November 6, 2020 Vanessa Niragira
Welcome to our series on raffles, these blogs will help you fully understand all that a raffle is and whether or not it’s best for your brand.
Let’s start with the definition. Raffles run on a lottery system, in which people purchase a ticket for a chance to win a prize. Unless run by a nonprofit organization, raffles are considered illegal gambling. It is illegal for a for-profit business to run a raffle.
Federally only 501(c)(3) nonprofits can run a raffle, however, different states, cities, and even counties have their own regulations that also must be abided by.
Some regulations include:
Raffles are subject to some very strict rules regarding tax law in the US. Every nonprofit that holds a raffle must comply with federal income tax requirements linked to unrelated business income, reporting, withholding, and even record keeping. For more information, see the IRS’s publication on Tax-Exempt Organizations and Gaming.
In Canada, it is illegal to run a raffle unless you have a license to do so. Currently, only religious and/or charitable organizations can apply for a raffle license.
All provinces allow for raffles, however, each province has its own set of rules regarding the matter.
As an example:
Since we’re explaining legalities, we should explain the consequences of running a raffle despite not being eligible. Examples of punishments:
In short, we recommend against running an actual raffle or even using the term raffle. Instead, there is a legal way to run a raffle styled donation program. It’s called a charity sweepstakes. What’s a charity sweepstakes you ask? Check out our next blog No To Raffles Yes To Charity Sweepstakes to find out! As well we have a whole page dedicated to raffles you should also check out! www.raffle5.com
Vanessa Niragira, Oakville, Ontario, November 2020