Fundraising is a core component of most tax exempt organizations’ revenue generation efforts. Raffles and similar games of chance are often employed by tax exempt organizations as fundraising tools. However, if a tax exempt organization is going to conduct games of chance – including raffles – in any state, it needs to consult that state’s laws to ensure it is not violating the state’s gaming laws. Many tax exempt organizations are unaware that failure to comply with the sometimes very rigorous requirements may be a crime in that state.

For example, in Florida, if a tax exempt organization holds a raffle, it must comply with an extensive list of disclosure and operational requirements, one of which is that no purchase is necessary to enter the raffle. If the organization does not comply, it commits a second degree misdemeanor crime.[1] Since each state has different gaming laws, if the organization is engaged in a multistate game of chance, the best practice is to structure the game so it complies with the laws in the most strict jurisdiction.

Ways to Address Issue

Determine if the fundraiser is subject to the gaming laws.

Certain types of games, e.g., games of skill rather than chance, may not be subject to the gaming laws of the relevant jurisdiction.

If the fundraiser is subject to the gaming laws, organize the activities to comply with the law, opt for a different fundraiser, or move the fundraiser to a more liberal jurisdiction.

Games can be structured to comply with the gaming laws, but the practical implications – financial or otherwise – may not be palatable to the tax exempt organization. The organization may simply elect to have a different fundraiser that does not implicate the gaming laws or may opt to have the fundraiser in a different state or at a location within the state where such activities are permissible, e.g., a reservation managed by a Native American tribe under the U.S. Department of the Interior’s Bureau of Indian Affairs, which is exempt from state gaming laws, or a private venue where gaming is permitted because it is licensed and regulated by the state.

[1] Section 849.0935, Fla. Stat. (2011)