Find out what makes raffles different from sweepstakes and which one best fits your fundraising needs!
As you think about whether you would like to run a raffle or a sweepstakes Experience, there are several important factors to consider. This article will share how raffles and sweepstakes differ and provide the information you need to decide which drawing type is best for you.
Raffles and sweepstakes both give donors a chance to win a prize in exchange for a donation. The primary differences between the two types of Experiences are in the way they are legally regulated.
When it comes to US-based raffles:
- A form of gambling: Federal government regulators view raffles as a form of gambling since donors make a payment in exchange for a chance to win something – just as you’d do at a casino.
- Federal requirements: Raffles for charitable purposes are allowed at the federal level for 501(c) organizations. (US)
- State and local requirements: Organizations conducting raffles must comply with the state and local raffle laws and regulations that apply. Please check the state and local laws in the area your organization is domiciled.
- States that prohibit online raffles: Some states prohibit online raffles making it very difficult to run an interstate raffle and impossible to run one nationally.
- New Jersey
- New York
- Montana (raffle ticket purchases by credit card are prohibited)
If your organization is fundraising in one of these states, you may want to consider running a charity sweepstakes instead. They have a similar feel as a raffle but have fewer restrictions geographically.
Organizations outside of the US:
Please consult your legal counsel before publishing and running your raffle or lottery to ensure that it is compliant with all laws and regulations in your country and jurisdiction.
Because they require a free method of entry, sweepstakes are not considered gambling and generally have fewer geographic regulatory restrictions than raffles. Entries can be sold nationally or even internationally, so charity sweepstakes are an excellent choice when organizations aim to extend to a broader audience!
When it comes to sweepstakes:
- Not considered gambling: They are not considered a gambling activity in the same way that raffles are because of the free form of entry (you generally can’t gamble in a casino for free)
- Limit on free entries: There are limitations on free entries, e.g., one entry per person, to prevent abuse (participants who enter for free are still learning about your organization as they participate)
- Online entry sales only: They do not allow for physical entries or paper tickets to be sold (only online entries are permitted)
Good to know:
- 50/50 or split the pot drawings are prohibited
- Limited number of entries are prohibited
- No manual option for drawing winners (drawings are done at random, electronically, by our system)
Sweepstakes require official rules. Within the official rules is an eligibility section that specifies who is eligible to win the prize. Eligibility can extend to countries, states, local areas, or even for a company's employees. MemberHub provides default official rules which are legally compliant for the US and Canada. If you would like to limit the eligibility to only certain areas, please contact our firstname.lastname@example.org, who can edit the rules accordingly.
What are the official Rules on Sweepstakes?
If the total retail value of your prize(s) is $5,000 or more, then you’ll need to secure a surety bond and register your sweepstakes in the state of New York if you want its residents to be able to participate. In addition, if your organization is not a 501(c), then registration and bonding are also required in Florida.
The surety bond’s cost is 2% of the prize value, and the state registration fee is $100. So if you need to register and bond in both states, two bonds and two registration fees apply.
If you are not interested in securing a surety bond and registration for your sweepstakes, you can choose to exclude residents of Florida and New York from eligibility.
How does the registration and bonding process work?
Free entry requirement
While sweepstakes allow organizations to reach a vast audience because of the lessened geographical restrictions, a free method of entry must be offered in addition to donation-based entries. This is the biggest differentiator between raffles and sweepstakes!
Allowing a free method of entry removes the gambling classification from sweepstakes since you can’t gamble for free. Instructions for the method for free entry are in the official rules. People click the Alternate Method of Entry link, enter their email address and receive a form to fill out. Once the information on the form is filled out, they then need to print the form and mail it to our office, where it is entered into the drawing. In our experience, mail-in entries typically total less than one percent of the number of donation-based entries. Some sweepstakes receive no mail-in entries at all! We find that most people are willing to donate to participate since the cause is charitable.
What is the free entry on a sweepstakes?
Legally, the free method of entry must be presented at the point of sale. Offering free entries when selling printed tickets in person isn’t very feasible and can’t be enforced to the point that it would be acceptable to regulators. As a result, MemberHub does not support the in-person sale of printed tickets on sweepstakes.
The winning entries are drawn systematically at random by MemberHub. There is no way to draw winners manually by the organization (like you may traditionally in a raffle). As we mentioned before, this is due to the required method of free entry — and free entries are not just worth a single entry into the drawing.
Even though free entries are limited to one person, they receive the average number of paid entries donors have purchased to enter the drawing. Calculating this by hand would be too complex and introduce the risk for human errors (which could make the drawing unfair).
For the sake of fairness and simplicity, MemberHub:
- Uses a certified random generator to calculate the average number of paid entries.
- Assigns the average number of paid entries to each free entry.
- Runs it through the drawing process to select a winner.
If you’re considering a sweepstakes fundraiser instead of a raffle, we encourage you to look through this help article for some guidance!
Have more questions?
We’re here to help! Although we can’t provide legal advice, we have years of experience with charity drawings of all types, and we’ll be happy to help in any way we can.