on Team HARD Racing Ltd (2021)^{[footnote 66]}

Complaint:

The complainant challenged whether the promotion …had been administered fairly because entry to the paid route listed was unlimited but entry to the free route was limited to one.

Ruling:

Upheld. The CAP Code stated that promoters must conduct their promotions equitably, promptly and efficiently, be seen to deal fairly and honourably with participants and potential participants and avoid causing unnecessary disappointment. We therefore expected the free-entry route to be equitable and not discriminatory against those who had entered using it.

We understood that participants could pay to enter the competition as many times as they wanted whereas participants who had entered through the free route were limited to one entry. We considered that this gave participants who had paid to enter multiple times an unfair advantage by giving them a greater chance of winning than participants who could only enter once through the free entry route. We therefore concluded that the promotion had not been conducted equitably and breached the Code.

The ASA reported to us that, if presented with evidence of notable consumer harm in a particular sector derived from advertising practices, it can consider undertaking a piece of sector compliance work to ensure that operators are compliant with the CAP Code. The ASA’s sector compliance efforts typically involve active monitoring of advertising in a particular sector by the Compliance Team to supplement the ASA’s investigations of specific complaints (i.e., passive monitoring).^{[footnote 67]} For example, active monitoring may include a survey by the Compliance Team to assess compliance in a specific sector. The ASA can also issue an ‘Enforcement Notice’ informing all operators in the sector of changes they may need to make to their advertising practices to remain compliant with the CAP Codes. The ASA often works with sector trade associations to ensure sector compliance and Trading Standards serves as a ‘legal backstop’ for ASA enforcement actions should operators show reluctance to comply. According to the ASA, compliance rates with its enforcement action are above 90%.

It might be helpful for this intervention to be introduced alongside and in cooperation with a Gambling Commission enforcement drive against operators offering products which are labelled as PDCs but which may in practice be illegal lotteries. However, the feasibility and impact of such as intervention was not explored as part of this research. 

4.3.2 Anticipated positive impacts of the intervention

An enforcement intervention would target harms which result from practices by operators which contravene consumer protection rules. In particular, such an intervention would likely improve transparency, deter rogue operators and reduce the prevalence of scams. Furthermore, preventing underhanded advertising practices – such as misleading advertisements – could additionally somewhat level the playing field between PDCs and regulated lotteries, given that the latter are more constrained by regulation in their options for advertising.

It is also possible that consumer protection intervention could have the effect of forcing operators to implement more attractive free entry routes or at minimum describing the existing free entry routes more accurately. The ASA ruling presented in Box 1 suggests that the free entry routes many operators claim to offer should not in fact be described as ‘free’ under the CAP Codes. 

It should be noted, however, that given the competing priorities of the ASA there are limits to the extent to which they will be able to monitor the sector. Furthermore, they reported that it can be challenging for them to navigate between regulating legitimate businesses and referring matters involving unlawful behaviour to statutory regulators.

4.3.3 Unintended consequences

Some operators may incur additional costs to bring themselves into compliance with consumer protection rules. These costs may be passed on to consumers in the form of higher prices. These additional costs may also result in a reduced product choice in the market. 

More pertinently, intervention concerning free entry routes could threaten the business model of many operators of PDCs. If the free entry route is marketed more prominently and as a result the proportion of ‘free’ entries increases substantially, the chances of consumers winning with a paid entry falls which may make the products unattractive for paid consumers. 

4.4 Voluntary code of conduct

4.4.1 Description of the intervention

A voluntary code of conduct for operators of PDCs could be used to set industry standards for measures used to protect players from harm. Such a code could flexibly combine measures from the interventions outlined above. Although such a code would not legally require PDC operators to implement the kinds of player protection measures that lotteries have, it may induce them to do so (especially if the alternative is direct regulation). 

The contents of the code could include, but not be limited to, the player protection and transparency obligations set out in Section 4.3.1 and a pledge to avoid practices which cause consumer harm (such as those in Table 31). Many of these measures were suggested by operators themselves in the operator survey. 

Operators are unlikely to be amenable to a pledge requiring them to offer more attractive free entry routes (if they continue to describe them as such), given the threat this could pose to their business models. Minimum charity donations could also be part of the code and a degree of flexibility may be appropriate (for example with differing minimum donations for operators of different sizes and abilities to pay). In theory, such a code could potentially include a voluntary cap on prize sizes and ticket sales, although this may make it difficult, in practice, to obtain buy-in from larger operators. 

