Do You Need a Licence to Run a Prize Competition or Raffle in the UK?

For almost every commercial operator, the answer is no. You do not need a Gambling Commission licence to run a prize competition or a paid "raffle" — provided the structure includes either a genuine skill question or a proper free entry route.

Every commercial "raffle" business you have heard of, from Raffle House to BOTB to Omaze to Elite Competitions, runs on one of these two structures. Both sit outside the Gambling Act 2005, and the Gambling Commission does not regulate them.

You would only need a licence if your competition is a true lottery — paid entry, outcome by pure chance, and no valid free entry route. A commercial business cannot lawfully run a lottery at all in the UK; lotteries are reserved for non-commercial societies such as charities and clubs. So for a business, the practical question is not "which licence" but "which of the two exempt structures fits".

This guide covers both routes in plain English, the line you cannot cross, and the one operational problem every operator hits once tickets go on sale: payments. If you are a charity or club running a fundraising raffle rather than a commercial operator, the society-lottery rules apply instead — that pathway is covered on our sibling guide, UK Gambling Commission rules for prize competition and raffle operators.

The Short Answer: Skill or Free Entry, Not a Licence

Whether you need a licence depends on one thing: is your competition legally a lottery? Under the Gambling Act 2005, an activity is a lottery if three things are all true.

• There is a prize. Cash, a car, a house, vouchers, goods — anything of value.
• There is a payment to enter. A ticket price, an entry fee, or a "donation" that is really the cost of entry.
• The outcome is decided wholly by chance. A random draw, a numbered ticket, a digital random pick.

Remove either of the last two ingredients and it is no longer a lottery. That is exactly what the two commercial routes do.

• The prize competition removes pure chance. A genuine skill, judgement or knowledge question decides who wins. No licence needed.
• The free draw removes the payment barrier. A genuine free entry route runs alongside the paid route, on equal terms. No licence needed.

If you cannot fit your competition into one of these two structures, you are running a lottery — and a commercial business is not permitted to run one for its own profit. The rest of this guide assumes you are taking the commercial route, because that is where every visible operator in this market sits.

Route 1: The Prize Competition (Game of Skill)

The Gambling Commission defines a prize competition as one "where the outcome is determined by the participants skill, judgement or knowledge". The skill element has to do real work. The regulator sets two specific tests, and both must hold.

• The skill required must "discourage people wishing to enter from doing so because it is too difficult". If the question is so easy that nobody is put off, it is not filtering by skill — it is filtering by who chooses to enter, which is chance.
• The skill required must "prevent a proportion of those who enter from winning a prize". Some entrants who pay and try must fail. A question everyone gets right is not a skill question at all.

This is where most operators go wrong. The multiple-choice question is the classic trap.

Multiple-choice and second-chance questions rarely qualify. The Commission specifically calls these out. "What is the capital of France: London, Paris, or Berlin" is the textbook example of a skill question that is not really a skill question. Operators who rely on this pattern are running an illegal lottery in the regulator's view.

The practical question is what does count. A puzzle that takes genuine thought and has more than one plausible answer. A specialist-knowledge question tied to the niche the competition sits in. A tie-break essay or photo caption judged against a real criterion. The bar is "would a meaningful proportion of paying entrants get this wrong", not "is this technically a question".

Route 2: The Free Draw (Free Entry Route)

The free draw is the more common structure for the high-value house and car operators. The mechanism is simple in principle but rigorous in detail. Get any of the three rules below wrong and the Commission can treat the whole thing as a lottery.

• The free entry method must be charged at the normal rate. In the Commission's wording, "free is any method of communication charged at the normal rate, and specifically refers to the use of first or second class post". Standard postage qualifies. Special delivery, premium-rate phone lines, and charged SMS short-codes do not.
• The free route must be promoted at the same level as the paid route. The Commission requires that "the choice between the free entry route and the paid entry route must be promoted so that people who want to participate can see it", and that the routes are "promoted and displayed at the same level". Burying it in the small print does not meet the bar.
• The draw must treat both routes equally. "The system that determines prizes should not recognise the two routes as different." If paid entries go into one bucket and free entries into a smaller one, you are running a lottery with window dressing on top.

What this looks like in practice: a website where a customer can buy a ticket for £5 or send a postcard with their name, address and answer to a stated PO box for the price of a stamp. The postcard goes into the same draw, with the same odds, as the £5 ticket. The free option appears on the entry page at the same prominence as the paid option, not hidden two clicks away.

