Written evidence submitted by Omaze

DCMS Committee Inquiry into Gambling Regulation

Introduction to Omaze
 

Omaze is a for-profit, social impact company, originally founded in 2012 in the US and launched in the UK in 2020. We are best known for raising money for charity by operating free prize draws for houses that support the incredible work of our charitable partners. We complement charities’ existing fundraising, helping them to reach audiences who wouldn’t normally donate, raising awareness and excitement for worthwhile causes and campaigns through our high-profile marketing campaigns at zero risk and zero cost to the charity partner.
 

Since launching in the UK, we've donated over £9m to some of the biggest and most loved British charities, including £1,000,000 for Blood Cancer UK, £1,000,000 for the NSPCC’s Childline, and £500,000 for Cancer Research UK. We have also made direct donations to a number of small, local charities in the areas where our prize draws have taken place, including £25,000 to both The Well in the Lake District and the Cornwall Rural Housing Association.
 

In addition to the funding donated to good causes that we raise through our prize draws and direct donations, we are also committed to making a broader range of returns to society, including through the tax revenue we generate. Since beginning our operations in the UK we have generated over £10 million in VAT receipts.  

Although we are not a gambling operator, we welcome the opportunity to respond to the Committee’s inquiry. Our narrow interest in the gambling sector is admittedly limited, insofar as it is adjacent to our operations and thus we have focused our response on: our business model, the nature of harms associated with competitions as opposed to gambling, and therefore, what we believe should be prioritised for the upcoming White Paper.

How we operate
 

Omaze is a regulated prize draw. This means that, in line with the provisions of the Act, our draws are not gambling and are therefore not regulated by the Act’s provisions beyond those for regulated prize draws. In essence, the introduction of a prominent and fair free entry route allowed the Act to distinguish prize draws from gambling activities. We have found that this is consistent with all of the available evidence. 

Notably, the Gambling Act of 2005 explicitly carves out draws like those conducted by Omaze from the definition of gambling. The Gambling Commission’s website offers an additional summary of this: "You do not need a licence or permission to run a free draw or prize competition as long as they are being run in a way that meets the requirements of the Gambling Act 2005.”
 

Along with meeting the requirements to operate as a regulated prize draw, we are subject to a number of other regulatory frameworks in the UK. Notably, this includes that we are a registered commercial participant with the Fundraising Regulator and comply with all relevant marketing and consumer protection requirements in the UK.

Entrants are able to enter our prize draws via a paid-for route online or for free by post. The free entry route is displayed prominently alongside paid-for options and offers an equal chance to win, in line with UK law and Advertising Standards Authority guidance. For those who pay to enter, a considerable proportion of the proceeds goes towards Omaze’s charity partners, helping them continue to do more of the fantastic work they do around the UK. Once the competition has closed, the winner is chosen by a randomised draw engine that has been certified by an independent adjudicator.
 

In addition, our card payment processing is undertaken by PCI certified payment providers, we are a UK registered company making all relevant filings with Companies House and HMRC, and are a GDPR compliant registered Data Controller with the ICO.

Scale of gambling-related harm in the UK
 

We have limited experience on the scale of harms in the UK as it relates to health and mental health outcomes, so we defer to others who are more expert than us on the scale of gambling harms in the UK. We do have a specific perspective, which is our understanding of the extremely low levels of risk associated with prize draws, such as those that we offer.

Importantly, we believe that free draws are currently subject to adequate regulation under the Gambling Act and carry an exceptionally low risk of harm to consumers. Operators of free draws must meet a wide range of legal and regulatory requirements that, among other things, ensure participants can enter for free and are informed about the ability to do so. Objectively, as compared to gambling activities, free draws do not pose the same inherent risk of harm to consumers as there is no requirement to pay to enter.  Additional regulation, above and beyond that which Omaze and other prize draws currently adhere to, would negatively impact consumers, the charities we support and tax receipts for HMRC.

Why prize draws do not pose a risk of harm to users
 

There are multiple reasons that, unlike activities that are regulated as gambling (such as lotteries, sports betting, card games, scratch cards or betting terminals), prize draws do not generate the harm that should rightfully be the focus of the White Paper. These include delayed gratification, an overall low average spend on tickets, and the existing free entry route.

Taking each of the activities identified above, we examine what this means in the context of prize draws:
 

○     Instant or delayed gratification: Regulated prize draws, unlikely gambling, have a significant delay between entry and the result. It is unsurprising that the highest risks of harm are associated with gambling activities that offer either instant gratification or can be played continuously. This includes internet gambling and slot machines.[1]
 

■     Our draws operate over a course of 6 - 8 weeks, meaning there is a significant delay between the initial purchase and the ‘gratifaction’ one would get from winning. This makes it much less likely that they are used in a way that is problematic or that creates a risk of consumer harm.
 

○     Average spending: Average spend on prize draws is low and the option of a free entry route means that people can participate in our game without any financial risk at all.  Recent polling from Opinium has found that average spending on prize draws in the last quarter was under £20 (£18.70). Someone spending £18.70 on prize draws over a quarter of the year would be spending just over £1 a week.  This is a stark distinction from other activities regulated under the 2005 Act, all of which require the user to take on a financial risk in order to participate.
 

