Lotteries face growing challenge from free prize draws

March 3, 2025

Lotteries face growing challenge from free prize draws

As the UK’s gambling landscape continues to mature, alternative forms of gaming are emerging and challenging established models. UK Gambling Commission CEO Andrew Rhodes recently highlighted an important development: the rise of large-scale free prize draws. He said this growing phenomenon seems to be edging out the traditional dominance of lotteries.

Speaking at the Betting and Gaming Council’s Annual General Meeting (AGM) on 27 February 2025, Rhodes noted the substantial growth of these free prize draws, which, unlike regulated lotteries, remain outside the remit of the Gambling Act 2005. “We’ve seen the growth of large-scale prize draws, and that growth has been very significant,” he remarked, adding that the participation rate in these draws is quickly approaching that of traditional betting activities. The real kicker, however, is that free prize draws don’t face the same regulatory hurdles as lotteries, leaving the Gambling Commission on the sidelines while millions of consumers flock to these increasingly popular competitions.

This challenge is especially apparent when looking at the statistics. According to the latest data from the Gambling Commission’s Gambling Survey for Great Britain (GSGB), participation in gambling activities has remained stable at 48 percent, with lotteries continuing to lead as the most popular form of gambling. However, as Rhodes pointed out, the popularity of free prize draws is not only on the rise but is also shifting consumer preferences. These draws offer massive prizes, often far larger than those typically seen in traditional lottery draws. But this comes without the stringent regulation and charitable contributions that come with lotteries. As a result, they are attracting an ever-growing number of participants.

A fine line between regulation and freedom

The Gambling Act 2005 defines lotteries, which establishes the regulatory difference between lotteries and free prize draws. Lotteries require a license, must benefit good causes, and must adhere to strict rules. In contrast, companies can run free prize draws, which don’t require payment to enter for commercial gain without facing the same regulatory oversight.

This creates a grey area where organisers can avoid regulations by calling their offerings “free draws,” even though the stakes and participation levels closely resemble those of regulated gambling products.

Rhodes highlighted the changing landscape, noting the £1 billion milestone in society lottery sales while pointing out the rapid growth of free prize draws. While lotteries remain legally tied to charity funding, these novel forms of prize competitions are capturing the attention of the younger demographic — often those aged 25 to 34 — who are demanding more engaging, high-reward experiences that lotteries can’t always provide.

Free prize draws aren’t without their challenges. They lack regulation, so consumers may be unaware of the risks and dangers involved. Those who take part are not required to pay upfront to enter. But, the financial implications, including data collection, upsells, or hidden costs, are often murky and could lead to exploitation.

This year's AGM theme was Making a Difference, and we were delighted to welcome @fionatwycross @StuartAndrew @GamRegGB CEO Andrew Rhodes plus industry leaders, to hear how we do that, for members, the sector and the economy.

Read more here:

https://t.co/AVwsCYv21g
— Betting and Gaming Council (@BetGameCouncil) February 27, 2025

Why this matters

An important question is: should we regulate free prize draws? There is an argument from many in the lottery sector about the lack of oversight. This, they say, gives free prize draws an unfair advantage. They aren’t restrained by the same charitable funding requirements as lotteries and don’t face the same consumer protection standards. This creates an uneven playing field, making it difficult for traditional lotteries, especially those backing charitable causes, to stay competitive.

Rhodes himself is clear on this point. “If products are less attractive to this demographic, there is every reason they might suffer in terms of that share of participation,” he remarked. As these products continue to grow in popularity, especially among younger audiences, the traditional lottery sector may find itself squeezed out.

In a world where everyone, particularly millennials and Gen Z, has greater access to digital platforms and is more accustomed to instant gratification, lotteries may find themselves left behind. The traditional model of purchasing tickets in exchange for the hope of a big win doesn’t resonate with these audiences, who are used to more immediate, interactive experiences. Free prize draws offer the allure of large, instant prizes with minimal effort — an attractive proposition for many.

Calls for regulation and innovation

As the gap between regulated lotteries and free prize draws shrinks, we’re left with a pressing question about how to properly regulate these products. The UK Gambling Commission, who Flutter Entertainment recently launched court action against over its regulatory inquiry into Betfair, needs to step in and set clear boundaries, but we also have to be careful not to over-regulate and stifle growth. Rhodes made it clear that the Commission is paying close attention to these developments, but the real challenge will be finding a balance that doesn’t restrict innovation.

To stay relevant, lotteries need to keep up with the changing needs of today’s digital-savvy audience. To remain relevant, lotteries need to adapt to the changing needs of today’s digital-savvy audience. This might mean changing how they engage with players, focusing more on digital and interactive formats that appeal to younger users.

The gambling scene is changing, and the big question is whether free prize draws will dominate or if lotteries can adapt and stay competitive against these unregulated options.

What’s important is that both free prize draws and lotteries operate within a framework that protects consumers while keeping the industry fair. We cannot allow free prize draws to undermine the gambling sector’s integrity, but lotteries also must stay proactive and innovate rather than resting on their laurels. As Andrew Rhodes noted, the real task ahead is finding a balance where regulation nurtures growth rather than stifling it. He recently gave a speech during the International Association of Gaming Advisors (IAGA) webinar. This webinar, titled ‘Setting the Gambling Agenda for 2025: A Less Political Year?’

One thing is clear: The rise of free prize draws signals a major shift in consumer behaviour, and those who fail to recognise and adapt to this shift could find themselves left behind in the race for a piece of the growing gambling pie.