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Understanding the Legal Side of Raffles: Laws, Rules, & Limits

Raffles are an incredible tool for charities, non-profits, and religious organizations looking to reach their fundraising goals, but the very first step of hosting one is understanding raffle laws. Licenses are required in most jurisdictions, and raffles are heavily regulated, so it’s important to make sure you know what’s required when you host one. Laws differ across Canada and the U.S., too.

Here, we’ll provide an overview of some important rules you need to know, but you should always check local regulations before you host a raffle.

Key Takeaways

  • Charities, non-profits, and religious organizations can host raffles in most jurisdictions.
  • Most regions require approval from a gaming commission.
  • There are both minimum and maximum limits to prize values.

What Makes Raffles Different from Other Fundraisers?

Unlike a silent auction or a fundraising sale, raffles are carefully regulated by the government. The reason is that raffles are officially viewed as lottery schemes or promotional contests, where ticket purchasers pay for a chance to win a prize. 

They are regulated in Canada under section 74.06 of the Competition Act, and raffles are technically considered gambling because they involve donors making payments for the chance to win something. 

In every province in Canada, only charities, non-profits, and religious organizations are eligible to run raffles. The same is true in most U.S. states, but it’s essential to verify the specifics with local gaming authorities.

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What Are the Rules of a Raffle?

The rules and regulations for raffles vary state-by-state and province-by-province, so it’s important that you check with your local gaming authority to make sure you thoroughly understand what is and isn’t allowed.

There are, however, a few common rules that are generally consistent across jurisdictions. They include:

1. Who Can Host a Raffle?

  • Typically restricted to registered charities, nonprofits, and religious organizations. In Alberta, as an example, an organization does not need to be registered as a charity with the Canada Revenue Agency, but its structure and programs must follow Alberta Gaming, Liquor and Cannabis’ policies.
  • While every Canadian province allows charities, non-profits, and religious organizations to host raffles, the same is not true in the U.S., where states like Alabama do not allow raffles at all.

2. Licensing & Permits

  • Most regions require approval from a gaming commission or state/provincial authority.
  • Every jurisdiction will have different types of raffle licenses. In Alberta, for example, there are separate licenses for raffles that have a total ticket value of more or less than $20,000. Licenses for raffles with a total ticket value above $20,000 require that applications be submitted at least 8 weeks prior to the start of a raffle.
  • Again, this varies by province and state, but in Alberta, licensing will generally be granted to organizations as long as funds are used for approved charitable programs, have tickets that are sequentially numbered, and details like ticket price, draw date, and location are provided. In Alberta, many of the details can be found in the Charitable Gaming Policies Handbook.

3. Prize Rules & Limits

  • The rules may be different depending on your location, but in Alberta, the total value of prizes in your raffle must be a minimum of 20% of the total value of potential tickets sold. While that’s easy enough to calculate for cash prizes, for non-cash prizes, you should add up the fair market value of each item and ensure it’s 20%.
  • Some U.S. states place a cap on the value of prizes for raffles. In Arkansas, for example, there’s an annual prize limit of $50,000 across all raffles for organizations.
  • Donated prizes are not eligible for tax receipts in Canada.

4. Ticket Pricing & Sales

  • While you are generally free to charge as much or as little as you’d like for tickets, some jurisdictions may require the total value of prizes to be a minimum percentage of the total value of the license. 
  • Tickets can be sold online in some jurisdictions, like Alberta, as long as the organization is using an approved electronic raffle system. Raffle Rocket can provide you with the right information in jurisdictions where they’re approved. Some states, like California, allow for raffles, but not if they are online.
  • In most jurisdictions, anyone buying a ticket will need to be 18 years old or older.

5. Reporting & Compliance

  • It’s vital that you track how much you spent and how much your raffle brought in. The process differs from state to state and province to province, but providing financial details for your report is almost always necessary.
  • In Alberta, you have up to 60 days to fill in a Raffle Financial Form and submit it to the AGLC, and you must keep all records for two years.
  • GST/HST in Canada does not apply to revenue that’s received through the sale of raffle tickets, and people do not need to report lottery winnings, which includes raffles. 
  • In the US, all lottery winnings are taxable at the federal level, just like your employment taxes. Some states are exempt from state taxes, but most are not. 
A person sits at a desk and looks up the rules of a raffle on their laptop.

Regional Snapshots: U.S. vs. Canada

Here’s a look at some examples of raffle laws across the US and Canada. There’s much more to understand, so it’s important you check out the official regulators for your jurisdiction.

Canada

  • Alberta: A license through the AGLC is required for raffles in Alberta, where 50/50 draws, non-cash prize, and cash prize raffles are all allowed. The total prize amount must be a minimum of 20% of the potential you’ll bring in through tickets sold
  • Ontario: The Alcohol and Gaming Commission of Ontario governs raffles, and they have strict licensing requirements. It often takes 45 days to receive your license through AGCO; raffles are often capped by prize amount. You can also get licenses from your municipal licensing authority if your raffle’s total prizes will be less than $50,000.  
  • British Columbia: Online raffles are permitted with BC Gaming approval, although licenses are still required.

United States

  • California: Raffles are legal in California, but only non-profits that have been operating for at least a year can host them. Non-profits need to register with the Attorney General’s Registry for Charities and Fundraisers before a raffle and file a financial report for all raffles held during a year.
  • Texas: Non-profits that qualify under the law can host up to 4 raffles in a year and do not need to register. The value of each prize can’t exceed $75,000, and there is no limit on the value of donated prizes.
  • New York: You need to be an authorized charitable organization to host a raffle in New York that has been serving its community for at least 1 year. You can find all the forms required for a license application at gaming.ny.gov.
  • Florida: You do not need to obtain a license to host a raffle, but you do need to be a qualified non-profit and register with the Florida Department of Agriculture and Consumer Services if you are going to solicit donations as part of your raffle.

What Happens If You Don’t Comply with Raffle Laws?

Under Canada’s Competition Act, the punishments for not complying with the rules, regulations and laws that have been set out for raffles are severe. Section 74.06 touches on the rules:

“It prohibits any promotional contest that does not disclose the number and approximate value of prizes, the area or areas to which they relate and any important information relating to the chances of winning such as the odds of winning. It also stipulates that the distribution of prizes cannot be unduly delayed and that participants be selected or prizes distributed on the basis of skill or on a random basis.”

If a court determines that a person has engaged in conduct contrary to section 74.06, they could face a fine of up to $750,000 or $1,000,000 for a corporation.

In the U.S., rules vary state-by-state, but there are large fines and even the potential loss of non-profit status for violators. 

How Raffle Rocket Helps You Stay Compliant

When you host an online raffle with Raffle Rocket, there’s built-in help to make sure you stay compliant with the laws in your jurisdiction. They include:

  • While setting up a raffle is easy, Raffle Rocket’s team will review your eligibility and license to ensure it’s a legal raffle. This process can take up to 2 business days.
  • Raffle Rocket has been certified by Games Labs International, which is required in order to become a certified electronic raffle system and host online raffles.

Run Legal, Fun & Successful Raffles with Raffle Rocket

It’s absolutely vital that anyone hosting a raffle follow the laws in their jurisdiction. While we’ve provided an overview here, anyone thinking of hosting a raffle should be sure to search out the rules, regulations, and laws in their province or state to make sure they’re compliant. 

Once you’ve obtained a license, though, hosting an online raffle with Raffle Rocket is a great way to help your organization meet its fundraising goals. For more information, contact us by filling out our online form.

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