What Is the Gambling Act 2005?

The Gambling Act 2005 and prize competitions are an incredibly important combination and is the main law that regulates gambling activities in the United Kingdom. It was introduced to make sure all gambling is fair, open and protects both consumers and vulnerable individuals. This includes regulating betting, lotteries, casino games, and other chance-based activities. The Gambling Commission was created to enforce this law and to license gambling businesses across the UK.

However, the Gambling Act 2005 also makes a clear distinction between games of chance and games of skill. Prize competitions fall into the category of skill-based competitions, and that’s why they are not considered gambling—if they follow the correct legal requirements. This is one of the main reasons prize competitions are excluded from the usual gambling laws

Why Prize Competitions Are Exempt from Gambling Laws

The Gambling Act allows skill-based prize competitions to operate without a gambling licence. This exemption is based on the idea that these types of competitions do not encourage pure gambling behavior. In a legitimate prize competition, participants are expected to solve a challenge, answer a question, or complete a task that is difficult enough to filter entries based on ability. If everyone gets the answer right easily, or if no skill is genuinely required, it may be deemed a lottery, not a prize competition. 

The Importance of a Skill-Based Element

For a prize competition to be legal under the Gambling Act 2005, the skill element must be real and meaningful. It must affect the outcome of the competition. Competitions that rely on luck rather than skill run the risk of being classified as illegal lotteries. Organisers should make sure the skill-based task is not trivial or widely known. This is essential to stay within the legal definition of a prize competition and avoid penalties or shutdowns.

If you’re planning to run a prize competition in the UK, it’s essential that your competition is set up legally. The Gambling Act 2005 allows prize competitions to operate without a gambling licence—but only if they follow strict rules. If you don’t follow these rules, your competition could be classed as an illegal lottery, which is a criminal offence.

Here’s exactly what you need to do to stay legal:

 

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Your Competition Must Be Based on Skill, Knowledge, or Judgment

To be legal, the outcome of the competition must depend on the entrant’s ability to answer a question or solve a task that is not easy. The Gambling Act states that the competition must not rely on chance. This means:

You must include a genuinely skill-based question.
The question must be difficult enough that not everyone can answer it correctly without effort.If your question is too easy, your competition may be treated as a lottery, not a prize competition.

This skill element is what separates a legal prize competition from gambling.

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The Free Entry Route

To stay within the law under the Gambling Act 2005, a prize competition that isn’t based on genuine skill must offer a free entry option. This option must be clearly explained and just as easy to use as the paid option. It should be genuinely free – no purchase, payment, or cost to enter. The free entry route should be given equal treatment and must have the same chance of winning as paid entries. For example, if its 100 maximum tickets per entrant, then 100 free entries must be available too.

Every competition page on a website must clearly display the free entry route information at the same level as the paid route. 

*Free Entry Must Not Cost More Than a Ticket

According to the Gambling Act 2005, if your competition includes a free entry route, it must genuinely be free or cost less than entering through the paid route. This means people should not have to pay more in postage or any other fees than the cost of a ticket.

The cheapest legal free entry route in the UK is typically by post using a Royal Mail 2nd class stamp, which currently costs 85p. So if your paid ticket costs less than 85p, your free entry route will be seen as less accessible, which could put a competition at risk of being classed as an illegal lottery under the Gambling Act 2005.

Example:

  • Paid entry = £0.50 per ticket

  • Free entry (post) = 85p 

To stay compliant, the host of the competition has the following options:

  • Increase the number of entries allowed via the free route (e.g. 1 free postal entry gives 2 or more tickets)

  • Offer an email-based free entry option, which is completely free to the entrant

The Free Entry Route Must Be Clearly Visible

The free entry route must be made clearly visible and easy to access. This is a legal requirement under the Gambling Act 2005 to ensure the competition does not become an illegal lottery.

The free entry option must be:

  • Prominently displayed on the same page where ticket sales happen.

  • Written in plain, easy-to-understand language.

  • Not hidden in terms and conditions or behind extra clicks.

  • Clearly marked with, for example, how to enter for free—including the postal address or any required instructions.

  • Available to all UK residents for the full duration of the competition.

 

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Secure, Transparent Payments

If you charge for entry, you must use a secure payment platform, clearly explain entry fees and terms and never collect payments via personal bank accounts (e.g. BACS on Facebook).

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Based in the UK

For trust, compliance, payment processing, and customer safety, it’s best — and often essential — to run the business from within the UK.

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Random Number Generator

The Gambling Act 2005 allows a prize competition to use a random process (like a draw or a random number generator) to choose a winner only after filtering for skill.
PLEASE NOTE:

  • You can randomly pick a winner, but only from people who correctly completed the skill-based task (such as answering a question or solving a puzzle).

  • If everyone who enters is added to the draw—whether or not they answered correctly—then it’s a lottery, not a prize competition.

What Happens if You Break the Gambling Act 2005 Rules?

If a competition does not include a real skill element, and it does not offer a valid free entry route, then it could be classed as a lottery under the Gambling Act. Running a lottery without the correct licence is a criminal offence. This could lead to a business being shut down or facing legal action from the Gambling Commission.