Many non-profits cannot legally sell raffle tickets online . . .
What Is a Traditional Raffle
In a traditional raffle, the raffle sponsor sells tickets and selects a winning ticket via a random drawing. This is gambling and gambling (as a general rule with some limited exceptions) is illegal. As one of those exceptions, most states allow non-profits and other charitable organizations to offer raffles for fund-raising purposes.
Raffle Laws Vary by State
Since non-profit raffles are an exception to the state’s anti-gambling laws, the non-profit needs to make sure its raffle is in compliance with its state’s raffle laws and regulations. Raffle laws vary from state-to-state. This is where the online sale of raffle tickets might be problematic. Typically, the non-profit’s raffle is legal only in the state in which the non-profit is located. Hence, there may be issues if the non-profit sells raffle tickets across state lines. A non-profit that has locations in multiple states may be able to offer a separate raffle in each of those states but may have more difficulty coordinating compliance with differing state laws to offer one raffle across multiple states. Some states explicitly prohibit the sale of raffle tickets online.
Raffles Have Different Rules than Contests and Sweepstakes
Are you thinking that you see online sweepstakes and contests promoted and operated online all the time? That’s legal – and different.
Properly structured contests and sweepstakes are not gambling because they do not combine all three elements of (i) pay-to-play, (ii) prize, and (iii) random drawing. A promotion with all three of these elements is a lottery (i.e., form of gambling). A promotion with only one or two of these elements is not a lottery. In promotion/gambling legalese, these elements are sometimes referred to as consideration, prize, and chance.
Sweepstakes have a prize and random drawing (chance). Contests have pay-to-play (consideration) and prize. Traditional raffles have pay-to-play (consideration), prize, and random drawing (chance).
For More Information on Non-Profit Raffles
Contests and Sweepstakes Law: A Guide Through the Legal Jungle Practice Manual includes a general discussion of typical requirements found in state raffle laws. As part of the detailed legal summary for each state, there is a discussion of each state’s raffle and bingo laws. The book’s appendix also provides a table summarizing raffle laws for easy state-by-state comparison. Get a complimentary 40-page excerpt of the book here.