This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Recently, the Government launched a consultation on prohibiting betting on the outcome of non-UK versions of the EuroMillions, citing fears that the lines between the National Lottery and betting are becoming blurred, leading to confusion amongst customers and a potential threat to funds raised for good causes.

"Legal loophole"

Section 95 of the Gambling Act 2005 prohibits the offering of bets on any lottery which "forms part of the National Lottery". A lottery forms part of the National Lottery if - as set out in the National Lottery Act 1993 - the lottery is promoted by the body licensed to run the National Lottery (currently Camelot). The EuroMillions is a lottery run in partnership between a number of lottery operators throughout Europe and is, despite the jackpot and winning numbers remaining constant across borders, technically a separate game in each jurisdiction (and thus there is a UK EuroMillions, a Spanish EuroMillions, and so on). The UK EuroMillions draw does "form part of the National Lottery" as it is promoted by Camelot, and therefore operators are prohibited from offering bets on it. The EuroMillions of any other jurisdiction, however, are not caught by the prohibition. As a result of this so-called "loophole", UK-licensed operators have been able to legally offer bets on the EuroMillions by only offering bets on overseas draws, not the UK draw.

The Government is seeking to impose a licence condition to prohibit operators from offering bets on EuroMillions draws in any country, exercising their power to do so under s.78 of the Gambling Act.

The Government's case

Back in March 2015, the Culture, Media and Sport Select Committee published a report on society lotteries. In the course of the Select Committee's inquiry, Camelot raised concerns regarding betting on lotteries. In response to this, the Select Committee suggested the Government explore the options of prohibiting betting on lotteries altogether, re-defining all bets on lotteries as traditional-style lotteries and improving the clarity of marketing to reduce customer confusion.

In respect of the latter, the Gambling Commission has produced guidance for operators stressing the importance of being clear to customers that what they are participating in is betting, not a lottery. The Government – whilst stopping short of prohibiting bets on lotteries altogether – is now proposing to take further action. It says it is doing so for two principal reasons.

First, they believe that bets are muddying the "clear blue water" between betting and the National Lottery, leading to customer confusion. The Government argues that this is particularly the case for EuroMillions due to the affiliation that the brand has with the National Lottery. In support of this they cited research – from Camelot - in relation to a EuroMillions betting product which showed that only 14% of respondents understood that it was a betting product, whilst 61% thought it was a way of participating in the EuroMillions Lottery.

Secondly, the Government argues that bet on lottery operators are able to capitalise on the prize levels offered by the National Lottery without being obliged to fund good causes. As such operators often offer bets at lower prices than lottery tickets, with both the Government and the Gambling Commission fearing that consumers are being enticed away from the National Lottery, with the potential consequence of a negative impact on returns to good causes.

The industry responds

In response to the consultation, Nigel Birrell, Chief Executive of popular bet on lottery provider Lottoland, came out fighting, stressing not only that Lottoland have brought customer choice and value to the market but that the National Lottery is itself outdated:

"For many people the lottery has lost its magic. It is clearly a lack of choice, product innovation and an antiquated offering that has led to the decline of lottery sales over the past years. This is a trend that has been seen across many monopolistic industries where disruptor brands such as Uber, Airbnb and Netflix have brought customer choice, value and new technologies to the benefit of the customer, this is exactly what Lottoland are bringing to the market…We represent fair competition and an alternative from those disenfranchised with the current monopolistic market and offer."

Birrell also claimed that the driving force behind the consultation was likely to be lobbying from Camelot in an effort to protect their monopoly. In support of this argument, he cited the operator's similar response to the threat posed by the Health Lottery. The advent of the Health Lottery - an example of an umbrella lottery where various society lotteries group together under a single brand name - was at the heart of the push for society lottery reforms back in 2015. The reforms were welcomed by Camelot, who had claimed that the umbrella lottery posed unfair competition to the National Lottery. Their efforts in this respect had led them to go as far as to attempt to judicially review the Gambling Commission’s issue of licences to all 51 of the Health Lottery's constituent societies back in 2012.

Birrell played down the competition that Lottoland poses to the National Lottery: "the opportunity to bet on EuroMillions with Lottoland is only available online – circa 80% of Camelot’s revenue is generated through retail. To put this into perspective Lottoland EuroMillions betting revenues are less than 0.1% of Camelot’s total turnover, we are not affecting them or reducing their ability to give to Good Causes in any way". He also questioned Camelot's position as the monopoly operator, commenting that "the time has come to have a general discussion about the justification of the monopoly. Monopolies always hinder innovation and progress. The ones paying the bill are the UK consumers, especially in terms of lack of innovation and higher prices".

The consultation document can be found here and the deadline to respond is 2 May 2017