A few words on lotteries organized by influencers, or – how (NOT) to organize promotional lotteries.
The recent arrest of a popular influencer in connection with promotional lotteries organized by him (as stated in the public prosecutor’s communiqué) still raises more questions than answers. For most people, it is incomprehensible that a lottery organized with the authorization of the competent director of the Chamber of Tax Administration, which used a randomization device to select the winners, and which was supervised by a supervisory commission that held a certificate attesting to the completion of a training course on the provisions of the Act of 19 November 2009[1] on games of chance, could be considered to have infringed the provisions of the law..
This article is intended to provide an insight into the legal and fiscal aspects of organizing a lottery in accordance with the legislation in force, and is not an opinion on a specific case, but is the result of an analysis of a wider social phenomenon, namely the numerous promotional lotteries organized by Internet content creators.
Lottery = gambling?
Let us start from the beginning. Although many of us associate gambling only with casinos, slot machines or illegal betting, the regulatory understanding of the term differs from the colloquial one. In the eyes of the legislator, gambling includes, in particular, games of chance[2]. The regulatory concept of gambling refers to activities that are legal and regulated by the state. Games of chance are games, including those organized via the Internet, in which the winnings are in cash or in kind and the outcome depends in particular on chance[3]. According to the law, this includes, but is not limited to,
2) cash lotteries where entry is made by purchasing a ticket or other evidence of participation in the game and the organizer offers prizes only in cash;
9) prize draws in which entry is made by purchasing a ticket or other evidence of participation in the game and the organizer offers prizes only in kind; or
(10) promotional lotteries where entry is made by purchasing a product, service or other evidence of participation in the game, making entry into the lottery free of charge, and the organizer offers prizes in cash or in kind;
(11) audiotex lotteries where entry is made by means of chargeable:
a) phone calls
b) text messages
using the public telecommunications network.
Accordingly, the law provides for four types of lotteries, which can only be operated in line with the requirements set out in the Act. Cash lotteries should be excluded, as they can only be organized by the state[4].
Prize draws and promotional lotteries[5] as well as audiotex lotteries[6] may be organized on the basis of an authorization/permit issued by the director of the competent tax administration chamber.
Differences between lotteries
Given that any lottery requires government approval and oversight, why do online influencers opt for promotional lotteries? Why don’t they choose prize draws instead? Why do they sell e-books with “free” tickets attached instead of lottery tickets?
First of all, it should be noted that lotteries are not attractive to for-profit companies – they require that all proceeds be used to fulfil socially useful (especially charitable) purposes as defined in the permit and the rules of the game[7].
Audiotex lotteries, i.e. lotteries in which participants gain access to a cash prize draw by sending text messages, are widely used by radio and television broadcasters. The income received by the organizer of an audiotex lottery[8], i.e. the amounts paid by the participants for “entering the game” (after deduction of the access costs of the telecommunications network operator), is subject to gambling tax. The rate of this tax is 25% of the tax base[9]. This lottery is therefore profit-oriented – the organizer offers a prize and advertises it with the slogan “increase your chances of winning and send an extra SMS”. It is assumed that the proceeds of the lottery, even after taxation and deduction of the costs of organizing the lottery, will be significantly higher than the costs incurred.
Why do influencers organize promotional lotteries?
Unlike an audiotex lottery, promotional lotteries are exempt from gambling tax under Article 71(1) of the Act. The assumption is that a promotional lottery is intended to encourage the purchase of a product, and the lottery ticket is merely an add-on – an argument to buy the product.
And that’s the rub – do participants in a promotional lottery want to buy an e-book or a lottery ticket?
The answer to this question can be sought by answering another one: is there any reason for a single buyer to buy the same e-book several times? Of course, we can assume that buyers are so interested in the works of their icon that they decide to purchase access to the same product multiple times. Is this reasoning valid, or should we rather assume that the buyer is only focused on increasing his or her chances of winning? How many buyers have read (or even opened) the e-book file? Let us leave these questions unanswered.
The promotion of a digital product in the form of an e-book also raises doubts. Since a promotional lottery is expected to promote a product, the question is: why is the content creator promoting the lottery and not the e-book? In most cases, e-books are promoted at a disproportionately low level compared to the promotion of the lottery itself. This leads to the assumption that the e-book is a means of generating income from the sale of lottery tickets. The sale of the e-book as a product is less important because the buyer is focused on the complement to this product – the lottery ticket. The consumer’s attention is focused on the prize and not on the content of the publication. Furthermore, the content creators themselves motivate their audience in their promotional campaigns to increase their chances of winning, so is this a product promotion?
Finally, there is an argument that is often raised in this discussion, and not only by lawyers: the ratio of production and distribution costs to profit. The cost of publishing an e-book is disproportionately low compared to the profit from its sale. Meanwhile, the legislator has decided to exempt a promotional lottery from gambling tax, on the assumption that it is not profit-oriented. The promotion itself, the recognition of the product, the expansion of the customer base, the securing of customer favor are supposed to be the measurable benefits of the lottery. Thus, the organizer of a promotional lottery spends extra money on it by buying prizes and does not gain anything directly in return, because he gives the buyer – in exchange for paying the price – a full-value product, and the buyer gets the lottery ticket as an extra. e.g. a seller of household appliances organizes a promotional lottery in which a trip worth PLN 10,000 can be won. By definition, the seller is encouraging people to buy the product, and the cost of the trip is the seller’s expenditure in promoting the brand. The mark-up included in the price of the product is his only profit.
Can an e-book be promoted through a promotional contest? Absolutely. For example, an influencer in the fitness sector writes an e-book with his own fitness recommendations or workout plans. To promote it, he organizes a promotional sweepstake in which buyers of the e-book can enter a prize draw for, say, a 12-month personalized workout and diet collaboration with the influencer. This promotes the influencer’s personal training and nutrition business.
The above examples are intended to illustrate the scope of the problem, i.e. whether promotional lotteries organized by online content creators are really intended to promote a product or rather to make a profit from the money paid by lottery participants who are motivated by high prizes.
Does the permit to organize a lottery offer any protection?
Yes and no. In order to benefit from the protection afforded by the permit, it is necessary to conduct the lottery in conformity with the law, the provisions of the permit and the terms and conditions of the lottery. If the authority responsible for issuing the permit finds a breach, the permit may be revoked in whole or in part[10]. Such a decision may open the way to further liability, both under criminal law and under tax law.
Who made a mistake and what did it entail?
Finally, we may ask whether promotional lotteries organized by influencers meet the definition of a promotional lottery under the Act, i.e. whether they are intended to promote a product (in this case, an e-book), or whether they are designed to encourage purchasers to enter a draw for prizes worth several hundred thousand zlotys and to make a profit that is exempt from gambling tax. This will most likely be assessed by the competent authorities. The purpose of this article is merely to provide an overview of the legal and tax complexities of this issue.
[1] The Act of 19 November 2009 on games of chance, consolidated text in Journal of Laws of 2024, Item 1473 as amended – hereinafter: “the Act”).
[2] The Act, Art. 1.2.
[3] The Act, Art. 2.1 sentence 1.
[4] The Act, Art. 5.1.
[5] The Act, Art. 7.1.
[6] The Act, Art. 7.2 – with the proviso that they may only be organized by joint stock companies or limited liability companies with their registered office in the territory of the Republic of Poland or an EU or EFTA Member State party to the EEA Agreement.
[7] The Act, Art. 16.1.
[8] The Act, Art. 73.1.2.
[9] The Act, Art. 73.4.
[10] The Act, Art. 59.1.
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