This intervention could be informed by the recent example of the introduction of a code of conduct regarding loot boxes in video games. Loot boxes are features in some video games that are part of a wider market for in-game purchases. They contain apparently randomised items in which the player does not know what they are going to get until they have opened the loot box. They may be purchased with money (including by virtual currencies) or accessed via gameplay. Public concern on loot boxes has drawn on comparison with gambling products, and the risk of harm for children and adults.^{[footnote 68]}

In September 2020, DCMS launched a call for evidence on loot boxes in videogames. The government response to the call for evidence on loot boxes identified two key goals in this area. Firstly, that ‘the purchase of Loot Boxes should be unavailable to children unless enabled by a parent or guardian’ and secondly that ‘all players should have access to spending controls and transparent information to support safe gameplay.’^{[footnote 69]} In response, in July 2023, videogame industry body UK Interactive Entertainment (UKIE), in collaboration with a Technical Working Group set up by DCMS, published 11 industry principles ‘to meet UK government objectives to improve protections for all players [of loot boxes]’.^{[footnote 70]}A similar model could be used to ensure that similar government objectives are achieved in the market for PDCs, although as of yet it is too early to assess the success of this intervention in the loot box market. However, an important difference between the loot box case and the PDC case is that there was a strong case for this kind of intervention due to the association of loot boxes with children which is not present here. 

Furthermore, organising such an intervention in the market for PDCs may, however, prove more challenging than in the case of loot boxes. The PDC industry is newer than the UK videogame industry and lacks an established industry body such as UKIE. This could make it more challenging to coordinate industry-wide action amongst operators of PDCs, particularly the proliferation of smaller operators. 

However, some of the surveyed operators of PDCs suggested that they would be interested in being actively involved in the process of developing a voluntary code of conduct. One operator even suggested that discussions between operators have already taken place on what a code of conduct might look like. 

4.4.2 Anticipated positive impacts of the intervention

The purpose of such an intervention would primarily be to ensure that certain fundamental player protection and transparency standards are still in place across the PDC industry. A voluntary code of conduct would represent a less costly intervention than regulatory changes and would likely be faster to implement. 

Responses to the operator survey suggest that operators generally support the introduction of such a code; 75% of operators responded that this would be somewhat or very beneficial for the PDC industry, while none felt that this would be damaging. The evidence also indicates many operators would be in agreement regarding certain core elements of the code – such as player protection and transparency obligations. Several operators expressed sentiment similar to one respondent’s statement that a voluntary code of conduct is the ‘best solution to ensure player protection and transparency (which are, above all, the most important points).’ The code of conduct could also be devised to informally regulate the instant win aspects of PDCs and also reduce harmful gambling in other ways e.g. through having something on spending limits in the code. 

The code could also be designed to include minimum charitable contributions. This would then also have the effect of reducing the potential decline in charity donations associated with consumers potentially switching from lotteries to PDCs. 

Although this is not the main aim of the intervention, a voluntary code of conduct could also have positive effects on operators’ business.  Some operators pointed out that having this ‘badge of approval’ could improve consumers’ confidence in their products (similar to the way in which charities can display a badge to indicate that they are registered with the Fundraising Regulator).^{[footnote 71]} It was suggested that this may give consumers confidence that they are entering competitions that meet certain industry standards, and also that it would ensure a level playing field between operators of PDCs. Indeed, some of the operators surveyed raised concerns with some of the conduct of other operators, e.g. changing prizes in the event of poor ticket sales or the absence of spending limits. The ‘carrot’ of this badge of approval along with the ‘stick’ of possible changes to gambling regulation could encourage operators to take a code of conduct seriously, in spite of its voluntary nature. 

4.4.3 Unintended consequences

The risk of unintended consequences arising from such an intervention is relatively low, since operators who anticipate serious negative consequences could still choose not to follow the code. Furthermore, this approach likely means that product promotions and PDCs run by charities may not be affected. It is however possible that there may be a small impact on the costs of operators which may mean they would be unable to offer as broad and high quality an offering for consumers at the same price. The desire to avoid unintended consequences informed DCMS’s choice of a code of conduct approach in the case of loot boxes:

As the evidence base on loot boxes is still emerging, and direct government intervention may risk unintended consequences, our view is that it would be premature to take legislative action without first pursuing enhanced industry-led measures to deliver protections for children and young people and all players.^{[footnote 72]}

The main concern with this intervention is that operators may simply ignore it, given its voluntary nature. Some operators were concerned that the code may not be taken up by certain operators, which may reduce the potential benefits of this approach. Indeed, one operator questioned whether operators would face any ramifications for breaking the code. This is a valid concern, as any ramifications would be limited to reputational damage. 

