Sweepstakes, Doorprizes, and Raffles: Are Your Fundraisers Legal?

Sweepstakes, door prizes, and raffles have become nearly as common for promoting some church activities as they are for the local ball club or PTA. That's especially so when a church is looking to boost attendance at events or raise money for good causes.

Promotions are one way to raise funds for your ministry, but they also can introduce some complications, especially legal problems if they aren’t organized according to federal and state laws. By following charitable gaming laws, churches can avoid difficulties when they host such promotions.

Steer Clear of Lotteries

Federal and state governments heavily regulate lotteries. It’s illegal for any organization besides the government to sponsor one.

Lotteries are composed of three elements. To avoid hosting a lottery inadvertently, churches should offer promotions that eliminate one of these three elements:

1. A prize. Something of value.
2. Luck. The promotion’s outcome is not dependent on skill.
3. “Consideration.” Generally an entrance payment of some sort. This payment is typically money, but anything that takes a considerable amount of the entrant’s time, or provides a benefit to the promotion’s sponsor also may be “consideration.”

Here are some examples:

• Sweepstakes. Sweepstakes aren’t considered lotteries because there is no consideration—only a prize and luck.
• Contests. Although most contests include a prize and consideration, they do not include luck. True contests are tests of skill, which removes the element of luck.
• Raffles. Raffles are more difficult to classify. Because raffles include a prize, luck, and consideration they are considered lotteries in some states. In these states, hosting a raffle can be considered a felony, punishable by up to two years in prison or fines of up to two thousand dollars.
• Door Prize. True door prizes include only a prize and luck. When consideration is added, they can become an illegal lottery. Some states require door prize registration—check with your attorney to see if your state requires you to register.

Sweepstakes, contests, and raffles are subject to federal and state laws that are separate from lottery regulations. Information about these regulations can often be found on a state’s official website under “charitable gaming” or “charitable solicitations” sections.

Also, be sure to talk to a local attorney before setting up any promotion. See Promotional Activities: A Closer Look for examples and more information about potential legal issues and risk management solutions to consider when planning a church or ministry promotion.

Keep Charity Bingo Law-Abiding

Many churches host weekly bingo nights as a fun way to raise money for their ministry. While bingo is legal for non-profit organizations in most states, churches and other charitable organizations may need to register their bingo hall. Because laws differ by state, contact a local attorney before setting up a bingo night at your church.

If your church hosts bingo games, clearly communicate that side betting isn’t allowed. In one East Coast church, police took several people away in handcuffs after they had created an illegal side-betting ring in which they bet large sums of money on the church’s otherwise legal bingo games.

Establish Rules for Church Promotions

Sweepstakes and contests typically require official rules. Ministries should provide the rules to every entrant in an easy-to-find location. When creating rules, consider these factors:

• Eligibility requirements. Include elements such as age and residence. Consider allowing only entrants age 18 and older to participate. Additional laws may apply to minors. Every state has different laws governing promotions, so if your ministry operates in more than one state, you might consider limiting your promotion to certain states. Church employees may not be able to enter the promotion, especially if they were involved in setting up or organizing the event.
• Prize descriptions. Disclose the retail value of all prizes. If the prize has a retail value of more than $600, the ministry may be required to issue a 1099 tax form to the winner. For more information, see this IRS resource.
• Duration and deadline. Clearly define the start date, the end date, and the submission deadline.
• Liability release. Include a clause that prevents the prize winner from bringing a lawsuit against the church for damages, should the prize somehow harm the recipient.
• Sponsor name and contact information. Provide the church’s phone number, mailing address, and email address.

In addition to these key components, several other elements might be added to the official rules of any promotion, including a “no purchase necessary” statement, and a listing of the winners’ names. A local attorney can help your ministry develop a set of rules that meets state and federal guidelines.
For more information on promotions and what should be included in official rules, the United States Postal Service provides a helpful Guide to Sweepstakes and Lotteries.

Social Networks Add Extra Rules

Social networking sites like Facebook, Twitter, and Google+ are becoming popular places to conduct sweepstakes, contests, and raffles. As a result, all three sites developed their own sets of promotion guidelines. You can read them by following the links below:

• Facebook
• Twitter
• Google+

When using a social networking site to host or promote your church’s giveaway, be sure to obey not only federal and state laws, but also the social networking site’s promotion guidelines.

Complying with laws and guidelines will help ensure that your church’s promotions raise funds and further its ministries and stay in step with legal requirements for such promotions.