A raffle or bingo night may look like a simple nonprofit fundraiser, but charitable gaming is heavily dependent on state and local law. Tax-exempt status alone does not authorize an organization to conduct gambling.
Licensing, permitted games, prize rules, volunteer requirements, use of proceeds, advertising, reporting, and tax treatment can all affect an event. Organizations should check the rules where the game will physically or legally occur before selling chances.
The IRS describes gaming as including bingo, raffles, lotteries, pull-tabs, scratch-offs, and numerous other games of chance. It also notes that gaming is normally regulated by state and local law.
That means a nonprofit cannot rely solely on its federal exemption letter. State law may limit gaming to particular types of eligible organizations and require licenses or permits.
General regional online publications can be useful for ordinary community reading, but gaming authorization should always be checked with the government agency responsible for the jurisdiction.
Massachusetts offers a clear example of how charitable gaming can be structured. State guidance says qualified nonprofits need a permit from the municipality where certain gaming activities, including raffles, will be held.
The same guidance explains that only qualifying nonprofit organizations may legally conduct covered raffles and that proceeds must be used for authorized charitable, educational, religious, fraternal, civic, or veterans’ purposes.
Organizations therefore need to identify both their eligibility and the event rules before promoting ticket sales.
Gaming proceeds can create unrelated business income issues even when money eventually supports charitable programs. The IRS states that gaming ordinarily does not become related to a charity’s exempt purposes simply because the proceeds fund those purposes.
Certain traditional bingo games receive a specific federal exclusion if the statutory conditions are met. The game must qualify as bingo, comply with state and local law, and satisfy rules concerning for-profit bingo in the jurisdiction.
Organizations researching fundraiser presentation through local media resources should separate promotion questions from legal authorization.
| Issue | Possible Requirement | Why It Matters |
|---|---|---|
| Raffle | State/local permit | Legality of ticket sales |
| Bingo | Gaming rules | May affect tax treatment |
| Prizes | Statutory limits | Limits vary by location |
| Proceeds | Restricted use | Charity may need records |
Gaming laws may regulate far more than the initial permit. Pennsylvania, for example, licenses eligible organizations for specified small games of chance and imposes reporting requirements on certain club licensees.
Internal controls should document ticket sales, prizes, expenses, deposits, use of proceeds, and required reports. Promotional ideas found through community news material should never replace jurisdiction-specific gaming procedures.
The organization should also verify whether paid workers, vendors, electronic platforms, alcohol service, or off-site ticket sales change the applicable rules.
A frequent mistake is calling an activity a “donation drawing” or “fundraiser” and assuming that removes it from gambling law. Regulators usually look at how the activity actually works, including whether participants provide consideration for a chance to win a prize.
Another mistake is assuming that one state’s raffle permission works nationwide. Online ticket sales can create additional jurisdiction questions when purchasers are located elsewhere.
Contact the responsible gaming regulator, municipality, or qualified attorney before running a high-value raffle, selling entries across state lines, using an online gaming platform, or introducing a format not clearly covered by existing guidance.
Advice is also worthwhile when significant gaming revenue is involved because unrelated business income, reporting, and exemption issues may arise alongside state gaming law.
No universal federal rule grants that permission. State and local gaming laws determine whether the organization is eligible and what permits, operational restrictions, and reporting requirements apply.
No. The IRS provides a specific exclusion for qualifying bingo, but conditions apply, including legality under state and local law. Other gaming activity may produce unrelated business taxable income.
Not necessarily. State charitable-gaming laws can restrict permissible uses of proceeds, and the organization’s own charitable-purpose and accounting obligations still apply.
The safest time to review gaming law is before advertising begins. Identify the state and locality, confirm organizational eligibility, determine whether a permit is required, document how proceeds will be used, and examine federal tax treatment.
A successful fundraiser still needs to be a lawful one.
This article provides general legal information and is not a substitute for advice from a qualified attorney or tax professional.
Disaster fundraising can begin within hours of a hurricane, flood, wildfire, earthquake, or other emergency.…
A serious workplace accident can trigger several responsibilities at once. Employers may need to arrange…
International calling charges can involve per-minute rates, connection charges, service fees, roaming arrangements, taxes, or…
Sports sponsorship deals can involve far more than placing a logo on a jersey. Contracts…
Tips are an important part of compensation for many hotel, restaurant, banquet, and hospitality employees,…
Crematory operation laws commonly regulate licensing, authorization for cremation, facility conditions, identification procedures, inspections, environmental…