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What is the Difference Between a Raffle and a Trade Promotion Lottery?

If you are looking for novel ways to promote your business, you may have considered running a raffle or lottery. However, it is essential to understand that although the concept of these games of chance operates similarly, they are regulated differently and serve different purposes for the community. This article will explore the different community gaming models and permit requirements for raffles and trade promotion lotteries.

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What is a Trade Promotion Lottery?

A trade promotion is a free-entry competition that businesses conduct to promote goods or services supplied by a business. Trade promotions:

  • are free to enter;
  • promote goods or services; and
  • are conducted by a registered business.

Additionally, there are two main types of trade promotions, which are:

Trade promotions are commonly games of skill – specifically lotteries or random number generators, where entrants can purchase a product or service and enter the draw to receive a prize. Although, you may need a permit or authority to operate this type of promotion, depending on which state and territory you operate your business in. Furthermore, if the dollar value of the total prize pool is significant, you may also require a permit.

In Australia, most states and territories do not require a permit. Although, in those that do, the requirements can vary. If you are running a trade promotion across Australia, you should comply with each state or territory’s requirements for permits and authorities. 

What is a Raffle?

Similarly, a raffle is also a game of chance. However, these are usually for charity fundraising purposes. In some states, they are referred to as ‘draw lotteries’. Entrants will generally pay for an entry ticket to enter a raffle or draw lottery, and the winner will be selected randomly. However, to operate a legally compliant raffle, other conditions may apply depending on state regulations. For example, in NSW, the raffle or draw lottery must:

  • be conducted on behalf of a charitable organisation;
  • share a minimum of 40% of gross proceeds must go to the charity; and
  • have a maximum prize value of $30,000.

A charitable organisation is defined as an incorporated or unincorporated body formed for (or to benefit) a purpose that is:

  • benevolent,
  • philanthropic or
  • patriotic.

In NSW, if the prize is over $30,000, you will likely require a community gaming authority. However, it is important to note that fundraising laws differ in each Australian state and territory. 

In some states, including NSW, registered clubs may conduct promotional raffles. However, the primary purpose is attracting or entertaining patrons and receiving minimal profits. For example, a meat or vegetable tray raffle at a club.

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Other Charitable Fundraising Games

There are several other gaming activities that businesses can use to raise money for charity. We outline the details of these in NSW below:

Gaming ActivityDescriptionRules
Charity HousieA bingo style game where numbers or symbols are identified randomly until they are all marked off. It must be conducted on behalf of a charitable organisation, have a minimum of 12.5% of gross proceeds that must go to the charity, and the maximum prize value is $10,000 and must not exceed 75% of gross proceeds.
No-draw lotteriesThese are scratch and win style lotteries. It must be conducted on behalf of a charitable organisation, have a minimum of 40% of gross proceeds that go to the charity, a maximum prize value of $5,000 and the maximum number of tickets sold must be 3000.
Mini-Numbers lotteriesEntrants guess numbers, and numbers are drawn on a random basis. The prize is awarded if the numbers are guessed correctly.It must be conducted on behalf of a charitable organisation, have a minimum of 40% of gross proceeds that must go to the charity, a maximum prize value of $20,000, and it must not exceed 50% of gross proceeds.

To operate any of the above games, you must work with a charitable organisation. The above gaming activities are not trade promotions.

Fundraising Regulation

In some cases, the above gaming activities fall within the scope of the charitable fundraising rules. In NSW, the Charitable Fundraising Act 1991 (NSW) (the Fundraising Act) regulates charitable fundraising. The Fundraising Act also sets up the fundraising permit scheme and governs fundraising appeals for charitable purposes. Under section 5 of the Act, ‘fundraising appeal’ is defined as soliciting or receiving money or property for a charitable purpose. Examples of common fundraising activities can include:

  • requesting donations;
  • selling merchandise; or
  • holding events.

However, this can be extended to all activities where there is a representation that the proceeds will benefit the public or a section of the public rather than be for private benefit. In some cases, this could include trade promotion lotteries or draw lotteries.

Key Takeaways

Running a trade promotion can be an effective way to:

  • generate interest in your brand; 
  • engage new customers; or 
  • drive sales. 

Although, you should be aware of your record-keeping and auditing requirements, as the rules around trade promotions and games of chance are important and can be tricky to navigate. For instance, sometimes you may need a community gaming authority and a fundraising permit.

If you need assistance understanding raffles and trade promotion lotteries, our experienced disputes lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is a trade promotion lottery? 

A trade promotion is a free-entry competition that businesses conduct to promote goods or services supplied by a business. The three elements of a trade promotion are that they are free to enter, they promote goods or services, and a registered business conducts them.

What are the requirements for a no-draw lottery?

A no-draw lottery is a scratch and win style lottery. It must be conducted on behalf of a charitable organisation, have a minimum of 40% of gross proceeds that go to the charity, a maximum prize value of $5,000 and the maximum number tickets sold must be 3000.

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Caroline Snow

Caroline Snow

Senior Lawyer | View profile

Caroline is a Senior Lawyer in LegalVision’s Commercial Contracts team. She has previously worked at several boutique law firms with a background in commercial and family law disputes, as well as drafting and reviewing commercial contracts. Caroline has been admitted as a lawyer to the Supreme Court of New South Wales.

Qualifications: Bachelor of Laws, Bachelor of Arts, Graduate Diploma of Legal Practice, University of Technology Sydney.

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