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Differences Between Lotteries and Gambling

Legal Terms

Lottery – a game played according to established rules, in which players compete for cash or non-cash prizes based on the tickets they have purchased.

Gambling – a game or mutual betting conducted according to established rules, in which participants, seeking a monetary prize, voluntarily risk losing the amount they have wagered, and in which winning or losing is determined by chance, the outcome of an event, or the result of a sporting competition.

What’s in Common

  • The Game
  • Rules
  • Prizes for the Game
  • Aiming to Win
  • Randomness

What is the difference between

In a lottery, players compete against other players. The lottery prize pool is determined in advance, and the lottery organizer does not participate in the game.

In games of chance, players compete individually against the game organizer. The game organizer has an interest in winning against the players.

Gambling behavior is determined by

Gambling behavior is determined by a combination of the following key factors:

  1. The cost of participating in the game and the size of the prize. The lower the cost of participation and the larger the prize (the amount that can be won), the greater the participants’ engagement (and vice versa).
  2. The probability of winning. The higher the probability of winning, the greater the participants’ engagement (and vice versa).
  3. The time interval between placing a bet, the outcome, and the opportunity to bet again. The shorter the time interval between placing a bet, the outcome (win/lose), and the opportunity to bet again, i.e., the less time a participant has to make a rational decision—whether to continue playing or stop—the greater the participants’ engagement (and vice versa).

Principles of Taxation for Lottery and Gambling Organizers

Lottery Organizers

Taxable sales revenue:

  • 5 percent lottery tax;
  • 8 percent allocated to charity or support.
    A total of 13 percent of sales revenue.

Gambling operators

Two tax bases:

  1. Fixed facility tax (casinos and gaming halls);
  2. GGR (the difference between sales revenue and payouts): 15% – sports betting and totalizator, 10% – remote gambling.

Example

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Lotteries Online Gambling Sports Betting
Sales Revenue, EUR 100 EUR 100 EUR 100 EUR
Tax, % 13% 0% 0%
Tax, EUR 13 EUR 0 EUR 0 EUR
Sales revenue, EUR 100 EUR 100 EUR 100 EUR
Fee, % 13% 0% 0%
Fee, EUR 13 EUR 0 EUR 0 EUR
Sales revenue, EUR 100 EUR 100 EUR 100 EUR
Tax, % 13% 0% 0%
Tax, EUR 13 EUR 0 EUR 0 EUR