Spot prizes and the law

Spot prizes are given at a wide range of not-for-profit events but – of course they have to be conducted according to the law. Spot prize draws accompanying entry fees involve ‘chance’ and under the Gambling Act, are qualify as ‘gambling’.

Not-for-profit clubs, organisations or groups can have prize draws at their contests or tournaments. You don’t require a licence from Internal Affairs if total prizes remain below $5,000. If prizes exceed this limit though, you will require a licence.

This has been the case since the Gambling Act took effect in 2004.

Only non-commercial groups, clubs and societies can get licences.  The Act covers a wide range of gambling activities, but proceeds from the likes of draws, raffles and lotteries have to benefit the community, and not individuals.

There are three classes of gambling governing the operation of prize draws.

  • Class 1 covers the likes of office sweeps, where prizes or turnover do not exceed $500 and all the profit goes in prizes. These may be conducted by individuals.
  • Class 2 is gambling where prizes do not exceed $5,000 and income from entry fees does not exceed $25,000. No licence is required. (Only non-commercial organisations such as a club or society can conduct Class 2 gambling.)
  • Class 3 is where prizes exceed $5,000 and require a licence from Internal Affairs. (Only non-commercial organisations such as a club or society can conduct Class 2 gambling.)

Higher risk forms of gambling such as pub and clubs gaming machines and casinos are more stringently controlled under the Gambling Act.

There’s more about gambling activities on the Internal Affairs website, including info for  people wanting to raise funds for Christchurch earthquake relief through schemes that may involve gambling.

Source: Internal Affairs Charities Update