4.5 Conclusion

The three interventions outlined above offer differing and potentially complementary options for government intervention in the market for PDCs. All three are guided by the case for intervention articulated in Section 4. However, each intervention provides different strengths and weaknesses in addressing different elements of the case for intervention. Different interventions also carry different practical implications and different risks of negative consequences. All of these considerations should inform the government’s eventual choice of intervention(s). 

The expected impacts (and unintended consequences) of these interventions are summarised in the table below.

Table 32: Impacts and unintended consequences of possible government interventions

Impact/unintended consequence	Changes to gambling regulation	Greater enforcement of consumer protection rules	Voluntary code of conduct
Reducing the risk of gambling harm from PDCs	Significant positive impact	No impact	Slight positive impact
Improving the integrity and transparency of PDCs	Moderate positive impact	Moderate positive impact	Slight positive impact
Protecting donations to charities	Significant positive impact	No impact	Slight positive impact
Reduced competition and consumer choice due to a decline in the PDC industry	Significant negative impact	Moderate negative impact	Slight negative impact
Increased prices and reduced quality of PDCs	Significant negative impact	Moderate negative impact	Slight negative impact
Removal of free entry routes	Moderate negative impact	No impact	No impact

Changes to gambling regulation represent the most direct and comprehensive means of pursuing the objectives which underpin the case for intervention. Of the three interventions discussed, only this would address the core issue that PDCs do not have legally enforced protections against gambling harm that exist for lotteries. Bringing PDCs under the purview of Gambling Regulation would give the Gambling Commission powers to enforce minimum player protection and transparency standards in the market. Gambling regulation may, however, prove cumbersome and risky to amend. It also may make it more difficult for other kinds of organizations to run product promotions or charities to run their own prize draws internally. Some stakeholders – such as operators of PDCs – are sure to suffer negative effects. Others, such as consumers and charities, may, respectively, lose enjoyment and donations that they gain from the PDC industry. Changes to gambling regulation could also provoke unanticipated effects and responses, creating new issues in the process of mitigating old ones. 

Consumer protection enforcement and introducing a voluntary code of conduct for operators are comparatively more moderate options for intervention. Consumer protection enforcement may help to prevent scams in the market, as well as harmful practices by legitimate operators. This would do little, however, with regard to gambling harm. This would, however, require buy-in from and increased funding for consumer protection bodies. This type of intervention could complement changes to gambling regulation or could be implemented independently.  

A voluntary code of conduct could offer a less costly means of ensuring that fundamental transparency and player protection measures are in place for PDCs. Operators expressed little opposition towards this possibility, and a fair degree of enthusiasm, suggesting that this would be a feasible undertaking. This intervention would not address the arguably arbitrary regulatory differences between PDCs and lotteries. This would, however, offer a relatively low risk and straightforward means of assessing whether harm can be mitigated in the PDC industry through industry-led measures, rather than regulation.  

Each of these interventions could be implemented independently, or in concert with others. Changes to gambling regulation could, for example, be accompanied by consumer protection enforcement efforts. A voluntary code of conduct could serve as a temporary or experimental step while further consideration is made of the case for regulatory intervention. The optimal choice of intervention(s) will ultimately depend on policymakers’ assessment of the trade-offs which have been outlined above and may also require a more detailed consultation with relevant stakeholders on the specifics and implementation of any intervention. 

It should also be noted that there is some evidence that supports the idea of separate regulation focussed specifically on instant wins. However a full assessment of this would require further primary data collection on the extent to which the presence of instant win games drives spending and gambling harm in the PDC industry, which is beyond the scope of this research. Such further research would provide valuable evidence on the impact of instant wins on player behaviour and detriment.

