Learn about IRS regulations for running raffles in the United States.
Raffles are an excellent way to raise money for your cause, but you should be aware of any legal restrictions. In the United States, the IRS considers raffles to be a form of gambling. Other countries may also have restrictions, but this article specifically applies to organizations in the United States.
Check Your Eligibility
Only 501(c) organizations are allowed to run raffles. Some states also require a license or permit.
The following states prohibit online raffles:
- Montana (prohibits raffle ticket purchases by credit card, so Montana organizations can’t run raffles on MemberHub)
- New Jersey
Confirm Your Legal Compliance
MemberHub Fundraisers doesn’t offer legal advice or monitor individual raffles. Instead, it’s up to your organization to make sure your raffles are compliant. Exercise due diligence and do your own research. If necessary, consult with legal counsel to ensure you’re obeying federal, state, and local laws.
Consider a Sweepstakes Instead
If your organization operates in one of the states listed above, or you aren’t sure about your eligibility or legal compliance, you shouldn’t run a raffle. Instead, you may want to consider running a sweepstakes. In the United States sweepstakes aren’t considered gambling because you must offer free entries, so sweepstakes have fewer restrictions. Sweepstakes also have fewer geographic regulations, and entries can usually be sold nationally or internationally. This allows you to run charity drawings that have a much wider reach. Many organizations prefer to run a sweepstakes instead of a raffle for these reasons.