Without the free entry option the software requires an ELMOL (External Lottery Manager Operating Licence) and a Remote Gambling Software Operating Licence – both of these are required on an annual basis which makes the product unviable.
Even if you have a lottery licence – the software does not. So to run a race without the free entry would be an illegal lottery.
In March 2021 34,000 people used the virtual balloon race at balloonrace.com and the PDF free entry form was exported 19 times. Most races receive zero free entries because the balloons/ducks are usually sold for £3 each. If you sell your balloons for £50 each you will get a-lot of free entries.
Download the official legal classification advice here (read the conclusion on pages 21/22):