Raffles are a profitable and fun way for an organization to earn money. A raffle works by selling tickets that represent a chance to win a prize. Once all the tickets are sold, one ticket is drawn and the holder of that ticket wins the prize. Before deciding to hold a raffle, the organization must carefully research the raffle laws in the jurisdiction where it is to be conducted. Although raffle laws will differ by jurisdiction, most require an organization to register with one or more government agencies and secure a permit, or license, before conducting a raffle.
The first and most important of the raffle laws is whether or not raffles are legal in the jurisdiction where it is being planned. Within the United States, for example, raffles are not legal in all states. If in doubt, the local tax office or gaming office should be able to answer any questions about the legality of raffles.
Where they are legal, the laws pertaining to conducting a raffle are generally regulated under the gaming laws of the jurisdiction. "Gaming" is the broad classification that typically encompasses laws and regulations related to gambling, bingo games, lotteries, and other revenue generating games such as raffles. Careful adherence to all raffle laws is important, as a violation could result in hefty fines or criminal charges.
In most cases, gaming is divided into two broad categories — gaming for profit and gaming operated by not-for-profit organizations. Gaming for profit is what most people consider gambling. Casinos, for example, are a "for-profit" gaming operation. The laws relating to operation of a for-profit gaming operation are vast and complicated.
Not-for-profit organizations may also wish to conduct gaming operations such as bingo or raffles. The local church bingo night or a raffle held to raise money for a local charity are examples of not-for-profit gaming. As a rule, a not-for-profit organization must register as such well in advance of the intended raffle and be granted status as a not-for-profit organization before they can conduct the raffle. A specific license may also be needed depending on the raffle laws of the jurisdiction.
While each jurisdiction will operate differently, in most cases, an organization which plans to conduct a raffle should contact the local tax authority as well as a local gaming office if one exists. If the organization is charitable, then the raffle may be exempt from the payment of taxes, but will need to submit the proper paperwork asking to be considered tax exempt. Licensing is usually accomplished through the local gaming office in situations where a license is required.
