If you are planning to launch a competition website in the UK, this is usually the first question that stops people in their tracks.
Do you need a gambling licence, or not?
The confusion is understandable. Some competition sites operate legally without a licence. Others are shut down, blocked by payment providers, or warned by regulators for accidentally running an illegal lottery.
The difference usually comes down to how the competition is structured, not what the owner intended.
This guide explains, in plain English, when a gambling licence is required, when it is not, and the common mistakes that turn legitimate competition websites into illegal operations.
The short answer
Most competition websites in the UK do not need a gambling licence, but only if they are structured correctly.
If your website is classified as a lottery, you will need a licence or local authority registration. If it qualifies as a prize competition or a legal prize draw, you may be exempt.
The problem is that many sites believe they are running competitions when, legally, they are not.
How UK law classifies competitions
UK competition websites generally fall into one of three categories.
Prize competitions
Prize draws
Lotteries
Each is treated very differently under the Gambling Act.
What is a lottery under UK law?
A lottery exists if all three of the following are present.
Payment is required to enter
Prizes are awarded
Winners are determined by chance
If your website meets all three conditions, it is legally a lottery.
Running a lottery without the appropriate licence or registration is illegal.
This is where many competition websites go wrong.
Why most online lotteries are not allowed
Online lotteries in the UK are heavily regulated.
Unless you are a registered charity, a society lottery operator, or licensed by the Gambling Commission, you generally cannot run an online lottery.
This is why most commercial competition websites must avoid being classified as lotteries at all costs.
What is a prize competition?
A prize competition avoids being a lottery by removing chance.
This is done through a genuine skill, knowledge, or judgement requirement that either prevents a significant proportion of people from entering or prevents a significant proportion of entrants from winning.
The key word here is significant.
A simple or obvious question does not qualify.
Why most skill questions fail
Many competition sites use questions like:
What colour is the sky?
How many wheels does a car have?
Which is bigger, a mouse or an elephant?
These do not meet the legal threshold for skill.
If most people can answer correctly without effort, the competition still relies on chance and therefore becomes a lottery.
This is one of the most common reasons sites unintentionally require a gambling licence.
What is a prize draw?
A prize draw relies on chance but avoids being a lottery by removing the payment requirement.
This is achieved through a free entry route.
If a genuine free entry option exists and is not harder to access than the paid option, the draw may be lawful without a licence.
What counts as a genuine free entry route?
A valid free entry route must:
Be clearly displayed and easy to find
Not require a purchase
Not be hidden in the Terms and Conditions
Not be significantly more difficult than paid entry
Examples include postal entry or digital free entry forms.
If the free entry route is tokenistic or obstructive, the draw may still be classed as a paid lottery.
Common mistakes that turn competitions into illegal lotteries
Poorly designed skill questions
If the question does not genuinely require skill, the competition fails the legal test.
Free entry routes that are buried or unclear
If users cannot easily find or use the free entry option, it may be disregarded.
Charging for entry without understanding the rules
Many sites assume that calling something a competition makes it legal. It does not.
Copying other sites without understanding compliance
Just because another site appears to be operating does not mean it is compliant.
Ignoring Northern Ireland considerations
Different rules may apply depending on where entrants are located.
Do payment providers care if you need a licence?
Yes, and often more than regulators initially do.
Payment providers actively assess whether your site appears to be a lottery.
If they believe you require a gambling licence and do not have one, they may reject your merchant application, freeze funds, or close your account without notice.
This can happen even if no regulator has contacted you.
Do ads platforms care?
Advertising platforms also assess risk.
If your competition is misclassified, your ads may be rejected or your account restricted.
Clear compliance helps protect both payments and advertising access.
How to avoid needing a gambling licence
The safest options are structuring a genuine prize competition with proper skill requirements, or implementing a clearly compliant prize draw with a genuine free entry route.
Both approaches require careful planning and correct website implementation.
This is not something that should be guessed or improvised.
Why DIY competition sites often get this wrong
DIY platforms focus on visuals and checkout flows, not legal classification.
This leads to weak skill questions, incomplete free entry routes, missing explanations of how winners are selected, and poorly written Terms and Conditions.
From the outside, these sites often look like illegal lotteries, even if that was never the intention.
Frequently asked questions
Do all competition websites need a gambling licence?
No. Many operate legally without one, but only if structured correctly.
Can I add a skill question later?
Adding a question does not automatically fix compliance issues. The question must meet legal standards.
Is a free postal entry always enough?
Only if it is genuine, accessible, and clearly communicated.
What happens if I get this wrong?
At best, payment issues. At worst, account closures, refunds, and regulatory attention.
Final thoughts
Whether or not you need a gambling licence does not depend on what you call your website.
It depends on how it actually works.
Most founders who run into trouble did not intend to break the rules. They simply misunderstood them.
Getting this right from the start protects your business, your payments, and your ability to scale.
That is why serious competition operators treat legal structure as part of the website build itself, not an afterthought.
When compliance, payments, and platform design work together, a competition business can operate legally and confidently in the UK.
