How to Conduct Raffles with Nonprofits in California

Posted by Mohsen Parsa | Sep 11, 2020 | 0Comments

Everyone loves a raffle. It's a quick way to raise money, and it seems like a great way to support everything from the school PTA to the local Humane Society. Raffles are among the most popular fundraisers for charitable organizations nationwide. But in California, the rules about raffles are stricter than in most other states. If you don't know the rules, it's easy for your charitable organization to break the law inadvertently.

What is a Raffle?

In general, lotteries are prohibited in the U.S. unless run by state governments. Some states, however, carve out exceptions for raffles that follow carefully delineated rules. Under California law, a “raffle” means:

“a scheme for the distribution of prizes by chance among persons who have paid money for paper tickets that provide the opportunity to win these prizes, where all of the following are true:

(1) Each ticket is sold with a detachable coupon or stub, and both the ticket and its associated coupon or stub are marked with a unique and matching identifier.

(2) Winners of the prizes are determined by draw from among the coupons or stubs described in paragraph (1) that have been detached from all tickets sold for entry in the draw.

(3) The draw is conducted in California under the supervision of a natural person who is 18 years of age or older.”

Cal. Pen. Code § 320.5(b) (2010).

Why Are Raffles Highly Regulated?

Before the 1980s, lawmakers left California gambling establishments mostly unregulated. The legislature finally reigned in the Wild West of gambling with legislation in 1984 and the Gambling Control Act of 1997. Eventually, voters in California agreed that the pendulum had swung too far and carved out an exception to bans on gambling in 2000, permitting raffles for charitable purposes. 

Raffle Contests with Nonprofits

In California, it is a misdemeanor to conduct a lottery. The only exception to this constitutional ban is a raffle that gives 90% of the gross receipts directly to charitable purposes in the state. No more than 10% of the proceeds can run the raffle, including the winnings' payout. Additional raffle requirements include:

  • Each ticket must have an identifier or stub with a matching detachable coupon;
  • A random drawing must determine winners;
  • The drawing must be supervised by someone 18 or older;
  • The organization must use the money in California for a charitable purpose;
  • Anyone receiving compensation for holding the raffle must be an employee of the organization holding the raffle;
  • Organizations can't sell tickets at a gambling establishment, a racetrack, a satellite wagering facility, or on the internet;
  • The raffle can't benefit officers, directors, or members;
  • The nonprofit must register the raffle and meet the reporting requirements with the California Attorney General.

These rules still prohibit 50/50 raffles for most organizations, which are popular in many jurisdictions. But in California, only major sports organizations may hold 50/50 raffles. See Cal. Pen. Code § 320.6 (2019).

Application Requirements and Process

To conduct raffles in California, an organization must register in advance and report all of its raffles from the year to the California Attorney General. The raffle organization must:

  • Register the organization holding the raffle at least 60 days before the raffle to give registry employees time to process the form;
  • File Form CT-NRP-1and receive a confirmation letter from the Registry of Charitable Trusts before conducting any raffle activities, including selling tickets. You should mail this form with a return receipt requested to receive confirmation of receipt by the Registry;
  • File a report on all raffle activities for each year. Your organization will file Form CT-NRP-2to report all aggregate raffle activities for the year.

Consulting an attorney before conducting a nonprofit raffle in California is always a good idea to ensure compliance with the law.

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