Charity raffles and sweepstakes can be a great way to raise money for your cause. Most organizations are unaware of the differences between the two, however, and aren’t sure which option will best fit their fundraising needs. This article provides the information you need to help make that decision.
Raffles and sweepstakes are similar in that they both give donors a chance to win a prize in exchange for a donation. But there are key differences, particularly in how they are regulated. Raffles are technically considered a form of gambling by government regulators since donors make a payment in exchange for a chance to win something (just as you’d do at a casino).
Raffles for charitable purposes may be allowed at the federal level for 501(c)(3) organizations (US) in many instances. But organizations conducting raffles must still comply with the state and local raffle laws and regulations that apply to them. These regulations make it very difficult to run an interstate raffle, and impossible to run one nationally. But for local fundraisers by 501(c)(3) organizations who qualify, raffles are a great way to raise money.
Please note: Online raffles are prohibited entirely in Alabama, California, Hawaii, Kansas, Utah, Washington, Iowa and Minnesota. If your organization is fundraising in one of these states, you may want to consider whether you can run a charity sweepstakes instead.
Charity sweepstakes generally have fewer geographic regulatory restrictions than raffles, and entries may often be able to be sold nationally or even internationally. This enables organizations to run charity drawings that have a wider reach, when that’s a goal.
The primary factor that makes sweepstakes different from raffles is that a sweepstakes must offer a free method of entry in addition to donation-based entries. Because of this, sweepstakes may not be considered a gambling activity in the same way that raffles are (you generally can’t gamble in a casino for free).
The free method of entry is typically provided by requiring an entrant to print and hand-mail an entry form for a chance to win. In our experience, mail-in entries typically total less than one percent of the number of donation-based entries. Some sweepstakes receive no mail-in entries at all. We find that most people are willing to donate to participate since the cause is charitable. There are limitations on free entries (e.g. one entry per person) to prevent abuse. But at the very least, participants who enter for free are learning about your organization as they participate.
There is an additional requirement for charity sweepstakes if the total prize value is over $5,000. In that case, if you want to be able to receive donation-based entries from the state of New York, a state registration and surety bond are required. Don’t worry; this sounds more daunting than it is, and RallyUp can assist you with that paperwork. New York’s registration fee is $100 per charity sweepstakes, and the surety bond costs 2% of the prize value. But again, these are only needed if the prize value is over $5,000 and you want to allow residents of New York to participate. If you're considering a sweepstakes fundraiser instead of a raffle, feel free to read our article Charity Sweepstakes: What you need to know
We hope this information has been useful in helping you understand the difference between raffles and charity sweepstakes. As always, please feel free to reach out to our team if you have questions or want more information. Although we can’t provide legal advice, we have years of experience with charity drawings of all types and we’ll be happy to help in any way we can. Happy fundraising!