Although many of these charitable organizations have very little in common, they do have one ongoing similarity– they nearly all hold raffles or opportunity drawings during their fundraising events.
Years ago, I heard something about 50/50 drawings (where money raised in ticket sales is split in half between the winning ticket-holder and the charity) being illegal. Until recently, I had forgotten about the 50/50 rumor thing. A couple of weeks ago, one of my buddies mentioned that his organization was going to be selling tickets for his club, and boy, was he excited to tell me that half of the money collected would be given to the winning ticket holder. I told him that the whole thing made me nervous, and I then suggested that his group check into the legality of the endeavor. I’m sure he thought that I was a party pooper.
A few days later, I decided to look further into the matter of the legalities in California when it comes to raffle and opportunity drawings. The following is what I found at oag.ca.gov/charities/raffles. Please share it with your friends who work with nonprofit organizations.
In California, charities and certain other private nonprofit organizations may conduct raffles to raise funds for beneficial or charitable purposes in the state. This exception to the general constitutional prohibition against lotteries requires that at least 90 percent of the gross receipts from these raffles go directly to beneficial or charitable purposes in California. Penal Code section 320.5 governs which organizations qualify and how the raffles must be conducted. The Bureau of Gambling Control regulates the 50/50 Major League Sports Raffle Program established by Penal Code 320.6.
Unless specifically exempted, a nonprofit organization must register with the Attorney General’s Registry of Charitable Trusts before the raffle and must also file an aggregate financial disclosure report for all raffles held during the reporting year. Registration and reporting forms are available below.
An organization may register for raffles at any time during the calendar year. The registration period during which organizations may conduct raffles is September 1 through August 31. An organization must file the raffle registration form at least 60 days before the scheduled date of the raffle in order to give registry staff sufficient time to process the form. Registration via Form CT-NRP-1 must be filed and a confirmation letter from the Registry of Charitable Trusts must be received before conducting any raffle activities, including selling raffle tickets. If you wish to conduct the drawing after September 1 of any year, but you wish to sell tickets prior to September 1 of that year, you must register for both years. The Registry does not confirm receipt of raffle registration forms. An organization that wants confirmation that the Registry has received a form must submit the form to the Registry by requesting “certified receipt,” a service available at the U.S. Post Office.
Regardless of the number of raffles held during the registration period, the nonprofit organization must file a single, aggregate report for all raffles held by filing Form CT-NRP-2.
Penal Code section 320.5 is a criminal statute. Violations may be forwarded to the local district attorney, city attorney, or county counsel for investigation and possible prosecution. In addition, the Attorney General may take legal action under the provisions of the Nonprofit Corporation Law for breach of fiduciary duty or waste of charitable assets. The raffle registration may also be suspended or revoked. (See section 419.2(a)(2) of the raffle regulations, which can be found on our website: oag.ca.gov/charities/raffles.)
