A raffle is classified by the federal government and most states as a game of chance, meaning it is subject to a number of laws. Laws on raffles vary widely. In some states, including Michigan, raffle organisers must submit an application before holding a raffle, while in others, such as Hawaii and Alabama, they are banned. For a list of laws by state, see the link in the Resources section.
Sellers of Tickets
Generally, the only organisations legally allowed to hold raffles are non-profit corporations or charitable groups. These organisations usually must be registered with the state in which they are incorporated. Each state has its own laws governing who can sell tickets. In Washington, only members of the organisation or people supervised by members can sell tickets. However, in no states can raffle tickets be sold over the internet, as this is a violation of federal gambling laws.
Many states have other conditions on who can sell raffle tickets. In Ohio, if a non-profit organisation that does not hold 501(c)(3) status under the federal tax laws wishes to hold a raffle, 50 per cent of the receipts must be donated to a 501(c)(3)-eligible organisation.
Some casinos are allowed to sell raffle tickets as one of their games of chance, but the rules that regulate them are different than the statutes governing the holding of non-profit raffles.
Before raffle tickets can be sold, many states require a permit or license. This usually involves filling out an application describing the nature of the organisation, the event, the prizes and the distribution of the receipts. Organisers must usually pay a fee and should allow time for the application to be processed. In Michigan, the secretary of state advises waiting six weeks for the application to be approved.
Buyers of Tickets
In many states, such as Washington, people under 18 are not permitted to purchase raffle tickets. In others, members of the organisation selling the tickets are not permitted to buy them.
According to the Internal Revenue Service, all organisations must report the names of all prize winners and withhold the correct tax on the prize, usually 25 per cent to 28 per cent of the value of the prize. If the money is not withheld from the winner, the organisation sponsoring the raffle is liable for paying the tax.