Article L. 320-1 of the French Internal Security Code, (sécurité intérieure “CSI”) sets out the principle of a total ban on lotteries: “games of money and chance are prohibited”.
According to Ordinance no. 2019-1015 of October 2, 2019 reforming the regulation of gambling and games of chance (régulation des jeux d’argent et de hasard), four criteria are required to qualify a lottery:
- The offer to the public;
- The expectation of a win, in cash or in kind;
- The intervention of chance in the designation of the winner(s), in the form of a draw (the most classic hypothesis);
- A subsidiary question relating, for example, to the number of reply forms received, or any process which, in general, makes chance predominate over skill or intelligence; and
- Any form of financial participation.
If these four criteria are met, the lottery is prohibited in principle. This prohibition was reiterated by the Paris Court of Appeal (Cour d’Appel de PARIS) in ruling no. 2003/01523 of November 14, 2003: “lotteries are therefore prohibited only when they cumulatively meet the following four conditions: an offer to the public, the hope of a win, the intervention of chance, a financial sacrifice in order to be able to take part in the game”.
Exceptions to the ban on lotteries
Unfair
Lotteries and gaming machines offered at fairs are authorized without prefectoral authorization, subject to certain conditions:
- Prizes must be in kind,
- The unit stake must not exceed 1.5 EUR and the value of the prizes must not exceed 45 EUR.
These lotteries may be organized by people engaged in itinerant activities.
Personal property
Lotteries of movable objects intended for charitable purposes, the encouragement of the arts or the financing of non-profit sports activities are authorized subject to prior prefectural authorization.
The granting of this authorization is based on several criteria.
- The applicant organization must be primarily dedicated to charity, the encouragement of the arts or a sporting activity; and
- Be non-profit-making.
The seniority of the organization may be taken into account to assess its reliability. Funds raised by lotteries must be used exclusively for specific charitable, arts promotion or non-profit sports activities, and not for operating costs or to cover a deficit. Lottery applications to finance actions for mutual or corporate groups are excluded.
Lastly, lottery issue capital, which corresponds to the total value of tickets issued, must match the needs of the planned actions, with a reasonable ceiling for organization costs, set at 15% of issue capital.
The amount of the issue capital must not exceed the ticket placement capacity, and for a first request, the capital must be low.
Subsequent requests may be considered for higher amounts if previous operations have been regular.
Lottery application procedure
File preparation
Applications for authorization are made using Cerfa form no. 11823*021.
The petitioner must provide the organization’s articles of association, indicating its philanthropic, artistic or sporting aims, as well as the financial statement for the last financial year, necessary if the issue capital exceeds 7,500 EUR, to assess the association’s management, its budgetary balance and the proportion of revenue earmarked for specific actions, and detailed information on the planned operation and the use of funds.
Consultation
If the issue capital exceeds EUR 30,000, the opinion of the Directeur Régional des Finances Publiques is required.
When the operation concerns areas supported by the public authorities, the opinion of the relevant deconcentrated departments must be sought.
Local authorities (mayors) may also be consulted, especially if the operation takes place in one or more specific communes.
Decision
The authorization is formalized by an order after full examination of the file.
The order specifies the destination of the funds and the organizational costs and sets out the penalties for failure to comply with legal and regulatory rules: up to 3 years’ imprisonment, a fine of 90,000 euros, confiscation of gaming machines and possible destruction.
Additional penalties include disqualification from holding certain public offices, confiscation of assets, public dissemination of the decision or closure of the establishments involved.
Post-event control
After the event, you check that the funds raised, and unsold tickets correspond to the authorized issue capital.
Lottery proceeds must be used for the intended purpose, and organizational costs must not exceed 15% of the issue capital.
In the event of minor irregularities, a warning is issued; in the event of serious or repeated irregularities, you inform the Procureur de la République (public prosecutor) and refuse any further authorization.
In the event of poor ticket sales, the issue capital will have to be adjusted for future requests.
Legal framework for lotteries with prizes
Commercial lotteries
Commercial lotteries, which often include gifts, are defined as commercial practices carried out by professionals with regard to consumers, with the aim of awarding a prize or an advantage by means of a draw.
These lotteries are governed by article L. 121-20 of the French Consumer Code (Code de la Consommation) and are not subject to the gambling regulations set out in the French Internal Security Code “CSI”.
Requirements and restrictions
Commercial lotteries must meet certain requirements to be considered legal.
They must not be unfair within the meaning of Article L. 120-1 of the French Consumer Code, which prohibits unfair commercial practices.
Free entry is no longer a condition of validity, and the obligation to reimburse entry fees has been abolished.
Traditional lotteries
The principle laid down in article L. 322-1 of the “CSI” is that “lotteries of any kind are prohibited”. This general prohibition includes lotos.
Article L. 332-4 of the “CSI”, which has taken over the provisions of article 6 of the law of May 21 1836, introduces a temperament to this prohibition by excluding from the provisions of articles L. 322-1 and L. 322-2 “traditional lotos, also known as ‘poules au gibier’, ‘rifles’ or ‘quines’.
Traditional lotos are authorized by article L. 332-4 of the French Code “CSI”. Traditional lotos do not require prior authorization, but must meet certain criteria:
- Organized in a restricted circle and for social, cultural, scientific, educational or sporting purposes; and
- Stakes must not exceed EUR 20, and prizes must be in kind, with no cash or reimbursement. However, non-refundable vouchers are permitted.
These lotos can take place all year round, without prior declaration, provided these criteria are met. Only associations may organize traditional lotos within this framework, as they pursue social objectives. Commercial projects seeking to make a profit in violating these rules are illegal.
Nicolas BRAHIN Avocat, Lawyer in NICE
Master’s Degree in Banking and Financial Law
Cabinet BRAHIN Avocats 1, Rue Louis Gassin – 06300 NICE (FRANCE)
MOB: +33 493 830 876 / Fax : +33 493 181 437
Email : nicolas.brahin@brahin-avocats.com
www.brahin-avocats.com