■     80% of Omaze’s sales are generated by customers who are spending less than £10 per week on our draws, indicating that there is an extremely low risk of problematic spending by our customers. In addition, we operate a series of automated spending checks to ensure that there is no use of our platform that poses a risk to users.
 

○     Reliance on repeat users: prize draws rely on a broad user base spending small amounts of money in order to operate effectively. As we have outlined above, the vast majority of our own users spend very small amounts of money, but, because of the high number of individual entrants, we are still able to raise significant sums for good causes.
 

How broadly should the term, ‘gambling’, be drawn?
 

We believe that when setting the limits of the term gambling, which we take to include ‘gambling’, ‘betting’, ‘lotteries’, and ‘cross-category activities’ as defined in the Gambling Act 2005, there are two core issues that should be considered.
 

These issues are the level of, and requirement to take, a financial risk, and the potential for consumer harm arising from the activity.
 

We believe that free prize draws are distinct from both traditional gambling and lotteries because they do not require payment to participate and do not pose a risk of harm to users. We therefore believe that it is right that they are treated differently within the legal and regulatory framework and call on the Government’s White Paper to focus on those forms of betting which are the most harmful to consumers.
 

Here we set out some more information about prize draws and why we believe the regulatory regime should treat them distinctly and proportionately.
 

Prize draws

The prize draw sector itself covers a broad range of operators from both the private and charitable sectors. This includes the high profile draws that are run by broadcasters such as ITV, to those run by charities such as the Teenage Cancer Trust. The Gambling Commission states that free draws are not gambling and they can be organised commercially for private or commercial gain.
 

Within this existing definition, we believe there are three ways in which prize draws can vary. First, the organisation that is offering the prize draw. Second, the range of prizes that are made available. And finally the purpose of the draws. 
 

Across this diverse sector, prize draws are run for three different purposes.

■     Fully for profit: Commercial broadcasters and newspapers run prize competitions, often requiring entrants to respond to a question or enter via a paid text or phone-call. These will often include routes that allow users to enter for free, and/or can include requiring the exercise of a skill.  
 

■     Charitable causes: Prize draws are also used by charities themselves to fundraise for their causes, such as the Teenage Cancer Trust and British Legion. The simple rules in the 2005 Gambling Act mean that this is a quick and effective way for charities to quickly raise funds for their organisations.
 

■     Combination of the two: Omaze itself. We offer a unique proposition of raising significant sums of money for good causes while also operating as a for-profit business. This approach has made it possible for us to raise over £9m for charities and generate over £10 million in tax revenue  in the UK since we began operating in the country.

The prizes that are on offer from these draws are, as you would expert in a diverse market, extremely wide ranging. They can cover, for example, a free product given away by consumer companies to  the millions that can be won through competitions run by large broadcasters.

What should the key priorities be in the gambling White Paper?

Given the extremely diverse range of providers that operate as regulated prize draws, we believe it is important that the Government and regulators take a proportional response to regulating the sector. In particular, we believe that the current regulatory model, which allows free prize draws to be regulated distinctly to gambling itself, should be retained.
 

As set out above, we believe that the activities normally associated with consumer harms are not present within the prize draw sector. In contrast, free prize draws offer an opportunity for individuals to engage in aspirational or purposeful draws - they are fun, akin to buying a raffle ticket from a community function, or entering an office raffle.
 

Some of them are operated for profit, but the mechanism is also used by charities. In the case of Omaze, this has helped to raise over £9m for some of the UK’s best known charities and over £10 million in tax revenues at no risk to consumers. To reform this area of regulation in a way that would reduce charitable fundraising at a time when charities are confronting a cost-of-living and funding crisis would be a serious mistake.
 

We also ensure that we are industry leaders in providing consumer safeguards and assuring funding guarantees to charities. This includes:
 

■     We guarantee a minimum donation of £100,000, so charities have the comfort of knowing that regardless of ticket sales an Omaze partnership will contribute meaningfully to their vital work.

■     There is always a winner, irrespective of the number of tickets sold.
 

■     We support customers to engage in our prize draws safely and responsibly, and have developed automated systems to flag any early signs of particularly high spend.  
 

■     As a registered Commercial Participator with the Fundraising Regulator we comply with the Code of Fundraising Practice, which requires, among other things, that (i) marketing claims surrounding charitable giving are not misleading and (ii) fundraising claims are backed by evidence.
 

With this in mind, we believe that the upcoming white paper should ensure that the regulation of prize draws remains genuinely proportionate with the low level of risk that they pose to consumers, while focusing on the genuinely harmful forms of gambling that pose real risks. Regulation on prize draws would have implications for the commercial sector, tax revenues and the charity sector, who are already facing a squeeze on their funding due to rising costs of living. Therefore, we believe that the existing route of regulated free prize draws should be retained in any reforms to gambling legislation.

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