How to Start a Lottery: A Brief Guide

Lottery experts predict that the global lottery industry will grow between 9% and 10% (or US$220 billion) by 2025—so it’s no wonder that business-minded players and investors are increasingly interested in starting their own lotteries. But how feasible is this idea?

The good news is that launching your own lottery is certainly possible. However, it’s important to know that different regulations apply to online and in-person lotto businesses depending on the country where they’re based. This article breaks down how to start a lottery—no matter where you live in the world.

How to Start a Lottery - Ball MachineHot Tip: Only Start a Legal Lottery

Gambling and lottery games are strictly regulated around the world. The reason for this is that many countries and states already have established government-run lotteries that are used to collect funding for local programs and projects. To avoid competition for this essential revenue, many regions prohibit individuals from starting new lottery games or only offer licensing for certain types of lotteries, such as charitable lotteries or raffles.

Whichever kind of lottery you decide to start, it is absolutely essential to follow regional lottery business laws. Setting up an illegal lottery can result in massive fines and even jail time. For example, in the UK, running an illegal lottery can get you a £5,000 fine and up to 51 weeks in prison. In the US, lottery businesses that run afoul of the law can gather fines of US$100 to US$1,000 and up to 6 months in prison for their owners. Canada has some of the toughest laws: individuals running illegal lotteries are fined CA$750,000 or more, while corporations can expect to pay at least CA$10 million.

To put it mildly, running an illegal lottery will not make you rich. Now that we’ve established the basics, read on to find out how to start a lottery legally.

How to Start a Lottery in the UK

Lotteries in the UK are governed by The Gambling Act 2005 and the Gambling Commission. A lottery can take the form of sweepstakes or a raffle, also called a tombola. Competitions that involve knowledge or skill, such as a skill-testing question, are not considered to be lotteries.

In the UK, you can start a small lottery without getting an operating license from the Gambling Commission. Small lotteries include:

  • Private society lotteries, which raise money for the organization or a relevant charitable cause.
  • Work or residents’ lotteries that are for employees at a workplace or residents of a single premises are not for profit and raise money for a charity or related cause.
  • Customer lotteries, which are run by businesses specifically for their customers. The prizes cannot be larger than £
  • Event-based lotteries that collect money for charitable causes and offer prizes up to £500.

Lotteries with larger prizes need an operating license from the Gambling Commission. These include local authority lotteries with prizes up to £200,000; large society lotteries, which must earn minimum £20,000 in ticket sales per draw and have prizes up to 200,000 per year; and small society lotteries, whose ticket sales should not exceed £20,000 per draw and whose yearly prize limit is £25,000. By law, large UK lotteries must give 20% of their revenue to charities or other good causes.

How to Start a Lottery in the US

Historically speaking, lotteries were crucial in helping the USA develop as a nation, with big figures like Benjamin Franklin and George Washington starting their own lotteries to fund various endeavours and construction projects. Fast-forward to today and you'll find that 45 states, the District of Columbia, Puerto Rico, and the US Virgin Islands all operate lotteries. However, it is generally illegal in America to operate a lottery other than a state lottery or non-profit fundraising raffle or draw. Even the state of Nevada, home of America’s gambling capital, Las Vegas, offers no exception to this rule.

Instead of a standard lottery, in America you may run a contest or sweepstakes if there is no fee for entering the draw. Alternatively, you can charge an entry fee for a skills-based competition. Running charitable raffles and draws online is perfectly legal, and they are growing in popularity.

While US residents were previously allowed to buy tickets online for lotteries in other states, as of 2019, state lotteries are only allowed only sell tickets online to locals. Tickets to multi-state lotteries, such as the Mega Millions and Powerball draws, can also be purchased from online lottery ticket sellers based in foreign jurisdictions (read more about online lotteries below).

How to Start a Lottery in Australia

In Australia each state decides which kinds of lotteries may be operated locally, the prize limits, and what licensing is required to operate. Recently, many states have made it easier to get licenses for “competitions” like lotteries, charitable fundraisers, and company promotions.

For example, if the draw prize is worth more than AU$3,000, then you may need a license to operate your competition in the Northern Territory or in the Australian Capital Territory. If the prize pool is bigger than $5,000, you’d need a license for it in South Australia. Meanwhile, as of July 1, 2020, New South Wales only expects people to apply for a permit for a promotional competition lottery if the prize pool is worth AU$10,000 or more.

Starting an Online LotteryHow to Start an Online Lottery

All lotteries must be set up within a geographical regulatory framework in order to avoid being labelled a scam and face serious legal problems. A major benefit to starting a lottery online is that you can choose the country in which to base your lotto business.

Many countries have special rules just for online lotteries and games. For example, Australian states allow for setting up and licensing online lotteries to market to Australians. However, by law, these online lottery sites cannot offer “interactive” game options such as scratch cards, poker, or casino games.

Many regions also offer better licensing for online lotteries than they do for land-based games. For example, the UK Gambling Commission allows individuals based anywhere in the world to obtain a “remote society lottery operating licence” to run an online lottery that targets British customers. While land-based UK lotteries are limited to giving out £250,000 in prizes a year, online lotteries have a limit of £5 million per draw and total proceeds of £50 million per year. With such massive earnings, it’s a drop in the bucket to follow the law and give 20% of proceeds to good causes.

Conclusion

Starting a lottery is perfectly doable—as long as you stick within the legal framework of your chosen business region. With sufficient funds to use as prizes, some charitable donations, and professional legal help to set up your business, you too can be a winner in the multi-billion-dollar global lottery industry.


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