The UK’s £1.3 Billion Prize Draw Market: What the Government’s New Study Means for Operators
PromoVeritas Analysis: Drawing on 20+ years of promotional compliance expertise.
The UK’s online prize draws and competitions (PDCs) market has exploded into a £1.3 billion industry, attracting 7.4 million adults annually. But a comprehensive new study by London Economics for the Department for Culture, Media & Sport reveals significant regulatory gaps and consumer protection concerns that could reshape this rapidly growing sector.
At PromoVeritas, we’ve been monitoring this market’s evolution for over two decades, advising clients on navigating the complex intersection of promotional law, consumer protection, and regulatory compliance. This latest government study validates many of the concerns we’ve raised with clients about the PDC sector’s regulatory vulnerabilities.
The Current Landscape
Companies like Omaze have revolutionised how people engage with prize competitions, offering everything from luxury cars to dream homes through seemingly “free to enter” contests. The reality is more complex – while free entry routes exist, they’re often buried in fine print or made deliberately inconvenient, with most participants paying an average of £3 per ticket.
The market’s growth has been remarkable, with Omaze alone commanding over 60% of the player base. Social media advertising drives discovery and participants are motivated by both prize-winning opportunities and the appeal of supporting charitable causes – though transparency around charitable donations remains problematic.
Key Concerns Identified
The study highlights several critical issues that demand attention:
- Misleading “Free” Claims: Many operators promote free entry while making these routes practically inaccessible, raising concerns with regulators like the ASA about potentially misleading advertising.
- Consumer Confusion: Research shows participants often don’t understand basic competition mechanics – odds of winning, eligibility criteria, selection processes, or even whether all advertised prizes are actually awarded.
- Protection Gaps: Unlike licensed gambling platforms, most PDC operators don’t provide essential consumer safeguards like spending limits, self-exclusion tools, or clear links to support services.
Signs of Harm: Perhaps most concerning, 12% of PDC players show signs of harmful gambling behaviour – four times the national average of 3%. Two-thirds of participants believe PDCs are addictive, with 1 in 10 reporting negative effects including overspending and chasing losses.
Regulatory Challenges
The fundamental issue is that PDCs operate in a regulatory grey area. They’re not covered by the Gambling Act 2005 and don’t require Gambling Commission licensing. This creates an uneven playing field where traditional lotteries must follow strict rules, donate to good causes and implement player protections, while PDCs face no such obligations.
Current oversight relies primarily on consumer laws and ASA advertising codes – tools that weren’t designed for this type of commercial activity at this scale.
Government Response: A Phased Approach
The report outlines three potential intervention levels:
1. Voluntary Code of Conduct (Late 2025)
The government’s preferred initial approach involves introducing a voluntary industry code requiring:
– Clear operational rules and transparent terms
– Prominent display of free entry options
– Comprehensive disclosure of costs, odds, and prize information
– Basic consumer protections including age verification and complaint processes
– Honest reporting of charitable donations
2. Enhanced Enforcement
Existing regulators like the ASA and CMA could receive expanded powers to enforce higher standards without requiring new legislation, focusing on misleading advertising and unfair trading practices.
3. Full Gambling Regulation
If voluntary measures fail, the government could classify PDCs as gambling products, requiring operators to obtain licenses, follow strict operational rules, implement prize caps, and contribute to good causes. However, this would require new legislation and could take years to implement.
PromoVeritas Strategic Recommendations for Operators
Based on our extensive experience advising clients across the promotional landscape, we recommend immediate action across three key areas:
Immediate Compliance Actions:
- Free Entry Route Optimisation: Our audits consistently find that truly accessible free entry routes are rare. Operators must move beyond technical compliance to genuine accessibility.
- Transparency Enhancement: Clear, prominent disclosure of odds, costs, and prize availability isn’t just good practice—it’s becoming essential for regulatory survival.
- Age Verification Strengthening: Robust age verification processes are fundamental, particularly given the study’s findings on vulnerable participants.
- Fair Competition Practices: Ensure all advertised prizes are genuinely available and selection processes are demonstrably fair.
- Charitable Donation Clarity: With a third of operators claiming charitable links, transparency around actual donation amounts and recipient organizations is crucial.
Risk Mitigation Priorities:
- Regulatory Sanctions Prevention: Misleading advertising enforcement is increasing—proactive compliance review can prevent costly interventions.
- Statutory Regulation Preparation: Non-compliance with voluntary standards will likely accelerate mandatory regulation—early adoption provides competitive advantage.
- Consumer Protection Liability: Failure to implement adequate safeguards could expose operators to legal challenges and reputational damage.
PromoVeritas has supported numerous clients through similar regulatory transitions. Our experience shows that early adopters of enhanced compliance standards consistently outperform reactive competitors.
Looking Forward: PromoVeritas Perspective
The message from government is clear: the PDC industry must address current shortcomings voluntarily or face mandatory regulation. While the sector provides entertainment and engagement opportunities, the evidence of consumer harm and confusion cannot be ignored.
Having guided clients through multiple regulatory transitions over the past two decades, we recognize the patterns emerging in the PDC sector. The voluntary code represents a critical opportunity for the industry to demonstrate self-regulation capability. Success could prevent more restrictive statutory intervention; failure will likely accelerate it.
Our Experience Shows: Organisations that proactively embrace compliance standards consistently achieve better outcomes than those that wait for regulatory mandates. The current window for voluntary adaptation is narrow but valuable.
For Legal and Compliance Teams: This study should trigger immediate review of current practices, marketing approaches, and consumer protection measures. The regulatory landscape is shifting, and early adaptation will be crucial for long-term success. PromoVeritas has developed comprehensive audit frameworks specifically designed to address these emerging requirements.
The £1.3 billion question now is whether the industry will embrace voluntary reform or wait for mandatory regulation. Given the scale of identified harms and the government’s clear intent, proactive compliance appears to be the prudent path forward.
