Winner, Winner, Chicken Dinner — The Do’s and Don’ts of Holding a Raffle

Posted on Jan 8, 2019

If you have ever visited the Washington State Gambling Commission’s website, you’ll know how surprisingly complicated raffles can be. There is much more to them than just selling tickets and drawing a winner. To help you stay on the right side of the law, we’ve collected the Do’s and Don’ts of holding a raffle.

Eligibility to Conduct a Raffle

Do

  • Obtain a license if you:
    • Hold more than two public raffles per year. (You are allowed two unlicensed public raffles per year if the total gross revenue is less than $5,000);
    • Have gross revenues exceeding $5,000 from two unlicensed public raffles or all member-only raffles (be sure to track this throughout the year);
    • Award firearms;
    • Conduct a joint raffle with another nonprofit;
    • Give non-cash incentives for selling tickets;
    • Sell discounted tickets;
    • Have non-members selling tickets; or
    • Choose a winner by doing something other than drawing a ticket.
  • Conduct raffles if you are organized and operated for agricultural, athletic, charitable, civic, educational, fraternal, patriotic, political, or social purposes. Also authorized are fairs, fraternal societies, religious societies, churches, granges, credit unions, cities, counties, PTAs, and ASBs.
  • Conduct 50/50 raffles, which can be licensed or unlicensed (subject to the $5,000 limits mentioned above).

Don’t

  • Conduct raffles if you are:
    • A “lobby group.” These are organizations that primarily do lobbying;
    • An association. Per discussion with the Gambling Commission, membership organizations only provide value back to their members and therefore don’t meet the definition of an eligible entity;
    • An individual; or
    • A commercial business
  • For member-only raffles, guests cannot exceed 25% of the members present at the meeting, and prizes must be awarded at that meeting.

Selling Tickets

Do

  • Allow members to sell tickets.
  • Allow both members and non-members to purchase tickets.
  • Ensure tickets or promotional materials include:
    • Consecutive numbers;
    • Cost of each ticket;
    • Name of sponsoring organization;
    • Date, time, and location of drawing;
    • Description of prizes; and
    • Whether you must be present to win.
  • Price the tickets at $100 or less.

Don’t

  • Allow non-members to sell tickets unless it is a licensed raffle.
  • Allow minors to sell tickets unless the raffle is licensed, and the minor is a “member” as defined in the bylaws. The raffle must be supervised and managed by adults.
  • Allow minors to purchase tickets.
  • Pay people to sell tickets.
  • Give cash incentives for ticket sales. Non-cash incentives based on the number of tickets sold are acceptable if the amount is less than 5% of the gross revenue and you keep records of the incentives awarded.
  • Give away tickets.
  • Accept IOUs.
  • Allow tickets or payments to be mailed.
  • Sell tickets on the internet or over the phone. However, it is acceptable to advertise the raffle on the internet.
  • Sell tickets at a discount in unlicensed raffles. For licensed raffles, it is acceptable if you meet the disclosure requirements in WAC 230-11-025.

Awarding Prizes

Do

  • Award the prize even if you did not sell enough tickets to pay for the prize. You cannot delay the raffle until enough tickets are sold.
  • Exercise due diligence in trying to locate the winner.
  • Issue a receipt for a charitable donation if the winner does not accept the prize.
  • Display your raffle license when the drawing takes place.
  • Own the prizes before they are awarded.
  • Get pre-approval for prizes over $40,000 or if you plan to give away more than $300,000 of prizes during the year.
  • For a traditional drawing, place tickets in a receptacle and select winners randomly.
  • Notify the local police in writing prior to selling tickets in a licensed raffle, and at least five days in advance of an unlicensed raffle.

Don’t

  • Select a winner by an alternative method such as poker run, paddle wheel, or duck race, without licensing the raffle and verifying the method meets the requirements of WAC 230-11-050.
  • Give away alcohol unless it is a members-only raffle (licensed or unlicensed) and you have a permit from the Liquor Control Board.
  • Give away a firearm unless it is a licensed raffle. Also, state and federal laws may require you to award a gift certificate redeemable at a licensed firearms dealer. Finally, include a disclosure that if the winner is not eligible to possess a firearm, then an alternate prize will be awarded.

Record Keeping, etc.

Do

  • Keep records showing gross receipts, expenses, cost of prizes, and how proceeds were used. Class E raffles require standard forms be completed as well. The rule is to retain records for three years for licensed raffles and one year for unlicensed.
  • Pay city and county taxes on net proceeds. Cities and counties may tax up to 5% of the net proceeds. However, the first $10,000 cannot be taxed.

Don’t

  • Use proceeds for anything other than your exempt purpose. The one exception is a raffle to benefit a local child who needs medical care or a similar good deed in the community. This exception requires pre-approval from the Gambling Commission. You cannot give the proceeds to the individual, it must go to the hospital or other service provider.
  • Pay members to manage the raffle.

For those who may be running afoul of these rules, I’m sorry to bear the bad news, but better to hear it from me than from the Washington State Gambling Commission. If you need clarification on any of these points, please email Clark Nuber, visit the Gambling Commission’s website, or call them at 800-345-2529

© Clark Nuber PS, 2019. All Rights Reserved

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This article or blog contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.

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