Without a doubt, no matter which fundraiser you choose, charity raffles and sweepstakes are a great way to raise funds for the causes you care about most. Oftentimes, organizations are unaware of the differences between these two types of fundraising campaigns.
Let us break it down for you!
Charity raffles: More restricted geographically
Charity raffles and sweepstakes have one main thing in common: they both give donors a chance to win a prize in exchange for a donation (fun stuff, right?). The primary differences between the two types of campaigns are in the way they’re regulated legally.
When it comes to US based raffles:
- They are technically considered a form of gambling by federal 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) organizations (US)
- Organizations conducting raffles must still comply with the state and local raffle laws and regulations that apply
- Some states prohibit online raffles making it very difficult to run an interstate raffle, and impossible to run one nationally
Montana (raffle ticket purchases by credit card are prohibited)
If your organization is fundraising in one of these states, you may want to consider running a charity sweepstakes instead. They have a similar feel as a raffle, but have less restrictions geographically.
Organizations outside of the US:
Please consult your legal counsel before publishing and running your raffle or lottery to ensure that it is compliant with all laws and regulations in your country and jurisdiction. If you are an organization domiciled in New Zealand, you won’t be able to run your raffle online.
Charity sweepstakes: Free entries required
Compared to a raffle, charity sweepstakes generally have fewer geographic regulatory restrictions, and entries can be sold nationally or even internationally. When organizations have a goal of extending to a wider audience, charity sweepstakes have a further reach!
While sweepstakes allow organizations to reach a vast audience because of the lessened geographical restrictions, a free method of entry must be offered in addition to donation-based entries. This is the biggest differentiator between raffles and sweepstakes!
When it comes to sweepstakes:
- They are not considered a gambling activity in the same way that raffles are because of the free form of entry (you generally can’t gamble in a casino for free)
- There are limitations on free entries, e.g. one entry per person, to prevent abuse (participants who enter for free are still learning about your organization as they participate)
- They do not allow for physical entries or paper tickets to be sold (unlike raffles, only online entries are allowed)
- They do not have a manual option for drawing winners (drawings are done at random, electronically, by our system)
- They do not allow a 50/50 or split the pot type format like raffles
- They do not allow a limited number of entries
- The free method of entry is usually 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.
Why aren’t physical entries or manual drawings allowed?
Legally, the free method of entry must be presented at the point of sale. Offering free entries when selling printed tickets in person isn’t very feasible and can’t be enforced to the point that it would be acceptable to regulators. As a result, RallyUp does not support the sale of printed tickets on sweepstakes.
Think about it. If participants were presented with a free option for sweepstakes entries in-person, they’d likely go with the free choice instead of purchasing entries! As a result, it would directly impact on the amount raised by the organization. Online only entries protect your organization in the event of a campaign audit by a government agency as there is not a way to prove a free entry was offered to physical entries sold. With online-only entries, you sidestep both issues completely.
The winning entries are drawn systematically at random by RallyUp. There is not a way to draw winners manually by the organization (like you may traditionally in a raffle). As we mentioned before, this is due to the required method of free entry — and free entries are not just worth a single entry into the drawing.
Even though free entries are limited to one person, they receive the average number of entries donors have paid for to enter the drawing. Calculating this by hand would be too complex and can introduce the risk for human errors (which could make the drawing unfair).
For the sake of fairness and simplicity, RallyUp:
- Uses a certified random generator to calculate the average number of paid entries
- Assigns the average number of paid entries to each free entry
- Runs it through the drawing process to select a winner
Something to keep in mind
If your charity sweepstakes has a total prize value over $5,000 (such as a vacation getaway), and you want to be able to receive donation-based entries from the state of New York, there’s an additional requirement that needs to be met. You’ll need to obtain state registration and a surety bond!
We know that may sound a little daunting, but trust us, it’s not as scary as it seems. As a matter of fact, we can assist you with the 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, we encourage you to look through this help article for some guidance!
Have more questions?
We’re here to help! 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. Our team is available via chat on our website during normal business hours. Just hit the orange message button in the bottom right of your screen.