Thinking of Running a Raffle?

November 6, 2020 Vanessa Niragira

Welcome to our series on raffles, these blogs will help you fully understand all that a raffle is and whether or not it’s best for your brand. 

Let’s start with the definition. Raffles run on a lottery system, in which people purchase a ticket for a chance to win a prize. Unless run by a nonprofit organization, raffles are considered illegal gambling. It is illegal for a for-profit business to run a raffle. 

Raffles in the United States 

Federally only 501(c)(3) nonprofits can run a raffle, however, different states, cities, and even counties have their own regulations that also must be abided by.

Some regulations include:

  • Funds raised from said raffle must be sent directly to a 501(c) organization, of which said organization must take responsibility for legal compliance 
  • National online raffles are prohibited entirely (due to restrictions in place by certain states)

Tax Requirements: United States 

Raffles are subject to some very strict rules regarding tax law in the US. Every nonprofit that holds a raffle must comply with federal income tax requirements linked to unrelated business income, reporting, withholding, and even record keeping. For more information, see the IRS’s publication on Tax-Exempt Organizations and Gaming.

Raffles in Canada 

In Canada, it is illegal to run a raffle unless you have a license to do so. Currently, only religious and/or charitable organizations can apply for a raffle license. 

All provinces allow for raffles, however, each province has its own set of rules regarding the matter. 

As an example:

  • To be eligible to run a raffle in Ontario, an organization must:
    • Have been in existence for at least 1 year 
    • Have a place of business in Ontario 
    • Be able to prove that it can provide charitable services in Ontario and use said profits from the said raffle to benefit the community in some way

Since we’re explaining legalities, we should explain the consequences of running a raffle despite not being eligible. Examples of punishments:

  • $1,000-$2,000 fine(s) or six months in jail/ 1 year in prison (US)
  • Up to $5,500 in fines (Canada)

In short, we recommend against running an actual raffle or even using the term raffle. Instead, there is a legal way to run a raffle styled donation program. It’s called a charity sweepstakes. What’s a charity sweepstakes you ask? Check out our next blog No To Raffles Yes To Charity Sweepstakes to find out! As well we have a whole page dedicated to raffles you should also check out! www.raffle5.com

Vanessa Niragira, Oakville, Ontario, November 2020 

Additional Resources 

https://racedayct.com/2020/01/takingachance-the-legal-gamble-that-is-online-racing-raffles/

https://www.e-district.org/userfiles/129/file/rules_on_raffles.pdf

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