What the Gambling Commission Does and Doesn't Do

The Commission's published position on prize competitions and free draws is hands-off. It does not approve structures, certify skill questions, or pre-clear free entry mechanics. Its role here is enforcement only.

The Commission is explicit about this:

• "The Gambling Commission does not approve free draws or prize competitions and we do not help you to develop them, although we may raise any concerns with you."
• "Many people running raffles on high value items such as houses and cars do so by running free draws or prize competitions. These are not forms of gambling and we do not regulate them."

So there is no licence application, no annual fee, and no regulator pre-approval. The trade-off is that you have to meet the legal test on your own, with no friendly regulator checking your work. Get it wrong and the Commission can treat the activity as an illegal lottery, which is a criminal offence under section 258 of the Gambling Act 2005.

The Commission has publicly flagged three recurring failures in this market: competitions extended past their stated end date, prizes substituted for something different from what was advertised, and competitions closed partway through for compliance issues. Each creates both a consumer-law problem and a much higher chance of regulator attention.

Online and Social Media: When the Channel Triggers Licensing

This is the rule that catches operators by surprise — but only if you are running a true lottery. The online channel does not turn a properly structured prize competition or free draw into a lottery.

A real skill question or free entry route is the carve-out. If the activity is genuinely a prize competition or free draw, the online-lottery rules do not apply at all. Facebook, Instagram and TikTok promotion is fine without a Gambling Commission licence. This is precisely why the visible commercial operators in this market advertise heavily on social media.

A paid-only chance draw online is a different story. The moment a ticket for a pure-chance, paid-only draw can be bought without being physically at an event, it is a remote lottery and needs a licence or registration. A Facebook post saying "DM me for tickets, £5 each, draw next Friday" is a remote lottery, not a social-media post. The Commission's guidance is explicit: "the only lotteries that can be advertised online are those run under a licence or registration with a local authority, or a lottery being run at a physical event with the tickets being sold at that event."

Meta's advertising rules apply separately from UK licensing. Even a fully compliant prize competition is treated as gambling and gaming content by Meta's ad system. To run paid Facebook or Instagram ads for a competition, Meta generally requires advertisers to apply for and receive its Real Money Gaming (RMG) permission before any ads go live. Without that approval, ads are rejected and accounts can be restricted — independently of whether you need a Gambling Commission licence.

The quick decision rule. Pure-chance, paid-only, sold online equals a lottery, which a commercial business cannot run. The same activity with a real skill question or a proper free entry route is a prize competition or free draw — no Gambling Commission licence required, but full consumer law and CAP Code obligations still apply.

What Law Still Applies (Even Without a Licence)

Sitting outside the Gambling Act does not put a prize competition or free draw outside the law. Consumer protection and advertising obligations apply in full.

• Consumer Protection from Unfair Trading Regulations 2008. You cannot mislead entrants on prize value, draw conduct, odds, or eligibility. Trading Standards enforce.
• Advertising Standards Authority and the CAP Code. All promotion must be legal, decent, honest and truthful. The CAP Code has specific rules on closing dates, eligibility, prize description, and how the winner is selected and notified.
• Contract law. Your terms and conditions form a binding contract with every entrant. Closing dates, prize-substitution clauses, dispute mechanics and winner selection sit here.
• Data protection. Entrant data is personal data. UK GDPR and the Data Protection Act 2018 govern how you collect, store and use it.
• Industry codes. The Institute of Promotional Marketing and other bodies publish best-practice codes. Not law, but ASA complaints often reference them.

The takeaway is that "no Gambling Commission licence" does not mean "no rules". The compliance burden moves to consumer law, advertising standards and your own terms and conditions. Get those right and you operate without a licence. Get them wrong and you face ASA rulings, Trading Standards intervention, payment-processor closure, and — if the structure is a sham — a Gambling Commission criminal referral.

Payments: Why You'll Need a Specialist Processor

The structure is only half the job. The other half is applying for a prize competition payment gateway — and this is where most launches stall.

Mainstream processors decline the whole category. Stripe, PayPal, Shopify Payments and Square all restrict competition, raffle and lottery merchants under their acceptable-use policies, whether or not your structure is legally a lottery. Accounts that process this activity are typically reviewed and closed, with funds held in reserve for 90 to 180 days.

