The rules for operating a raffle differ from state to state. Some states highly regulate raffles, while other states’ rules are comparatively relaxed. What does it take to operate a raffle?
A quick look at a few states’ regulations can help get you started.
Part Two: California, Florida and North Carolina Games of Chance Laws
Raffles and lotteries are highly regulated in California, where gambling is prohibited by the state constitution. However, under what is known as the “90/10 rule,” charities and certain other private nonprofit organizations are permitted to conduct raffles with the stipulation that at least 90% of the gross receipts go to beneficial or charitable purposes within the state.
In light of the 90/10 rule, 50/50 raffles – in which 50 percent of ticket-sale revenue is awarded as the prize and 50 percent of the revenue is retained by the organization conducting the raffle – are not permitted. The use of a gaming machine, apparatus or a device, such as a slot machine, is prohibited, as is operating or conducting a raffle over the Internet (but the organization conducting the raffle may advertise the event online).
Nonprofits must register with the attorney general’s Registry of Charitable Trusts prior to conducting the raffle. Registration is required if the tickets for a drawing are free of charge, solicitations of voluntary donations to the organization The raffle registration form needs to be filed at least 60 days before the raffle’s scheduled date to allow enough time for processing, and the registration process must be completed prior to conducting the raffle. The registration period runs from September 1 to August 31 every year.
Schools, hospitals and nonprofit religious organizations are exempt from the registration requirement.
After the raffle is held, a financial disclosure report must be filed. Called the “Nonprofit Raffle Report form,” the report provides the date and location of the raffle, the total funds received, the total expenses for conducting the raffle, the charitable or beneficial purpose for which raffle proceeds were used or the amount and organization to which proceeds were directed.
Charitable nonprofit organizations are permitted to hold “drawings by chance” in Florida as a fund-raiser. To conduct a drawing, the following is required:
- The drawing’s rules of conduct and operation must be disclosed,
- The organization’s full name and principal place of business,
- The source of the funds used to award cash prizes or purchase prizes, and
- The date, hour, and place where the winner will be chosen and the prizes will be awarded (unless the drawing’s brochures, advertisements, notices, tickets, or entry blanks are offered to the public less than 3 days prior to the drawing).
Additionally, it’s against the law to require an entry fee, donation, substantial consideration, payment, proof of purchase, or contribution to enter the drawing or be selected to win a prize. However, an organization is permitted to suggest a minimum donation or state the suggested minimum donation on any printed promotional or other material in connection with the event.
North Carolina law permits a nonprofit organization to operate no more than two raffles per year. Limits are placed on the maximum cash prize that may be offered or paid for any one raffle ($125,000). If merchandise is used as a prize and is not redeemable for cash, the maximum fair market value of that prize is also $125,000.
In any calendar year, the total cash prizes offered or paid in a raffle may not exceed $125,000; the total fair market value of all prizes offered by a nonprofit organization or association, either in cash or in merchandise that is not redeemable for cash, is also limited to $125,000 per calendar year.
A minimum of 90% of the net proceeds of a raffle must be used for charitable, religious, educational, civic, or other nonprofit purposes. None of the net proceeds of the raffle may be used to pay any person to conduct the raffle or to rent a building where the tickets are received or sold or the drawing is conducted.
Additionally, a raffle may not be conducted in conjunction with bingo. (Bingo requires a license from the Department of Crime Control and Public Safety, with an application fee currently set at $200.)
Real property may be offered as a prize in a raffle. The maximum appraised value of real property that may be offered for any one raffle is $500,000, and the total appraised value of all real estate prizes offered by any nonprofit organization or association may not exceed $500,000 in any calendar year.