Many people have bought raffle tickets without any consideration of the prizes offered because these games of chance are frequently used by schools and other nonprofits for fundraising. These raffles may seem like a fine and noncontroversial way to raise money, but some state laws treat them as if they are a form of gambling to be strictly regulated.
While Texas permits some nonprofit raffles, it is one of those states that strictly regulates them. It limits the types of organizations that can hold raffles and also where the money raised from a raffle can be used.
Thinking of raffle fundraising in Texas? Before jumping in, it pays to become familiar with the fairly complex laws involving licensing, registration, record-keeping, operations and reporting requirements.
Raffles Under the Charitable Raffle Enabling Act
Laws governing raffle tickets in Texas are set out in the Charitable Raffle Enabling Act, found at Chapter 2002 of the Texas Occupations Code section titled "Charitable Raffles." It contains a definition of a raffle ticket and details the requirements that an organization must meet in order to be qualified to sell them.
Section 2002.002. of the Texas Charitable Raffle Enabling Act defines a raffle very explicitly as a commercial transaction. It is said to be “the award of one or more prizes by chance at a single occasion among a single pool or group of persons.”
The law goes on to explain that a raffle participant buys a ticket in exchange for a chance to receive a “promised thing of value.” That thing of value would be the claim to a prize.
Strict Limitations as to Qualified Organizations
The Texas Charitable Raffle Enabling Act allows only “qualified organizations” to hold raffle drawings in the state. One might think that all organizations holding a certificate of authority under the Texas Non-Profit Corporation Act would be a qualified nonprofit organization for the purposes of holding a raffle, but this is only the case if the organization meets these criteria:
- Does not distribute any of its income to its members, officers or governing body, except as reasonable compensation for services.
- Has existed for the three preceding years.
- Is not a lobbying organizations, does not devote a substantial part of its activities to attempting to influence legislation, and does not participate or intervene in any political campaign on behalf of any candidate for public office.
- Has qualified for an IRS exemption from federal income tax.
- Does not have any local chapter, affiliate, unit or subsidiary organization in the state.
Churches, synagogues and other religious organizations that have been in operation for at least 10 years are also considered qualified organizations.
What Prizes Can Be Offered?
The kinds of prizes that a qualified charitable organization may offer in a raffle are strictly limited in Texas. To start, no qualified charitable organization can offer a cash prize. And no prize offered can have a value exceeding $50,000, other than a residential dwelling. If the dwelling is offered or awarded as a prize at a raffle, the value cannot exceed $250,000.
The other exception to the value limit on raffle prizes allows a charitable organization to give tickets in the Texas state lottery authorized by Government Code Chapter 466 (State Lottery), even if the prize in the lottery game to which the ticket or tickets relate exceeds $50,000.
Use of Raffle Proceeds in Texas
Texas law also limits the use of raffle proceeds by qualified organizations. The law specifies that all proceeds from the sale of raffle tickets by qualified organizations must be dedicated to charitable purposes. Any and all forms of paid advertising for the raffle or promotion of the raffle are prohibited, including those in newspapers, on television and on radio.
Restrictions and Penalties
Qualified organizations in Texas are restricted as to how many raffles they can hold every year. The law states that they cannot hold more than two raffle drawings each year. In addition, the two drawings cannot be held at the same time.
It is unlawful under Texas law for the organization to compensate anyone who participates in or assists in a raffle, including aiding the organization and the sale of raffle tickets.
A violation of any of the provisions of the Texas Charitable Raffle Enabling Act is considered gambling, and will be prosecuted as a Class A misdemeanor under the Texas Penal Code. A Class A misdemeanor in Texas is punishable by a fine of up to $400, a jail term of up to one year, or a combination of both.
FAQs About Texas Raffles
What is a raffle?
In Texas, a raffle is the award of one or more prizes by chance at a single occasion among a single pool or group of persons who have paid or been promised a thing of value for a ticket that represents a chance to win a prize.
Is registration required?
No. The organization just has to qualify under state law. If they do, they can hold up to two raffles per calendar year.
Can you change the date of a raffle?
The qualified organization can change the date if necessary. They can set another date not later than 30 days from the original date. However, this 30-day limit is inflexible. If prizes have not been awarded within 30 days of the original date, the organization must refund the ticket money.
Can you promote ticket sales for a raffle?
Paid media advertising is not allowed in Texas. However, if promotion is donated, it is permissible.
Can an organization hire people to sell tickets or organize the raffle?
It is illegal in Texas for an organization to compensate a person directly or indirectly for selling raffle tickets. Nor can the organization compensate a person directly or indirectly for organizing or conducting a raffle.
What should be printed on the tickets?
Texas law requires that five items be on each ticket:
- Name of the organization conducting the raffle.
- Address of the organization or named officer of the organization.
- Price of the ticket.
- General description of each prize with a value of more than $10.
- Date on which the raffle prize or prizes will be awarded.
Must the prize be on hand at the drawing?
The organization must have the prize in its possession or ownership at the time of the raffle. Alternatively, Texas law permits the organization to post a bond with the county clerk for the full amount of the money value of the prize.
What about poker tournaments or casino night fundraisers?
Texas gambling laws (Chapter 47 of the Penal Code) do not permit nonprofit organizations to hold poker or casino night fundraising events. The gambling law applies to nonprofits and for-profits equally. The three parts to an activity that could make it illegal gambling are:
- Money or anything of value is paid to enter the game.
- Winners are decided by a game of chance.
- Prizes of value are awarded.
If all three of these conditions are met, it's probably gambling and illegal.
Teo Spengler earned a JD from U.C. Berkeley Law School. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an MA and an MFA in English/writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.