GAMBLING FOR THE GREATER GOOD

Posted by Tilly Tong on July 29 2022 in News

We have seen numerous organisations running lotteries and competitions to raise funds. These lotteries and competitions are regulated under the Gambling Act 2003 (Act), which states that all gambling activities are prohibited unless authorised by the Act. The Act categorises gambling activities into four classes, and it is legal to operate a gambling activity so long as the requirements under each class are met, and your organisation complies with the relevant game rules. Non-compliance with the Act and the relevant game rules will lead to serious repercussions – financial, reputational, and possibly criminal.

The classes of gambling

Within the four classes, most regular gambling activities fall into classes 1-3. You must abide by the relevant game rules as prescribed under the Act whether or not a license is required. If operated by a society (defined as ‘an association of persons established and conducted entirely for purposes other than commercial purposes’, common examples include incorporated societies, charitable trusts, etc), all proceeds must be applied for ‘authorised purposes’. Generally, this refers to a charitable purpose or a non-commercial purpose that is beneficial to the community.

Class 1: The gambling activity has a turnover and/or total value of prizes below $500. Class 1 gambling can be operated by individuals, so long as the winner(s) receive the net proceeds, e.g., office sweepstakes. You do not need a license.

Class 2: The gambling activity has a turnover not exceeding $25,000 and the total value of prizes must not exceed $5,000. Class 2 gambling can only be run by a society. You do not need a license.

Class 3: The gambling activity has a total value of prizes that exceeds $5,000. Class 3 gambling can only be run by a society. A class 3 gambling license is required.

Class 4: Class 4 controls the administration of gambling machines outside a casino and gambling can only be run by a ‘corporate society’ (as defined under the Act).

Types of gambling activities

You must comply with the relevant game rules, and where the gambling activity falls into class 3 gambling, obtain a license using the proper form for the gambling activity you choose. The following are some examples of the various gambling activities:

• Housie – also known as bingo.
• Instant games e.g., scratch and win games run by the school and mystery envelopes.
• Game of chance e.g., gaming session, filly stakes, and parlor derby.
• Lottery – e.g., lotto, raffles, and sweepstakes.
• Prize competition – gambling activity that has an element of chance but also requires some level of knowledge or skills, such as sporting competitions. Note, that a competition involving skill may not be subject to the Act if there is no gambling involved.

Class 3 gambling license

In granting a license, the Department of Internal Affairs must be satisfied that the proposed gambling activity is financially viable, and the costs of running the activity will be minimised while returns to the community are maximised. You must provide the relevant financial information, including costs and anticipated profit, accompanied by a description of how you intend to minimise the costs and increase the returns to affect the authorised purpose.

Other things to consider

Given the compliance obligations under the Act, we strongly recommend that you seek legal advice and tax and accounting advice before going ahead with a gambling activity. Some other factors you will need to consider which the lawyers and/or the tax and accounting advisors should be able to assist you with are:

• Check if there are any restrictions in your governing documents to run a gambling activity.
• Check whether you require a license.
• Assess financial viability.
• Consider any third-party contracts.
• Ensure you have suitable and compliant terms and conditions.
• Consider privacy issues, particularly when tickets are purchased digitally, and obtain personal information.

If you would like any assistance in running a gambling activity in New Zealand or have any questions about the Act, please feel free to contact us.

Richard Hatch | Partner | richard.hatch@shieffangland.co.nz

Tilly Tong | Solicitor | tilly.tong@shieffangland.co.nz

Dasha Kovalenko | Senior Associate | dasha.kovalenko@shieffangland.co.nz