Text Raffles are classified as free draws by the Gambling Commission. This means that individuals must have a way of entering the raffle for free. This is a much more cost-effective way of organising a raffle and means more money reaches the charity.
Text Raffles were developed as a fundraising solution because charities were finding it difficult to organise a remote raffle. Whilst in-person raffles (incidental lotteries) are simple to organise, when a raffle is organised remotely it is much more difficult to do so.
In order to make things as simple as possible for charities, and to ensure as much money as possible reached the charity, we have set Text Raffles up as free draws. You can read more about what free draws are and how they differ from lotteries and prize competitions on the Fundraising Regulator website.
What is a free draw?
To be a free draw the arrangement must either be completely free to enter or have a free method of entry. This free method of entry must either be a letter sent by ordinary post (first-class or second-class post) or another method of communication that is no more expensive and no less convenient than the paid method. The system for allocating prizes must not distinguish between entries made through the free or the paid method of entry.
Paragraph 12.6.2, The Gambling Act 2005
For a Text Raffle to operate as a free draw, it must be possible to enter for free. All entries into a Text Raffle are free, but supporters are able to nominate an amount they would like to donate to your charity. If a supporter wishes to donate, they reply specifying the number of entries they would like and the amount they would like to donate. If a supporter does not wish to donate, they specify the number of entries they would like to make and add NODONATION to the end of their message.
What if free entry wasn't offered?
If a free entry option was not offered, then the raffle would be classified as a remote lottery. This would have two main implications - it would need to be licensed and less money would reach the charity.
To run a remote lottery, a charity has to register with the local authority or Gambling Commission depending on the size of the draw. Further to this, any partners involved in organising the society lottery (such as Donr) would need to hold a license with the Gambling Commission.
As the lottery license is costly, we would have to increase our fee to cover this cost. Furthermore, as mobile phone networks would classify entries as transactions, rather than donations, we would also be charged more to process entries. This would mean that the cost would be significantly higher - when we forecast, we found that we would have to charge around 50% of the entry cost to make it financially viable.
How do charities end up with more money by offering free entries?
Having a free entry option means that no license is needed and any payments are considered as donations by mobile phone networks. This means that we can charge the same 5%+VAT fee on any donations as we do for Text Giving.
Furthermore, Gift Aid can be claimed on any donations received. This is because the supporter is receiving nothing in exchange for their donation, as the donation is separate to the entry into the raffle.
Having no free entry option, would mean that a license would be required for the both the charity and Donr - which would be costly. Furthermore, as supporters are paying to enter, rather than entering for free and making a donation, mobile phone networks would consider any payments as transactions. Transactions are more costly to process than donations. This would mean that the cost would be significantly higher - when we forecast, we found that we would have to charge around 50% of the entry cost to make it financially viable.
For every 100 people entering a voluntary donation raffle (i.e. with free entry option), you could expect 90 people to make a £1 donation, so you'd receive £85.50 after costs - plus Gift Aid.
For every 100 people entering a compulsory donation raffle at £1 per ticket, you could expect to receive around £50 after costs.
What if someone enters for free multiple times?
Whilst we haven't experienced this with Text Raffles, there have been other cases of unscrupulous individuals entering free draws repeatedly without making a donation. We believe that this hasn't happened for Text Raffles as it would be quite impractical for someone to do this.
However, we would recommend that you ensure your charity is fully protected against this by adding a maximum number of entries per mobile number. See term 5 in our sample terms and conditions for an example of how to do this.