Can A Nonprofit Legally Run A Raffle Or Lottery? With Restrictions, Yes…
Gambling in Florida is, for the most part, illegal. Your business would probably never consider opening a gambling operation or a sports book. But when you look around you may notice that nonprofit organizations use gambling as a fundraiser all the time, in the form of lotteries and raffles. So how is this possible and legal? Or is every nonprofit organization that conducts a lottery, doing so illegally?
There are certain exceptions that are made in Florida’s gambling laws for nonprofit organizations. However the exceptions must be followed carefully, as there can be criminal penalties for organizations that conduct lotteries in violation of the law.
Only 501(c)(3) Companies Can Play
The most obvious requirement is that your organization must be a legitimate, registered 501(c)(3) organization. Just calling yourself a nonprofit doesn’t work, and being a “not for profit” (different than a nonprofit) also doesn’t work. You need the IRS registration as a 501(c)(3). This usually entails your organization being a religious group, university athletic, or social welfare organization.
Rules and Disclosures
Assuming you qualify, there are restrictions and requirements that need to be followed for you to hold your raffle.
First, every ticket must have the name of the organization and where it primarily does business. That includes every ticket, brochure, or advertisement. You must also disclose, in your marketing, the rules of the raffle, and disclose information as to when the raffle will be held and how you will choose winners, and distribute prizes. The source of the funds that are used to purchase the prizes must also be disclosed.
No Pay to Play
One major drawback is that nonprofits cannot require payments for entering into the raffle, and that should be disclosed on your marketing materials.
In other words—it needs to be possible to win the lottery without paying any money. Although the law doesn’t exactly say that everybody has to have the same chance of winning, the law does say that you cannot discriminate on the basis of those who pay and those who do not pay (or donate or contribute).
You can suggest or encourage people to make a donation when purchasing tickets, so long as you note that the purchase is not a required prerequisite for winning or entering the drawing. You also can limit how many tickets someone gets—since people aren’t being required to purchase tickets, you can limit how many tickets each person gets.
You also can’t get around the law by requiring contributions or donations to receive prizes if someone wins, or cancel the raffle because not enough people made the voluntary donations.
Needless to say any attempt to rig the raffle, or where people are getting tickets but the winner is predetermined in any way, is also illegal.
Call the West Palm Beach commercial litigation lawyers at Pike & Lustig for help running your business safely and legally.