By Kevin Peters
An inquiry I often receive relates to a nonprofit organization, school organization or civic group asking about having some sort of raffle.
Each state has specific guidelines on this issue. This blog will focus on Tennessee Law. The Tennessee Secretary of State has an excellent website which provides resources and several FAQ’s which I highly recommend you review.
In Tennessee, raffles and games of chance are prohibited. There are certain provisions in which these types of activities may be permissible. Certain charitable organizations may apply to have one raffle each year. Only a 501 (c) (3) or 501 (c) (19) organization may apply to hold a raffle. These types of organizations must first submit an application and be granted permission. There are specific requirements including filing fees, documentation requirements and regulations specific to whom you may or may not sell tickets.
After an approved raffle takes place, a financial report is due within 90 days. If gross revenue from an event exceeds $50,000, an audited financial statement is also required. The organization must return at least 25% of its gross proceeds of the event back to its stated charitable purpose or program.
One final point to be aware of, the state defines a raffle as, “… a game of chance in which a participant is required to purchase a ticket for a chance to win a prize, with the winner to be determined by random drawing.”
If the Division of Charitable Solicitations is informed of an unapproved event, the Division will notify local authorities which have jurisdiction to investigate and prosecute. The Secretary of State’s website includes this FAQ, “If I don’t call it a raffle or sell tickets, but ask for donations for a chance to win a prize, is that allowed? Their answer should serve as a warning, “an event is considered a raffle if someone must pay for a chance to win a prize…It does not matter that the payment is called a donation.”
Source: https://sos.tn.gov/products/charitable-solicitations-and-gaming/who-can-hold-raffle