In this guide, you’re going to learn exactly how to throw a fundraising raffle.
This definitive guide covers everything you’ll need to know in detail, including:
- Procuring raffle items
- Selling tickets
- Rules & regulations
- Lots more
So if you are ready to break ticket sales this year, you’ll love this guide.
What Is a Fundraising Raffle?
In a fundraising raffle, participants purchase numbered tickets. At a specified time, a ticket is drawn at random, and the holder of the ticket wins a prize. The term “raffle” is often confused with “sweepstakes”. In a sweepstakes, participants are not required to purchase anything to enter the contest.
Why Are Raffles Effective Fundraisers?
Raffles are popular fundraisers format for schools, churches, foundations, and many other kinds of nonprofits.
- People of broad socioeconomic backgrounds can participate in raffles.
- Raffles are inexpensive to organize so your risk is low.
- You can earn ticket revenue for much more than the prize is worth (or what it cost you to procure).
- Raffles are a seamless addition to any event, delivering big donations without eating into your event’s schedule.
Chapter 1: Types of Raffles
Raffles come in all shapes and sizes. Below are the key decisions you will need to make to determine how to proceed with the reset of your raffle planning.
Raffle or Sweepstakes?
As mentioned above, raffles require payment or other consideration to be entered. Sweepstakes do not. This important distinction has regulatory implications with regard to the license you may need to execute your fundraiser.
If your goal is to have a fun drawing to engage your guests, but you will raise your money elsewhere, you may find that a sweepstakes is an easier option (with a suggested donation for tickets). If you insist on requiring participants to purchase tickets, then you should proceed with planning your raffle.
Regardless of your choice, much of the information in this guide will still apply.
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Raffle Event, Side Game or Online?
You may have an entire event dedicated to raffle drawings, such as a tricky tray event, or the raffle can be a side game at your annual gala.
Increasingly, fundraisers are moving their raffles online, as dedicated raffle websites have made it easier to go virtual. Note that online raffles are subject to certain regulations that in-person raffles are not (more on that below).
Which Type of Raffle?
You have several options to choose from when planning your raffle. Below are the most common:
Participants purchase uniquely numbered tickets, and a copy of each purchased ticket is put into a raffle barrel. A ticket is drawn at random from the raffle barrel and the number on the ticket is announced. The holder of the matching ticket wins a prize.
There are many variations of the traditional raffle that don’t involve tickets. Though, all boil down to someone purchasing an entry and the winner drawn at random. For examples:
- Treasure Chest: Fill a locked box with valuable items and sell identical looking keys to guests. Over the course of a gala, people will try their luck at unlocking the treasure chest, but there will be only one key that fits.
- Diamond Bar: Wrap a felt bag around the stem of 100 champagne glass. All but one of the bags contain a cubic zirconium with the exception being a real diamond. Sell each glass for a fixed price, say $50. Purchasers visit an “Appraisal Station” for a jeweler to examine each person’s stone to identify the real diamond.
- Reverse Draw: Tickets are drawn and announced one-by-one, with each announced ticket being “eliminated” from consideration. The final ticket drawn is the winner.
The 50/50 raffle is identical to the Traditional Raffle with the exception that the prize depends on the total ticket revenue. All ticket revenues are totaled, and the holder of the winning ticket wins half of the revenue.
50/50 raffles are great because they eliminate your risk that you don’t sell enough tickets to cover your cost to procure the prize. It is also common for the winner to donate back some or all of their winnings.
Participants purchase bidding paddles whose numbers correspond with numbered ping pong balls in a bingo cage. A participant may purchase one or more paddles, usually starting at $5-$10 for the first paddle and lower prices for subsequent paddles.
Once everyone is seated, an auctioneer announces an item and declares how many quarters it costs to enter a bid (usually one, two, three or four quarters). A volunteer circles the room while bidders put their quarters in a bucket. Someone holding multiple paddles can place multiple bids or choose to play just one of their numbers (flipping the inactive paddle upside down).
The auctioneer pulls a ping pong ball from the cage and announces the number. The holder of the matching paddle wins the prize. If the number corresponds to an inactive paddle, the holder of the paddle announces “Pass” and another ping pong ball is drawn.
