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Raffles, lotteries and competitions: The acceptable face of gambling
4 min | 21 October 2024
It might sound like you're in with a reasonable chance of winning a big ticket item for a relatively small outlay, but don't get dazzled by the glitz of a big prize.
Picture this: you see an ad that says for £20, you can buy 20 entries into a raffle and potentially win the million-pound home of your dreams. Sounds tempting, doesn’t it?
You might have spotted these sorts of raffles on social feeds online. And the dream they're selling makes it easy to be drawn in – you can support a noble cause and climb the housing ladder, all in one.
The housing raffle emerged in the late 2000s during the height of the recession. With enormous financial insecurity, homeowners needed new ways to shift their properties, and the raffle became the most popular. After falling from its peak in 2008, it shot up again in 2020 and 2021. With inflated housing costs and rising rents, it's no surprise that developers have recently returned to this scheme, in a bid to sell homes to hopeful individuals.
As much as raffles seem harmless and often claim to support a charity, they're a cause for concern and do count as gambling. Buying a lottery ticket or entering a raffle can become an addictive behaviour that leads to personal financial damage. Recent research has found that nearly one in 10 people who entered prize draws and competitions for items like new homes or cars have ended up in debt as a result. Of the £653 million spent entering these paid-entry prize draws and competitions, £117 million comes from credit cards. Though using credit cards for gambling has been banned in the UK since 2020, an exception lets these competitions fall through the cracks.
There are three ways pay-to-enter prizes work: lotteries, raffles and competitions. Though they all seem similar, they’re handled differently:
Lotteries
Regulated under the Gambling Act, lotteries are when someone pays to enter, and prizes are awarded based on chance.
Raffles
These are still lotteries that are meant to be run at non-profit events. Tickets are sold at the event, and winners are announced there too. However, unlike an explicit lottery, no licence is required to carry them out, and they're unregulated by the Gambling Commission.
Competitions
Here's where things change slightly. A lottery or raffle becomes a competition and won’t be regulated by the Gambling Commission if an ‘element of skill’ is included in the entry process. So, it can be as simple as asking people, ‘What colour is the sun?’ All correct answers are put into a draw, and a winner is selected.
Beyond the slow decline into a potentially unhealthy gambling addiction, some of these prizes are unregulated, and people can end up getting scammed or no winners crowned at all. For example, in 2020, there were 93 housing raffle competitions, and only 25 houses were awarded. And remember, those 25 winners would have had to pay Stamp Duty Land Tax when they acquired their new property. In 2021, there were 108 competitions, and only 27 homes were awarded. Of course, entering doesn’t mean you'll win, but shockingly, in some cases, nobody ends up winning. What's more, these raffles aren’t always run to give away homes – but instead tickets are sold, and the proceeds are pocketed or used to cover 'expenses'.
These competitions have limited accountability. Where they fall into gambling, these competitions are often shut down for failing to comply with the Gambling Commission. So it falls on entrants to wise up and spot potential scams.
Here are some key ways to help you do this:
- Avoid competitions that offer a vague cash amount as a consolation prize for the property if there aren’t enough tickets sold
- Make sure you understand the terms of the competition, particularly the closing dates, if you can sell the property immediately and what the running costs of the property are
- Consider whether the amount the seller wants to generate is realistic and if they can make that much
- Before you buy a ticket, if you're suspicious of anything, report it to Citizens Advice in England on 0800 144 8848 or if you're in Wales 0800 702 2020
- If you're worried you might have a gambling problem, you can get support from BeGambleAware.org
If you think you might be the victim of a scam or fraud involving any of your Chase accounts, please contact us right away.
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