One option may be to start with a light touch option (e.g. a voluntary code of conduct) with the possibility of amending gambling regulation if such a code proves problematic to develop or take up and adherence to the code is inadequate. This approach may also be the most proportionate. This is because there is clear evidence that consumers enjoy participating in PDCs and so it is worth exploring whether the major issues present in the PDC market can be addressed in a light touch way that avoids severe unintended consequences.  Furthermore, this research has not established evidence of a causal link between PDC participation and harmful gambling that would indicate an urgent need for gambling regulation. 

There is also an argument for this approach on the basis that changes to gambling regulation would be the most time consuming of the three intervention options considered, in the sense that this would likely require changes to primary legislation.

Index of tables, figures and boxes

Tables

Figures

Boxes

 

1. GambleAware Treatment & Support Survey 2022. ↩

2. The National Lottery. Where the money goes. Available at the National Lottery website. ↩

3. GambleAware Treatment & Support Survey 2022. ↩

4. House of Commons. (2023). The potential merits of removing the caps on charity lottery fundraising. Available at the House of Commons website.  ↩

5.   GambleAware. Understanding the risks of gambling. Available at the GambleAware website. ↩

6. GambleAware Treatment & Support Survey 2022. ↩

7. The Gambling Act distinguishes between several types of legal lottery operator, some requiring a licence and others which are exempt from this requirement. Amongst these lottery operators, the most comparable to commercial PDCs are operators of ‘society lotteries’, which are ‘lotteries promoted for the benefit of a non-commercial society’.  Society lotteries are classified as ‘large’ or ‘small’ depending on their ticket sales, with the former requiring a licence to operate. Henceforth, when we refer to ‘society lotteries’ in this report, we are referring specifically to large society lotteries. ↩

8. GambleAware Treatment & Support Survey 2022.  ↩

9. The National Lottery. Where the money goes. Available at the National Lottery website. ↩

10. UKIE (2023). New Principles and Guidance on Paid Loot Boxes. Available at the UKIE website. ↩

11. A sample of 30 operator websites for manual review was drawn using stratified random sampling from a sample frame of operator websites identified by the web crawl. Operators were stratified based on whether they fell in the top, middle, or bottom third of operators by number of Trustpilot reviews. Omaze was added as the 31st operator in the sample. ↩

12. A sample of 200 operator websites for manual review was drawn using the same stratified random sampling methodology as above.  ↩

13. GambleAware Annual GB Treatment & Support Survey 2022. ↩

14. The National Lottery. Where the money goes. Available at the National Lottery website. ↩

15. GambleAware Annual GB Treatment & Support Survey 2022. ↩

16. House of Commons. (2023). The potential merits of removing the caps on charity lottery fundraising. Available at the House of Commons website.  ↩

17. This figure does not distinguish between entries which do and do not include a chance of winning an instant win prize, in addition to the chance of winning a prize in the main draw.  ↩

18. The web crawl may not have detected all instances of a free entry route or skilled element on operator websites. So, it is not necessarily the case that all operators marked as ‘neither’ actually offer neither (which could make them illegal lotteries). ↩

19. GambleAware. Understanding the risks of gambling. Available at the GambleAware website. ↩

20. PDCs are not legally defined as gambling, but this terminology is used so that gambling activities can be easily referenced. ↩

21. GambleAware Annual GB Treatment & Support Survey 2022. ↩

22. Gambling Commission survey data on gambling participation, March 2023. ↩

23. GambleAware Annual GB Treatment & Support Survey 2022. ↩

24. GambleAware Annual GB Treatment & Support Survey 2022. ↩

25. These websites post information about active PDCs that followers of the website may be interested in entering. These websites typically do not run PDCs themselves, but instead aggregate information about PDCs run by other entities, including PDCs run by commercial PDC operators and marketing promotions offered by non-PDC businesses. ↩

26. In the GambleAware survey this option also included online poker.  ↩

27.   ICLG (2023). ‘Consumer Protection Laws and Regulations UK’. Available at the ICLG website.  ↩

28.   The Consumer Protection from Unfair Trading Regulations 2008. Available on the gov.uk website.  ↩

29. Advertising Standards Authority (2021). Promotional marketing: Prize draws. Available at the ASA website.   ↩

30. ibid  ↩

31.   Advertising Standards Authority  (2023). Promotional marketing: terms and conditions and significant conditions. Available at the ASA website.  ↩