Prizes are scattered throughout the room. Participants buy raffle tickets to place in containers next to the items they want to win. A participant can put one or multiple tickets in a given container.
Once all the purchased tickets have been placed in containers, a designated person draws a ticket from each container and announces the numbers as they go. The person with the matching ticket for a particular prize gets to take it home.
Chapter 2: Prize Procurement
The type of raffle will dictate what kind of prize(s) you need to procure. Tricky tray raffles often consist of many smaller prizes (under $200 retail value), whereas a traditional raffle may have a larger prize.
All other things equal, fully donated prizes generate the biggest net donations since they have no cost to your nonprofit. Though, cold calling business for donated items is a daunting task.
Avoid cold calling by listing the people you know, like yourself, spouse, immediate family, closest friends, co-workers, neighbors, extended family, places you shop, professionals, and vendors. Then, match people with things they could likely donate, like a week at their vacation home, memorabilia or services.
Once it’s time to “make the ask”, remember the following:
- Be Specific: Don’t ask for “something,” ask for something specific.
- Be Thorough: Ask everyone on your list. You’ll be surprised who donates!
- Remove Barriers: Pre-fill any forms. All they should need to do is sign.
- Don’t Apologize: It is never an imposition to help a friend.
Pro Tip: “Bundle” the smaller donated items you receive into raffle baskets. For example, put together a basket of restaurant gift certificates and market it as “Dine out for a year.”
Alert: For your donors and sponsors to claim a tax deduction, you must give them an acknowledgement letter. Deductions are available for cash contributions and donations of property, but not for services or vacation rentals.
Purchase prizes for your raffle only if you are confident you can sell enough tickets to cover your costs and net a meaningful donation. Most states have rules that dictate that your total gross ticket sales must exceed your cost obtaining the prize.
If a business you contact is unwilling to donate an item for your raffle, ask if they will sell the item to you “at cost.” For instance, a new television set can fetch several times what you pay for it if you don’t have to pay the markup.
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The last category of prizes is cash. For instance, a 50/50 raffle has a cash prize of half of the proceeds. Although your profit margin on a percentage basis is less with cash than it is on donated prizes, you may find you enjoy higher ticket sales
Cash appeals to most all participants, the escalating prize of a 50/50 raffle builds excitement, and winners can use their cash winnings to cover their tax liability.
Alert: Check with your state that a 50/50 raffle is legal. In California, for instance, 50/50 raffles are available only at major league sporting events.
Chapter 3: Legal Considerations
In most locales, raffles are considered a form of gambling and are subject to gaming regulation. We can’t cover the nuances of every municipality so please consult with your lawyer to learn the specifics for your situation.
If you are running a raffle, you will most likely need a gaming license. Your requirement for a license may depend on:
- Retail value of your prizes: Prizes with low retail value may require a less expensive license and relaxed reporting requirements.
- How you sell tickets: Online ticket sales may require a special license with your state, or may be totally disallowed.
- Gross proceeds: Raffles exceeding many thousands of dollars in ticket sales may require a special license, or may be totally disallowed.
- How many raffles you run each year: If you run just one or two raffles each year, check if your state offers a special limited license which has lower fees and less stringent reporting requirements.
Gaming License Eligibility
For most locales, you need to be a tax-exempt 501(c) organization. Additionally, many locales require that your nonprofit has been in existence for a minimum amount of time.
How to Apply for a Gaming License
In some states, you will be required to register with the state gaming commission, and then apply for a license with your municipality. In other states, you will apply directly with the municipality. Applications are fairly inexpensive (around $100), though tedious.
If you plan to issue a cash prize or real estate, double check that your state allows it. Additionally, check your state’s regulations regarding paying for prizes as the nonprofit if you can’t procure a full donation. Some states require that you generate enough proceeds in ticket sales to cover your costs.
On the flip side, some states, like Nebraska, require you award at least 65% of the gross proceeds as prizes when proceeds exceed $5,000. For example, if you raffle off a vacation with a fair market value of $6,500, you can sell only up to $10,000 in tickets.
