Many not-for-profit organizations choose to supplement their fundraising efforts with raffles, either in conjunction with an event such as a dinner auction or on a standalone basis. However, many are unaware that such raffles are illegal if the organization is not in compliance with the Washington State Gambling Commission’s rules. Raffles are covered in state law under RCW 9.46 with further administrative guidance in WAC 230-11. In addition, the gambling commission has published a helpful brochure covering raffles. In this article, I will summarize some of most common requirements for raffles. However, before holding your own raffle, you should be familiar with all the requirements.
Not every nonprofit organization is allowed to hold a raffle. To be eligible to hold a raffle of any kind, the organization must have been in existence and operating for at least a year. You cannot hold a raffle in attempts to get a brand new organization off the ground. In addition, the by-laws or articles of incorporation must state that the organization is organized and operated only for certain charitable purposes (see RCW 9.46.0209). Although this list is fairly inclusive, it does not include such things as lobbying. In addition, it is clear that you must actually have filed by-laws/articles with the state. Loosely formed groups of well-meaning volunteers cannot hold a raffle even if all the proceeds are going to a charitable purpose.
A raffle can be either licensed or unlicensed. For unlicensed raffles, no application or reporting is due to the gambling commission. However, an organization may only offer two unlicensed raffles to the public each year and the combined gross revenue from the unlicensed raffles cannot exceed $5,000. There are certain other situations that also require a license such as holding a joint raffle with another organization. (WAC 230-11) If you plan to exceed either of the limits, you must apply for a license before holding the raffle. When applying for a license, you must prove that significant progress has been made toward accomplishing your stated purpose during the prior year. Once you have received your license, you must display the license when selecting the winners of the raffle.
Be sure to check with your local taxing authority for any taxes that may be due. Only the first $10,000 of net proceeds is specifically exempt from taxation. (RCW 9.46.110) Also, you may have a federal tax reporting requirement if the winner receives more than $600. The winner must provide their tax information so you can complete an IRS Form W-2G.
One of the lesser known requirements of holding a raffle is the requirement to notify your local police. For unlicensed raffles, the local police must be notified at least 5 days prior to selecting the winners and for licensed raffles, the notification must be in writing prior to selling any tickets.
Whether the raffle is licensed or not, rules for conducting the raffle are similar. When selling tickets (WAC 230-11-014 to WAC 230-11-035), the maximum allowable individual ticket price (cost per chance) is $100. All tickets must be sold for the same price. You may not give away any free tickets. Tickets cannot be sold over the phone, via the internet or through the mail. You can promote the raffle via phone, internet or mail but the actual sale of tickets must be in person and paid in full (no IOUs). Purchaser must be 18 or older. Except in certain circumstances (WAC 230-06-101), tickets can only be sold by members who are 18 or older.
The printed tickets (or accompanying hand out) must state: the cost per chance (ticket price); date, time and location of drawing; name of sponsoring organization; whether or not the winner must be present to win; and a description of all prizes to be awarded. If the prize is a percentage of the raffles gross receipts, a minimum prize level must be stated. Liquor (i.e. wine) cannot be a prize for a raffle open to the public and pre-approval must be obtained from the gambling commission for any individual prizes over $40,000 or total annual raffle prizes over $300,000 (WAC 230-11-067).
Raffles are a fun addition to any auction or event and the prospect of a flashing button or other indication of raffle ticket purchase can add a sense of competition within the room. However, before your event committee gets too far along in its planning, make sure you can comply with all of the gambling commission rules.