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The example UK business wants to run a weekly cryptocurrency lottery, in which cryptocurrency is initially exchanged for tickets, and the prize is cryptocurrency.

Participants would not purchase the cryptocurrency for fiat currency directly, so there would be no monetary transaction anywhere during the participation of the lottery. In this scenario, the prize is a large amount of cryptocurrency, which could be traded on some arbitrary, external cryptocurrency exchange, for other cryptocurrencies or money, but not directly through the company who hosts the lottery.

On the issue of crypto gambling, https://www.gamblingcommission.gov.uk/ says

Any gambling business wishing to offer gambling facilities to consumers in Great Britain using digital currencies, or virtual currencies that can be exchanged for cash or traded for items of value, must hold an operating licence.

However, I am unsure on the strictness of phrase traded for items of value. The cryptocurrency could be traded for other cryptocurrencies - I'm not sure if they are considered items of value, or even items at all.

Would this crypto-only lottery be legally constrained by current UK lottery gambling laws and requirements?

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    How did people get the currency in the first place, if not somehow by buying or trading for it, and what are they proposing to use it for, except to trade for goods and services or to sell it for fiat currency? – Nij Jan 20 '20 at 6:48
  • Not sure why the -1... People get crypto a variety of ways, whether it be mining, buying, or claiming it from faucets. Many cryptocurrencies aren't even traded, so it's hard to say what it will be used for. – Oscar Chambers Jan 20 '20 at 7:09
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    So, you've just answered your own question. If the currency is used for getting anything, it is necessarily "traded for items of value". And if they don't have value, why is anybody bothering to play this lottery? It doesn't matter where or how the crypto is exchanged or traded, or even whether it actually is, only that it can be. – Nij Jan 20 '20 at 7:13
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    @OscarChambers - I'm not sure it matters whether the currency is considered cash or synonymous with it : the extract says the business must hold an operating licence if the digital or virtual currency "can be exchanged" for it. – ItWasLikeThatWhenIGotHere Jan 20 '20 at 9:29
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    @Nij tell that to the Belgian government who banned lootboxes purchased with real money. – jwenting Jan 20 '20 at 12:04
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Does the crypto-currency have value?

Gambling is the wagering of anything of value. Crypto-currency, Lima beans, skins, concert tickets - if it has value, it’s gambling.

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    The question isn’t about whether it constitutes gambling though. It’s specifically about UK lottery law. – owjburnham Jan 20 '20 at 12:52

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