Finally, always make sure you award your prize. This is a key difference between raffles and lotteries: raffles always have a winner and lotteries sometimes have a winner. This distinction may change how your fundraising is regulated.
For all raffles, it’s important to publish the rules to minimize the likelihood of a dispute. Here is an example of terms and conditions for a 50/50 raffle performed at Atlanta Hawks games to benefit the Atlanta Hawks Foundation. You’ll see they cover:
- Eligibility (e.g., age, void where prohibited by law)
- How to enter
- Date and location of drawing
- Prize description (and remind participants of their potential tax liability)
- How the winner will be notified
- How the winner can claim the prize (Do they have to be present to win?)
- Any other conditions
Publish the rules online and have a copy of the rules available to your ticket sellers to give to purchasers. Your municipality may also have laws that require you to publish rules on any marketing materials.
Many raffle organizers are surprised to learn that the orange double roll of tickets with “TICKET” printed on one side and “KEEP THIS COUPON” printed on the other don’t meet many states’ requirements for raffle tickets.
For example, the New Jersey Legalized Games of Chance Control Commission requires you to furnish a sample ticket with minimum information before approving your license for off-premise raffles (participant need not be present to win). This ensures that the nonprofit is able to contact the winner if they are not present.
What to Include on Your Raffle Tickets
Some common ticket requirements are:
- Ticket number
- Organization name
- Gaming license number
- Date, time & location of the drawing
- Prizes and fair market values
- Ticket price (put the base ticket price, though you can still provide participants “volume discounts”)
- Purpose to which net proceeds will be devoted
- Certain legal statements, like “You need not be present to win”
Your organization should also keep a stub to perform the drawing and identify the winner(s). The stub should contain the name and contact information of the ticket holder, the ticket number, your organization’s name, and gaming license number.
Pro Tip: For raffles where participants may purchase dozens of tickets, furnishing this information on every ticket is impractical. Many nonprofits continue issuing the ubiquitous orange tickets and then furnish purchasers with a single card with the above information.
Selling tickets in-person is generally allowed, so long as you adhere to the following:
- Don’t sell tickets to minors or allow minors to sell tickets
- Give everyone the same price
- Don’t price your tickets above $100
- Don’t pay anyone to sell tickets
Where many regulations come into play is when you sell tickets online, over the phone, or through the mail. These alternative selling channels are heavily regulated because it is difficult to prevent someone from out-of-state or a minor from purchasing a ticket.
Your ticket-selling website must have certain safeguards in place to prevent interstate sales. As of this writing, online raffles are prohibited in Alabama, California, Hawaii, Kansas, Utah, Washington, Iowa and Minnesota and Montana
One more note about online raffles. The federal Wire Wager Act prohibits regular online gambling and for online gambling to provide regular and essential income to an organization. Thus, avoid running an online raffle with regularity.
Venue & Drawing
If you are planning an “off premise” raffle (participant need not be present to win), check that your state allows it and if there are any special regulations. As mentioned above, New Jersey requires specific information to be included on the ticket when hosting an off premise raffle.
For “on premise” raffles, check your state’s regulations on eligible venues. For example, Georgia requires that the drawing takes place on premises owned by the nonprofit or leased by the nonprofit and regularly used for non-raffle activities, In other states, venues not owned or leased by the nonprofit may host a raffle with special permitting.
In all cases, make sure that your gaming license is displayed at the venue, and that someone at least 18 years old supervises the drawing.
Too Much Red Tape? Consider a Sweepstakes
Turn a raffle into a sweepstakes by allowing entrants to print and mail an entry form for a free chance to win. As with raffles, check if your municipality has any additional rules that govern sweepstakes, though you’ll generally find a less stringent regulatory environment.
To be certain, the vast majority of sweepstakes entries will be issued after someone makes a cash donation to your cause. Many charity sweepstakes won’t get a single mailed-in entry form because participants understand the purpose is to raise money for a good cause.