It is risk classification, not your paperwork. Competition merchants sit alongside gambling for card-scheme monitoring and carry higher chargeback rates, because some entrants dispute the charge once they realise they have not won. A clean prize-competition structure does not change how a mainstream PSP codes the category.

The answer is a specialist high-risk acquirer. These providers underwrite competition and raffle merchants as a known risk class, with chargeback monitoring and reserves sized for the category. The trade-off is slower onboarding and higher processing rates, in exchange for an account that does not freeze a fortnight after launch.

What Happens If You Get the Structure Wrong

The Gambling Commission has a lower public profile than the FCA, which leads operators to underestimate the exposure. In this market the sharpest consequences often come from platforms and payment processors rather than the regulator — and they arrive faster.

• The Commission raises concerns. Its first step is usually to flag a structure it views as a sham — a weak skill question, or a free entry route that is suppressed or weighted differently in the draw — and ask you to correct it.
• ASA and Trading Standards act. Misleading promotion, unclear odds, moved closing dates or substituted prizes draw ASA rulings and Trading Standards intervention under consumer law, independently of any gambling question.
• Platform and payment accounts close. Meta removes promotions that read as unlicensed gambling. Stripe, PayPal and other PSPs close accounts that process competition activity in breach of their policies, with held funds sitting in reserve for 90 to 180 days afterwards.
• The activity is treated as an illegal lottery. If the skill question or free entry route does not genuinely take the activity outside the Gambling Act, the Commission can treat the whole thing as an unlicensed lottery — with forced refunds and shutdown.
• Criminal prosecution. Promoting an unlicensed lottery is a criminal offence under section 258 of the Gambling Act 2005. Prosecutions are rare but real, typically reserved for repeat offenders or large-scale unlicensed activity.

The pattern we see most often is not deliberate rule-breaking. It is an operator running a paid Facebook draw in good faith without a skill question or free entry route, or relying on a multiple-choice question that does no real filtering. Getting the structure right at the start costs far less than fixing it after a notice arrives.

Common Mistakes and How Merchant Advice Helps

Three mistakes account for most of the friction we see across this category. Each has a fix, and each is far cheaper to avoid than to recover from.

Mistake 1: treating a paid Facebook draw as a social-media post. A paid-only draw with no free entry route and no skill question is a remote lottery, which a commercial business cannot run. Operators who launch first and ask later end up with closed Meta accounts, frozen PSP funds, and sometimes a Gambling Commission letter.

Mistake 2: a weak skill question or a suppressed free entry route. The skill must "discourage people wishing to enter from doing so because it is too difficult" and "prevent a proportion of those who enter from winning". A multiple-choice question with one obvious answer does not qualify, and neither does a free route buried in the small print or weighted differently in the draw. When the structure is a sham, the Commission treats it as an illegal lottery and prosecution under section 258 is on the table.

Mistake 3: launching on a mainstream processor. Stripe, PayPal, Shopify Payments and Square all restrict this category. Building a launch around one of them means a near-certain account freeze once volume or disputes flag the activity — often at the worst possible moment, mid-campaign, with customer funds held in reserve.

Where Merchant Advice fits. We are a payments advisor and broker. The advisory call typically covers two things: a sense-check that the operation sits cleanly inside the prize-competition or free-draw structure, and an introduction to specialist acquirers who underwrite competition and raffle merchants. We work alongside the operator's legal advisor, who owns the structuring decision itself.

What we do not do is rank providers, draft your terms, or promise approval. The acquirer underwrites the operator on its own criteria. Our value is in the introduction, the documentation framing, and the time saved by not having to find the right acquirer one by one. More on the payments side sits on our raffle websites service page.

Conclusion

For a commercial operator the licence question has a simple answer. If your competition is a prize competition with a real skill question, or a free draw with a proper free entry route, no Gambling Commission licence is needed and the Commission does not regulate the activity.

That freedom comes with conditions. Consumer law, the CAP Code and your own terms and conditions all apply in full, and the skill question or free entry route has to do genuine work — not just exist on paper.

The structure is only half the job. The other half is payments: mainstream processors decline this whole category, whatever the structure, so every commercial operator needs a specialist payment partner before the first ticket goes on sale. Getting that lined up early is what separates a launch that runs from one that freezes a fortnight in.