Spot prizes and the law

25 October 2012

Spot prizes are still possible for a wide range of events but they have to be conducted according to the law, Internal Affairs Gambling Compliance Director, Debbie Despard said today. Spot prize draws accompanying entry fees involve ‘chance’ and are therefore gambling under the Gambling Act.

“Non-commercial clubs, organisations or groups can still have prize draws at their contests or tournaments. They do not require a licence from the Department of Internal Affairs if total prizes remain below $5000. If prizes exceed this limit they require a licence. This has been the case since the Gambling Act took effect in 2004,” she said.

“The Department has been working with the organiser of Ruakaka’s Beach and Boat Competition to help him comply and also wrote to a number organisations that do or may conduct prize draws, in order to ensure that they are aware of the law and to offer assistance where needed. This arose from a complaint from a gambling operator. Our focus has been on helping people understand and comply with the Gambling Act.

“At worst we see some organisations as needing to modify the structure of their prize draws, or to apply for a licence. We are encouraged that many organisations have contacted us for assistance. Where necessary, we have been able to help them adjust their event so that it is compliant. In many cases the event was already compliant.

“To be clear, spot prize draws are still permitted. The size of prizes is an issue because a licence is required if they exceed $5000. Only non-commercial groups clubs and societies can get licences. Commercial organisations cannot. 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.

Only non-commercial organisations such as a club or society can conduct Class 2 and Class 3 gambling. Class 2 is gambling where prizes do not exceed $5000 and income from entry fees does not exceed $25,000. No licence is required. Class 3 is where prizes exceed $5000 and require a licence from the Department.
Higher risk forms of gambling such as pub and clubs gaming machines and casinos are more stringently controlled under the Gambling Act.

Media contact:
Trevor Henry, senior communications adviser, Department of Internal Affairs
Ph 04 495 7211; cell 021 245 8642