Although sweepstakes avoid many of the regulations that govern raffles, mind the following:
- The free method of entry must be presented to the purchaser at the point of sale. Many sweepstakes have exclusively online ticket sales to guarantee the free method is presented.
- Free entries must be given the same chance of winning as donation-based entries. So, award each free entry a number of tickets equal to the average number of tickets purchased by paying participants.
- Publish clear rules specifying methods of entry, the entry deadline, drawing date and other disclaimers pertaining to your sweepstakes.
Chapter 4: Sell Tickets
Alert: This section is purely about selling tickets for your raffle. Some strategies may or may not be allowed by your state or municipality. Please reference the previous chapter and consult with your lawyer if you have concerns.
Set a Ticket Price
There’s no “one size fits all” rule for setting raffle ticket prizes. In an ideal world, you’ve run multiple raffles over the years with comparable prizes and varying price levels so you can see which price level generated the most revenue.
For those starting from scratch, the optimal price level will depend on the:
- Prize: Bigger prizes with broad interest command higher prices than smaller items.
- # of Tickets: Raffles with a capped number of tickets can charge higher ticket prices since each participant’s odds of winning increases.
- Audience: A wealthy audience committed to your cause is willing to pay more to support your raffle.
- Event: A ritzy gala should not sell $1 raffle tickets, as the low price would “cheapen” the event and harm other fundraising.
If your raffle’s format allows, include buying incentives to up-sell purchasers. For example, your 50/50 raffle ticket pricing could be 1 ticket for $5, 5 tickets for $10, and 20 tickets for $20. Additionally, consider early-bird incentives so people are encouraged to buy now.
Think about your raffle ticket as a piece of marketing for your event. An orange roll of tickets may be cheap and easy to obtain, but they ultimately limit the price you can command for a ticket (not to mention, they may lack legally required information). Would you pay $100 for a raffle ticket for a new car if it was a tiny stub you could easily lose? Likely not.
Services like Canva and TicketPrinting.com have hundreds of templates for you to choose from that look professional and contain the required information. You can get your ticket printed for around 10 cents per ticket, which you’ll likely make up for with a sharp design.
If designing and printing your own tickets, double and triple-check that there are no duplicate numbers!
With your tickets printed, it’s time to sell them. In most cases, your sales will be in-person, and you’ll want to follow these tips:
Perfect the Sales Pitch
Your sales pitch should be short, sweet and assumptive. Explain why you are raising money and assume they want to help. For example, “We’re doing a raffle to fund our after-school programming. You can help us reach our goal by participating in our raffle. How many tickets can I put you down for?”
Notice the call-to-action is “How many tickets can I put you down for?” instead of “Would you like to buy a raffle ticket?” The latter offer is very easy to decline with a “No.”
Sell to Personal Connections
People give to people, not causes. Have your volunteers sell tickets to their family, friends, neighbors and coworkers.
Alert: Be careful not to sell tickets to people involved in organizing the raffle. If they or you win, people may question the results.
Sell to the General Public
Pick high traffic areas relevant to your audience to sell tickets. For instance, school fundraisers should sell raffle tickets at their home football games. Make sure that you have permission to canvas wherever you decide to sell.
Equip your volunteers with a uniform or other identifier to build legitimacy. Many people won’t buy a raffle ticket if they are concerned it is a scam. Send volunteers out in teams of two so one can make the approach and the other can record the transaction.
Be very clear about when the drawing will take place and if the purchaser needs to be present. If selling to the general public, likely the purchaser needn’t be present.
Pro Tip: If your state allows, equip your volunteers to accept payment via cash, check or card. Cash is being used less and less so it is important to accept alternative methods of payment.
Sell at Your Event
Build a table display at your event that showcases the prizes and explains the rules. You may even have the raffle drum on the table to grab attention. Then send volunteers to the event floor to make sales. Another fun tactic is to put footprint stickers on the floor that lead to your ticketing table.
Give purchasers a fun identifier, like a sticker, after their purchase. This will prevent other volunteers from approaching the same people and turn your purchasers into “walking billboards.”
Pro Tip: It’s always a good touch (if not required) to include a sign at your booth to explain how someone can get help if they have a gambling problem.
