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Raffle rules for nonprofits aren't just about state permits. The IRS has its own requirements too, and missing either one can cost your organization real money.
This guide covers both. You'll find the federal tax rules every 501(c)(3) needs to know, a clear breakdown of how raffles differ from sweepstakes and lotteries, and a full state-by-state permit table.
⚡TL;DR — The Short Answer
Raffles are legal for nonprofits in 47 of 50 states, but rules vary widely by state.
The IRS requires you to withhold taxes and file Form W-2G when a winner's prize hits certain thresholds.
A raffle is legally distinct from a sweepstakes and a lottery. Getting that wrong can create serious legal exposure.
Raffle proceeds can trigger Unrelated Business Income Tax (UBIT) if your raffle doesn't qualify for the IRC Section 513(f) exclusion.
Raffles in the US are regulated at the state level. Most states have created laws that outline:
What types of organizations can host a raffle
What purpose the raffle must serve (usually charitable)
What rules and requirements apply
How many raffles an organization can host per year
For the most part, nonprofit and 501(c)(3) organizations can host raffles to raise money for their cause. But the rules vary a lot from state to state.
Some states have strict regulations, including:
Licensing requirements
Limitations on prize values
Record-keeping obligations
Others (looking at you, Texas) have almost no requirements at all. In states where raffles are outright illegal or heavily restricted, talk to your attorney or local government before doing anything.
Yes, in most cases, raffles in the US are legal. But always verify the specific laws in your state before your organization hosts one.
Who can host a raffle in the United States?
In 47 of the 50 US states, nonprofits and 501(c)(3) organizations can host a raffle. A few states have almost no rules (like Texas). Two states ban them outright (Alabama and Utah), and Hawaii prohibits paid-entry raffles.
The one consistent rule across every state that allows raffles: only nonprofit and charitable organizations can host them. For-profit businesses cannot.
Not all 501(c) organizations are treated the same. Most states limit raffle eligibility to 501(c)(3) charitable organizations, but some also allow 501(c)(4) social welfare organizations, 501(c)(7) social clubs, and 501(c)(19) veterans' organizations. Check your state's specific rules — the designation matters.
Federal IRS tax rules for nonprofit raffles
State permits get most of the attention, but federal tax law applies to every nonprofit raffle in the US. Here's what you need to know.
When you must report raffle winnings to the IRS
The IRS treats raffle prizes as gambling winnings. That means they're taxable income for your winners, and your organization has reporting and withholding obligations.
The $600 reporting threshold
You must report raffle winnings to the IRS on Form W-2G when:
The prize is worth $600 or more, AND
The prize is at least 300 times the ticket price
If a winner's prize meets both conditions, you must file Form W-2G and give a copy to the winner.
Backup withholding
If a winner doesn't provide their Social Security number, you're required to withhold 24% of the prize value as backup withholding and remit it to the IRS.
Regular withholding
If a prize is worth more than $5,000 (after subtracting the ticket price), you must withhold 24% of the net prize amount before paying the winner.
What is Form W-2G?
Form W-2G is the IRS form used to report gambling winnings, including raffle prizes. As the organization running the raffle, you're the payer. You need to:
1. Complete a W-2G for any prize meeting the reporting threshold
2. Give a copy to the winner by January 31 of the following year
3. File copies with the IRS by the applicable deadline
Keep records of all ticket sales, prize values, and winner information for at least four years.
Does your raffle trigger UBIT?
Unrelated Business Income Tax (UBIT) applies when a tax-exempt organization earns income from activities that aren't substantially related to its exempt purpose.
Raffle income is generally exempt from UBIT under IRC Section 513(f), which provides a specific exclusion for qualified public entertainment activities — including games of chance conducted by tax-exempt organizations. This exclusion applies as long as:
The raffle is conducted in compliance with state and local law
The activity is not regularly carried on as a commercial enterprise
A separate exemption under Section 513(a)(1) also applies if substantially all the labor is performed by volunteers. In practice, most nonprofit raffles qualify under both provisions. However, if your organization runs large, frequent, or highly commercialized raffles, consult a tax professional.
What winners owe
Winners are responsible for reporting their prizes as income on their federal tax return. Your organization isn't responsible for their personal tax filing, but giving winners a completed W-2G makes the process easier and keeps your organization in good standing.
Raffle vs. sweepstakes vs. lottery: the legal difference
Mixing up these three terms isn't just a branding issue. It can be a legal one. Here's how they differ under US law.
The three-element test
Under US law, a lottery requires all three of these elements:
1. Prize — something of value awarded to a winner
2. Chance — the winner is selected randomly
3. Consideration — participants pay or provide something of value to enter
If all three elements exist, it's a lottery. Only governments can run lotteries. Nonprofits can't.
