Charity raffles and sweepstakes have one main thing in common: they both give donors a chance to win a prize or prizes in exchange for a donation. Charity raffles and sweepstakes can be a great, easy way for nonprofits to raise funds online. There are a lot of restrictions, however, and oftentimes, organizations are unaware of these restrictions and differences between these two types of fundraising campaigns. Let us break it down for you.
The primary differences between the two types of campaigns are in the way they’re regulated legally. Raffles are more restricted geographically than charity sweepstakes.
Legal Considerations for US Raffles
Raffles are considered a form of gambling by federal government regulators since donors make a payment in exchange for a chance to win something – just as you’d do at a casino. Raffles are regulated by the State Attorney General’s office.
- Raffles for charitable purposes may be allowed at the federal level for 501(c) organizations
- Organizations conducting raffles must comply with the state and local raffle laws and regulations that apply
- Several states prohibit online raffles making it very difficult to run an interstate raffle, and impossible to run one nationally. If your organization is fundraising in one of those states (see above map for red states), you won’t be able to set up an online raffle on our platform.
Legal Considerations for Canadian Raffles
Raffles are also regulated by the province in Canada. 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.
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Charity sweepstakes generally have fewer geographic regulatory restrictions than raffles, and entries can be sold nationally or even internationally. When organizations have a goal of extending to a wider audience, charity sweepstakes can often have a further reach.
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.
Legal Considerations for Sweepstakes
Charity sweepstakes 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).
- There are limitations on free entries, e.g. one entry per person, to prevent abuse. But keep in mind, participants who enter for free are still learning about your organization as they participate.
- Sweepstakes do not allow a 50/50 or split the pot type format like raffles.
- They do not allow a limited number of entries, since you must offer free entries.
Free Entries on Sweepstakes
Required free entries can be more complex than they seem. That’s because free entries are not just worth a single entry into the drawing. Even though free entries are limited to one person, they must receive the average number of entries donors have paid for to enter the drawing. Calculating this by hand can be complex and can introduce the risk for human error, making your sweepstakes unfair.
If your organization is interested in hosting charity sweepstakes, check out our friends at RallyUp.
New York Sweepstakes – Something to keep in mind
If your charity sweepstakes has a total prize value of over $5,000 (such as a vacation getaway), and you want to be able to receive donation-based entries from the state of New York, there’s an additional requirement that needs to be met. You’ll need to obtain state registration and a surety bond. New York’s registration fee is $100 per charity sweepstakes, and the surety bond costs 2% of the prize value. But again, these are only needed if the prize value is over $5,000 and you want to allow residents of New York to participate.