Lotteries, Skill-Based Prize Games and Free Draws & Prize Competitions

If you are starting a UK prize competition business, the most important question is not what you call your promotion. It is how the promotion actually works.

The UK legal distinction is usually discussed through three clearer categories: lotteries, skill-based prize games, and free draws & prize competitions. Those categories matter because a promotion that is structured badly can drift into lottery territory, while a promotion that is structured properly can sit outside lottery regulation. Either way, operators need to understand the rules and take advice on their own model.

Quick summary

A lottery is usually the risk area operators are trying to avoid, particularly where people pay to enter, winners are selected by chance and prizes are awarded.

A skill-based prize game relies on skill, judgement or knowledge, but the skill element must be real. If chance plays an appreciable role, or the skill requirement is too weak, the position may be different.

A free draw or prize competition is specifically recognised by the Gambling Commission as a route that can be run for commercial or private gain when structured within the requirements of the Gambling Act 2005. For many modern operators, the most relevant model is a free draw with both a paid entry route and a genuine free entry route.

Why the terminology matters

The wording gets confusing because people often use raffle, prize draw, competition, giveaway and lottery casually. That is fine in everyday conversation, but it is not enough when building an operator website, writing terms or preparing advertising.

The clearer legal framing is: a lottery is regulated gambling territory; a skill-based prize game depends on genuine skill, knowledge or judgement; a free draw can include a paid route and a free route, but the free route must meet specific conditions; and a prize competition must genuinely require skill, judgement or knowledge. The operator's job is to make sure the actual mechanics match the intended structure.

What is a lottery?

A lottery is the structure operators generally need to be careful not to create accidentally. In practical terms, the risk increases where there is payment to enter, a prize, and chance determining the winner.

The Gambling Commission states that if a free draw or prize competition does not meet the relevant requirements, the operator may be running an illegal lottery. That is why the model needs to be designed carefully before launch.

What are skill-based prize games?

Skill-based prize games rely on the participant's skill, knowledge or judgement. The key point is that the skill element must be meaningful. The Gambling Commission says that, for prize competitions, organisers must be able to show that the skill, knowledge or judgement required will either discourage some people from entering because it is too difficult, or prevent a proportion of those who enter from winning.

The Gambling Commission also warns that multiple-choice questions, or questions that allow another attempt after a wrong answer, rarely meet this criterion. This is an important point for online operators. A very easy question is not a magic shield. If almost everyone can answer it, the operator should not assume it creates a genuine skill-based structure.

What are free draws & prize competitions?

The Gambling Commission groups free draws and prize competitions together as a category that can be used for commercial or private gain, provided the promotion is run within the law. For free draws, the Commission describes two types: draws where all entries are free, and draws with both a paid entry route and a free entry route.

For the second type, the free route is not just a technical detail. The Gambling Commission says people must be able to take part without paying, the free route must be no more expensive and no less convenient than the paid route, it must be promoted and displayed at the same level as paid routes, and the system that determines prizes should not recognise the two routes as different. Our guide to free postal entry routes covers this in detail.

The practical difference for operators

These distinctions affect almost every part of the business:

• Website wording

• Terms and conditions

• Entry routes and postal entry handling

• Paid advertising claims

• Draw process

• Customer support scripts

• Payment provider review

• Meta RMG preparation

• Record keeping

An operator should not simply copy another website's structure and assume it is safe. The model needs to be thought through, documented and reflected consistently across the website.

Where operators commonly go wrong

• Using lottery, raffle, draw and competition interchangeably

• Treating a free entry route as small-print wording rather than a real route to entry

• Using a weak multiple-choice question and assuming it creates a skill-based competition

• Making the free route harder, less visible or less convenient than the paid route

• Writing marketing copy that makes the promotion look more like gambling

• Failing to document the model before launch

• Copying another operator's terms without understanding the structure

Our view

The industry would benefit from cleaner language. "Prize competition vs lottery vs prize draw" is a useful search phrase, but it is not the clearest operating framework. The clearer distinction for UK operators is lotteries, skill-based prize games, and free draws & prize competitions.

That distinction should be reflected in the way operators build their sites, write their terms, train support teams and explain free entry routes to customers. BaseComp's view is simple: compliance should not live only in legal copy. It should be built into the operating model, which means clear entry routes, plain-English terms, transparent draw processes, consistent records and software that supports the way the business is meant to work. This connects directly to the Voluntary Code of Good Practice.

Frequently asked questions

Is a prize competition the same as a lottery?

No. They can be legally different, but the structure matters. A promotion that does not meet the requirements for a free draw or prize competition may risk being treated as an illegal lottery.

Can a free draw have a paid entry route?

Yes. The Gambling Commission describes a type of free draw with both a paid entry route and a free entry route. The free route must meet specific requirements, including being no more expensive, no less convenient and displayed at the same level as paid routes.

Is a simple multiple-choice question enough to create a skill-based prize competition?

Operators should be careful. The Gambling Commission says multiple-choice questions, or questions that allow another chance after a wrong answer, rarely meet the relevant criterion.

Do I need a licence to run a free draw or prize competition?

The Gambling Commission says you do not need a licence or permission to run a free draw or prize competition as long as it is run in a way that meets the requirements of the Gambling Act 2005. Operators should still take advice on their own circumstances. You can read the Gambling Commission guidance and the Gambling Act 2005 directly.