How raffles fit in
Raffles have all three elements: a prize, random selection, and paid entry. That's why most states classify raffles as a form of lottery and regulate them specifically. States that allow nonprofit raffles have carved out an explicit exception to their general lottery prohibition.
A raffle is legal for your nonprofit only because your state created an exemption. Without that exemption, it's an illegal lottery.
How sweepstakes differ
A sweepstakes removes the consideration element. No purchase or payment is required to enter. That's the key legal distinction.
Because there's no paid entry, sweepstakes aren't classified as lotteries and face far fewer restrictions. That's also why you see "no purchase necessary" on sweepstakes promotions. It's not just a marketing phrase. It's a legal requirement.
Nonprofits can run sweepstakes where winners are selected by chance and entry is free. You can suggest a donation, but entry must be genuinely free for participants who don't donate.
How contests differ
A contest removes the chance element. Winners are chosen based on skill or merit, not random selection. Think essay contests, photo competitions, or grant challenges. Because the outcome depends on skill rather than chance, contests avoid lottery classification entirely.
Quick comparison
Feature
Raffle
Sweepstakes
Contest
Lottery
Prize
Yes
Yes
Yes
Yes
Chance
Yes
Yes
No
Yes
Paid entry
Yes
No
Sometimes
Yes
Who can run it
Nonprofits (where permitted)
Anyone
Anyone
Government only
Permit required
Usually
Rarely
Rarely
N/A
Why this matters for your nonprofit
If your organization plans to run a promotion, the legal category determines what rules apply. Get it wrong and you could be running an illegal lottery without knowing it. When in doubt, talk to an attorney familiar with gaming law in your state.
Nonprofit raffle laws and regulations by state: A–C
Raffles are illegal. Alabama classifies raffles as lotteries, which are prohibited under state law. A constitutional amendment and voter approval would be required to change this.
Nonprofits and 501(c)(3) organizations cannot host raffles.
Legal with state registration and municipal permits.
First register with the Legalized Games of Chance Control Commission for an ID number. Then apply for a municipal license in the jurisdiction where gaming occurs.
No
$100.00 (ID number) + $20.00–$400.00 (municipal license)
Only organizations exempt from federal income tax may run charitable gaming. No license needed if cumulative ticket sales are $10,000 or less per calendar year.
Submit the application and $5.00 fee to the Chief of Police in the city or town where the drawing will be held. Online sales allowed only if the third-party platform is licensed by the Superintendent of Rhode Island.
Must file an annual raffle registration form with the Division of Public Charities. Exempt if prizes are donated noncash items valued at $950 or less, or if it's a 50/50 raffle with total proceeds under $950.
Register at the county or city level where the drawing is held at least 30 days before selling tickets. Statewide ticket sales also require written notice to the Secretary of State.
Must have been in existence in West Virginia for at least one year. No license needed if ticket sales stay under $15,000 per year and no single prize exceeds $4,000.
Must be a local religious, charitable, service, fraternal, veterans, or 501(c)(3) organization in existence for at least one year (or chartered by a national organization in existence for at least three years).
Is there a way to host a raffle without registering with the government?
Yes, often. Raffle laws vary by state, but there's almost always a path to hosting a raffle without a license or permit.
Some states don't require any license at all. These include Florida, Maine, Montana, Ohio, Oklahoma, Texas, Vermont, and Wyoming.
Most other states only require a permit once your raffle ticket sales or prize values exceed a certain threshold. Keeping your raffle small usually keeps you under that line.
Here are a few practical tips if you want to keep it simple:
Only host the raffle for a charitable purpose
Keep the raffle small and informal
Limit tickets sold and prize value (under $2,500 is usually a safe threshold in many states)
Get permission from the property owner where the raffle will be held, if required
Partner with a registered charitable organization if possible
Be transparent about the raffle rules and how proceeds will be used
Keep accurate records of all ticket sales and expenses for at least three years after the raffle ends
Always verify the rules in your specific state before proceeding.
How to legally hold a raffle for your nonprofit
1. Make sure your nonprofit is eligible
States that allow raffles almost always restrict them to registered nonprofits or 501(c)(3)-status organizations. Check with your local government if you're unsure whether your organization qualifies.
If your nonprofit has 501(c)(3) status, you're generally eligible.
If you're a state-registered nonprofit without 501(c)(3) status, you're likely eligible too, but double-check your state's requirements.
2. Complete and submit all required forms
Read the entire application before you start filling it out. If your state provides a how-to guide or video, use it. And if it's your first time applying, call your local government office. They can often walk you through the process or flag common mistakes.