You can opt to sell tickets online as well using a service like RallyUp. However, you will need to take precautions to prevent people in other states from purchasing tickets since you are only authorized to sell tickets in the state of your license. For this reason, most nonprofits stick with in-person ticket sales (or run a sweepstakes instead of a raffle).
Chapter 5: Announce the Winner
Announcing the winner of your raffle is an exciting moment for guests and your organization. This is usually a straightforward step, though there are some important details to consider.
Announce the winner at the time specified in your raffle rules. If your raffle is a side game at your fundraising gala, then you should schedule the drawing to be at the end of the event so people don’t leave early.
Perform the Drawing
If possible, get a big raffle drum to properly mix up the ticket stubs and provide a fun visual for guests. For smaller raffles a big bowl or bucket is fine.
After choosing and announcing the winner, draw two more tickets and store them securely in case the winner declines the prize or does not claim the prize.
Some raffles use alternative ways to select the winner, such as dropping a bunch a numbered golf balls on a target with the ball closest to the center being the winner. As with everything raffles, ensure this meets your local regulations.
Announce the Winner
For noisy events, invest in a robust sound system so the numbers or name are properly heard. Wait for your audience to be quiet as well before announcing the winner.
If your winner is not present, and you did not require them to be present to win, contact the winner via the information they provided you. Furthermore, publish the winning ticket number online and any other place you indicated in rules.
Alert: Don’t publish the winner’s name online, as they may want to remain anonymous should they win a large prize.
Chapter 6: IRS Reporting
Nonprofit accounting can be complicated. The key points are summarized below, but the IRS publishes a great document with examples in Publication 3079: Tax Exempt Organizations and Gaming. We highly encourage you to check it out.
Reporting on the Winner
If the fair market value of the prize is at least 300 times the wager (i.e., ticket price) AND the fair market value, minus the wager, is over $600, then you must file Form W-2G with the IRS and give a copy to the winner.
When the person receiving the prize is not the actual winner or is a member of a group of two or more people sharing the winnings, have them fill out IRS Form 5754 and submit it to you. This form contains helpful information for you to fill out Form W-2G.
In addition to the above requirements, if the fair market value of the prize, minus the wager, exceeds $5,000, then you must withhold income tax at a 24% rate (as of this writing) and report it on Form W-2G with the winner’s signature. This is a straightforward filing for cash prizes, but must also be done for non-cash prizes, like a car.
If it is a non-cash prize, the winner pays the organization the necessary tax. For this reason, it is very common for winners of non-cash prizes to reject the prize due to the tax burden. Some nonprofits offer to pay the tax burden or provide a “cash in lieu of prize” option so the winner is rewarded.
At year end, report the total amount of federal income tax withheld during the year on Form 945: Annual Return of Withheld Federal Income Tax. This will include all the taxes reported across all the Forms W-2G filed for the year.
Unrelated Business Taxable Income (UBTI)
Unrelated Business Taxable Income, or UBTI, is income earned by 501(c)(3) organizations that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization’s exemption. Hence, UBTI is taxable.
Unfortunately, income from raffles qualifies as UBTI and must be reported on IRS Form 990-T. An exception to this rule is made for organizations where substantially all the work is performed by a volunteer workforce – just make sure to record hours worked by compensated and volunteer workers! For complete IRS rules, see IRS Publication 598.
For each federal IRS form you submit, there is a corresponding state form to submit as well. Consult your local tax laws to determine your requirements.
Keep Your Records
Always keep your records for your raffle for at least three years. This is a best practice if not a legal requirement. At a minimum, records should contain:
- An itemized list of all gross receipts
- An itemized list of all expenses (other than raffle prizes)
- A list of the prizes awarded and the names of any persons who wins prizes
- The number of participants in the raffles
- Hours worked by compensated and volunteer workers
- Copies of any license applications and IRS forms
Let’s Hear From You
We hope you found this guide helpful. Now we’d like to hear what you have to say:
- Which chapter was the most helpful?
- Which section to you want to read more about?
- Do you have any tips that weren’t included?
Let us know by leaving a comment below.