32. Advertising Standards Authority CAP Code – 17. Lotteries. Available at the ASA website.  ↩

33. Advertising Standards Authority CAP Code – 16. Gambling. Available at the ASA website.  ↩

34. Gambling Act 2005. Available at the gov.uk website.    ↩

35. It should be noted that it is beyond the scope of this research to assess whether questions used by PDC operators meet these requirements from a legal perspective. ↩

36. Gambling Act 2005. Available at the gov.uk website.   ↩

37. London Economics stakeholder consultation with Gambling Commission. ↩

38.   Gambling Commission. Meaning of society and local authority lotteries. Available at the Gambling Commission website.   ↩

39.   A society lottery is ‘large’ if its ticket sales may exceed £20,000 or if the sum total of ticket sales by the operator during the current calendar year (including the lottery in question) may exceed £250,000.  ↩

40. Gambling Commission. Fundraising and lotteries. Available at the Gambling Commission website.  ↩

41. Gambling Commission. (2020). Information to lottery players: proceeds and prize. Available at the Gambling Commission website.  ↩

42. Gambling Commission. Age, ID and financial verification. Available at the Gambling Commission website. ↩

43. For example, the web crawl would not register links to gambling charities which are embedded as images (rather than text) on operator websites.  ↩

44. Gambling Commission. (2020). Problem gambling vs gambling-related harms. Available at the Gambling Commission website. ↩

45. See the Gambling Commission guidance on problem gambling screens for details.  ↩

46. It should be noted that PGSI questions are not designed to be asked specifically in relation to PDC participation and so these results should be viewed in light of that fact.  ↩

47. Gender variation in harm was not asked about in the gambling charities survey so that survey neither supports nor refutes the idea that men experience more harm from online prize draws and competitions than women.  ↩

48. Advertising Standards Authority. (2021). ASA Ruling on Team HARD Racing Ltd. The ruling is available on the ASA website. ↩

49. Advertising Standards Authority (2020). ASA Ruling on Omaze Inc. The ruling is available on the ASA website.  ↩

50. Advertising Standards Authority. (2019). ASA Ruling on Raffle House Ltd. The ruling is available on the ASA website.  ↩

51. Advertising Standards Authority. (2022). ASA Ruling on Clarson Ltd t/a Raffleaid. The ruling is available on the ASA website. ↩

52. Advertising Standards Authority. (2020). ASA Ruling on KS Competitions Ltd. The ruling is available on the ASA website.  ↩

53. Advertising Standards Authority. (2019). ASA Ruling on Ogilvie Promotions Ltd. The ruling is available on the ASA website.  ↩

54. Advertising Standards Authority. (2018). ASA Ruling on Win Your Dream Home UK Ltd t/a Win Your Dream Home. The ruling is available on the ASA website.  ↩

55. Gambling Commission. (2023). Advice to Government - Review of the Gambling Act 2005. The advice can be viewed here.  ↩

56. Department for Digital, Culture, Media & Sport (2018). Consultation on Society Lottery Reform. ↩

57. The National Lottery. Where the money goes. Available at the National Lottery website. ↩

58.   Postcode Lottery. Our lottery. Available on the Postcode Society Trust website.  ↩

59.   Gambling Commission. (2023). Advice to Government - Review of the Gambling Act 2005. The advice can be viewed here.  ↩

60. Advertising Standards Authority. (2021). ASA Ruling on Team HARD Racing Ltd. The ruling is available on the ASA website.  ↩

61. Advertising Standards Authority. Our proactive work. Available on the ASA website.   ↩

62. Under the Gambling Act 2005, gambling is defined as playing a game of chance for money or money’s worth. The prizes that can be won via most loot boxes do not have a monetary value, cannot be cashed-out and are only of value within the context of the game. The Gambling Act can be found at the gov.uk website.    ↩

63. UKIE (2023). New Principles and Guidance on Paid Loot Boxes. Available at the UKIE website. ↩

64. Ibid. Membership of the Technical Working Group consists of a wide range of stakeholders including industry bodies (e.g. the Games Rating Authority) and public bodies (e.g. the Competition and Markets Authority) and its focus is on developing guidance and monitoring new technical developments in the area. ↩

65. See the Fundraising Regulator website for details. It should also be noted that some PDC operators also have this badge. ↩

66. Department for Digital, Culture, Media & Sport. (2022). Government response to the call for evidence on loot boxes in video games. Available at the gov.uk website. ↩