In some states, like TX, raffles (those are reserved for 501c3's) for cash prizes aren't legal:
---------- Post added at 06:14 PM ---------- Previous post was at 06:13 PM ----------
For instance, Texas says:
"Texas law allows only certain charitable and nonprofit organizations to conduct raffles to support their charitable causes. Only the following entities which meet certain qualifications are permitted to hold raffles:
volunteer emergency medical service providers
volunteer fire departments
qualified nonprofit organizations
In order to conduct a raffle legally, a nonprofit organization must have, among other criteria, an exemption from federal taxes under Section 501© of the Internal Revenue Code. A qualified nonprofit must also have been in existence for three years. The law permits only two raffles per calendar year, requires several disclosures printed on tickets, and limits the value of prizes purchased by the organization to $50,000, or $250,000 if the purchased prize is a residential dwelling.
It is also against the law to hold a raffle in which cash, or anything readily convertible to cash, is offered as a prize, or which is promoted statewide or through paid advertising, including television, radio or newspapers.
An unlawful raffle could be considered illegal gambling, which may carry criminal penalties. A county attorney, district attorney or the attorney general may also shut down an illegal raffle."
---------- Post added at 06:17 PM ---------- Previous post was at 06:14 PM ----------
"Federal Laws. Federal law strictly limits non-profits from conducting multi-state
raffles. If the not-for-profit plans to use the U.S. mails for any part of the raffle –
e.g. for mailing entry cards or raffle tickets – there are federal laws and regulations
that bear consideration. Also, the FTC is empowered to regulate certain types of
sweepstakes and contests.
---------- Post added at 06:18 PM ---------- Previous post was at 06:17 PM ----------
A reader commented to our homepage on this awhile ago,
"I think penny auctions are a great business model, rather revolutionary.
I see nothing illegal about charging for bidding. Many face-to-face auctions charge some sort of entry fee or registration fee to bid.
However, when it comes to bidding for cash, I won’t gamble my luck there with the FTC. The problem with cash is that it comes really close to a lottery which we all know are illegal. You pay for a chance to win the grand cash prize."
---------- Post added at 06:22 PM ---------- Previous post was at 06:18 PM ----------
The bad news was that the definition of “lottery” includes a raffle or drawing of any sort in which
there are (a) a prize, cash or non-cash, ( an element of chance, and © a required payment to purchase a
---------- Post added at 06:24 PM ---------- Previous post was at 06:22 PM ----------
From Missouri State Law:
"Gambling, with only a few exceptions, is illegal in Missouri. Those exceptions are restricted and highly regulated.
There are many types of gambling. Promotions that award prizes may be called contests, sweepstakes, lotteries, raffles, drawings or games. It is important to know the law and to understand what elements make a promotion illegal.
Three elements make up an illegal promotion:
Prize is any benefit, cash or property awarded to a winner.
Chance means the winner is chosen by “luck” with little or no skill or ability involved.
Consideration is the exchange of something of value for the opportunity to participate in the game."
Edited by PennyAuctionWatch, 15 December 2010 - 12:31 AM.