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  1. #1

    Making a small online lottery

    I'm would like to add a lottery to my upcoming community site where members aged 17 or over can play. It's a really simple system where members pay $2 or 1 to play in little games up to the value of around 200. The members could pay using PayPal and I could used a randomising program to select who the winner is each month. I would on only keep 5% of each total and the winner will get the rest using PayPal. The 5% is to pay for the site etc.

    I've been advised by a few people that this would be legal as long as I pay the winner the full amount stated on the site. Would I not need a license for this as I would assume it would be classed as online betting?
    Last edited by 121X; 05-25-2005 at 03:58 PM.

  2. #2
    I'm certain that a lottery site would be illegal, I have read it many times.

  3. #3
    Does it depend on what country your web host is situated?

  4. #4
    I believe if your servers are based in US, then it is illegal. I'm not sure if you can start such a site if servers are based outside of US.

  5. #5
    Join Date
    Feb 2002
    I could be wrong but I thought Paypal does not allow their service to be used anymore for any type of gambling?? You might want to double check.,00.htm

    Light travels faster than sound, which is why some people appear bright until you hear them speak.

  6. #6
    Yes that is true, PayPal does not allow such sites.

  7. #7
    Thanks for the link. Could I use NOCHEX instead? Also could I get in trouble for tax evasion? People regularly donate to sites and that is tax free income for the adiministator.

  8. #8
    not only is it illegal to host a lottery in the US, it's illegal for US customers to play the lottery online. don't you think the state lotteries have thought of this already?

  9. #9
    Join Date
    May 2003
    Cheshire UK
    I'm Guessing that you are in the UK, which means that you'll need to obtain a licence since it falls under the lotteries and gaming act. The promoter and holder of the gaming licence will need to be 18+

    Even if your lottery is non profit making, you'll still need to inform the inland revenue within 3 months of starting the venture, and to keep accurate records of your income and outgoings. The when you submit a self assessment form at the end of your first year if you have not made a profit then you will not pay any tax. However you need to keep records like any business, to PROVE that you are running a non profit venture.

    If you fail to notify the revenue or to keep records in order to prove your non profit status then you are liable to a large fine based on the profit that the Revenue believe that you have made!, and also a 100 penalty for failing to notify them within 3 months of starting up.

    People regularly donate to sites and that is tax free income for the adiministator.
    Sorry but you have been mis-informed, at least in the UK. Assuming you already earn more than about 4700 a year from some form of paid empolyment and are aged 16+ then the profit from all additional income (including donations and tips) is taxable and has to be declared from any venture unless it was a private sale of your own 2nd hand goods on Ebay for example.

    However this can be off-set against tax. So for instance if your site costs you 200 a year to host and you make 200 in donations then you will not be liable for tax because you have shown no profit. However, if you take 300 in donations, then you'll be taxed on the 100 difference between your expenses and your profit. However you still need to keep records.
    Last edited by Chris1973; 05-25-2005 at 05:41 PM.

  10. #10
    Sorry I'm new to this. When you say 'host' are you refering to a US based server? Would it be legal to set up a small lottery forum on my site if the host was in a place like Amsterdam? How would someone get a licence for such a venture?

    EDIT: Sorry Chris, I missed your post,

    How would I go about obtaining a license for my idea? Could you point me in the right direction?
    Last edited by 121X; 05-25-2005 at 05:41 PM.

  11. #11
    Join Date
    May 2003
    Cheshire UK
    I believe that as the legal registered promoter, you will also be liable to register and comply with the laws in your own jurisdiction. I would guess that the laws in the country where the server was hosted would also apply - so technically you'd have two countries laws to comply with.

    Here is the Law in the UK

  12. #12
    we have turnkey websites and lottery portal happends to be one of them.and from what i gather it is not illegal to run a such site. allthough there are terms.its kinda like running a porn site you have to make sure they are over 18 years of age blablabla. i did have a link where it gives you all the info.if i can find it i will post it here for you

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