3. Wait for your confirmation
Don't start selling tickets until you have your license or permit in hand. Most states require 30 days' notice. Some require 60 or even 90 days. Apply early and pay close attention to the scope of what your permit allows — including the number, size, and type of raffle.
4. Host your raffle on an online fundraising platform
There's only one 100% zero-fee raffle platform for nonprofits: Zeffy. Other platforms charge fees that come directly out of your fundraising. With Zeffy, zero fees means every dollar goes to your mission.
5. Submit your raffle report after the event
Most states require nonprofits to file record-keeping forms after a raffle ends and to retain all raffle-related records for at least three years. A good online raffle platform will help you track ticket sales, winner information, and prize details automatically, whether or not your state allows online ticket sales.
Even well-intentioned nonprofits make avoidable mistakes when running raffles. Here are the most common compliance errors to watch for:
Failing to register or get permits before selling tickets
Not filing Form W-2G when a prize exceeds $600 (and meets the 300x rule)
Forgetting to withhold 24% on prizes over $5,000
Selling raffle tickets across state lines without checking each state's laws
Running online raffles in states that prohibit online ticket sales
Allowing minors to purchase raffle tickets (prohibited in many states)
Not keeping records of ticket sales, prize values, and winner details for at least 3 years
Treating raffle ticket purchases as tax-deductible donations (they're not)
Avoiding these mistakes starts with knowing your state's rules and the federal IRS requirements outlined earlier in this guide. When in doubt, consult a gaming attorney or tax professional before your raffle begins.
What to include on your raffle ticket
Ticket holder's name and mailing address (space for them to fill in)
The web address where winning numbers will be posted
How long the winning number will remain posted
A phone number winners can call to verify the result
Your license number (if applicable)
The ticket number
Your nonprofit's legal name, exactly as it appears on your license
Date, time, and location of the draw
Ticket price (and bundle pricing if applicable)
A description of major prizes
Any date when the ticket price changes
The word "RAFFLE"
A statement that the ticket holder need not be present to win
Any house rules
Sponsor logos
Feel free to use this template as a starting point. We recommend Canva for Nonprofits to customize it for your organization.
Start your raffle for free on Zeffy
Not every state allows online raffle ticket sales, but you can use an online fundraising and raffle platform to:
Track ticket sales by campaign
Record ticket buyer information (name, email, phone) for contacting winners
Monitor total tickets sold and any additional donations received
Automatically build a contact list for thank-you emails and future campaigns
Promote your raffle with newsletters and digital banners
Display raffle rules and prize descriptions
List prize winners after the draw
Zeffy is the only 100% zero-fee platform built for nonprofits. No platform fees, no payment processing fees, nothing. Every dollar you raise stays with your cause.
Yes. The IRS treats raffle prizes as taxable income, and winners are responsible for reporting them on their federal tax return. See the Federal IRS tax rules section above for full details on reporting thresholds, Form W-2G, and withholding requirements.
Generally, no. In every state that permits raffles, only nonprofit or charitable organizations are eligible to host them. A for-profit business hosting a raffle — even one that donates the proceeds — is typically running an illegal lottery. Some states allow businesses to co-sponsor or donate prizes, but the nonprofit must be the legal organizer.
Consequences vary by state, but they can include fines, loss of charitable registration, and in some cases criminal charges under state gaming laws. Don't skip the permit process. If you're not sure whether your raffle requires one, check your state's charitable gaming office before selling a single ticket.
Yes, in most states that allow raffles. A 50/50 raffle splits the prize pool between the winner and the nonprofit. The same state permit and IRS reporting rules apply. If the winner's share hits the $600 threshold and is at least 300 times the ticket price, you'll need to file Form W-2G.
It depends on your state. Some states explicitly permit online sales with approval. Others prohibit them entirely. A handful are silent on the issue. Check your state's specific rules before selling tickets through a website or app. The state-by-state table above includes online sales status for each state.
This is a gray area. Generally, raffle laws apply based on where the raffle is conducted and where tickets are sold. Selling tickets across state lines could subject your organization to the raffle laws of multiple states. If you're planning a multi-state raffle, talk to a gaming attorney before you start.
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The Ultimate Guide to Selling Raffle Tickets Effectively
Learn how to sell effectively raffle tickets both online and in person. Discover the best tips to price your tickets, maximize your sales, and promote your raffle event.
Look for people who attend related events, follow relevant Facebook groups, or subscribe to aligned newsletters.These aren’t just potential donors—they’re your future advocates.
Look for people who attend related events, follow relevant Facebook groups, or subscribe to aligned newsletters.These aren’t just potential donors—they’re your future advocates.
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