501(c)(3) Raffle Laws by State: IRS Rules and Permits 2026

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Table of contents

• Are raffles in the US legal?

• Who can host a raffle in the United States?

• Federal IRS tax rules for nonprofit raffles

• Raffle vs. sweepstakes vs. lottery: the legal difference

• Nonprofit raffle laws and regulations by state: A-C

• Nonprofit raffle laws and regulations by state: D-I

• Nonprofit raffle laws and regulations by state: K-M

• Nonprofit raffle laws and regulations by state: M-N

• Nonprofit raffle laws and regulations by state: N-O

• Nonprofit raffle laws and regulations by state: P-V

• Nonprofit raffle laws and regulations by state: V-W

• Is there a way to host a raffle without registering with the government?

• Can you use Zeffy to run online raffles?

• How to legally hold a raffle for your nonprofit

• Common 501(c)(3) raffle compliance mistakes

• What to include on your raffle ticket

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Raffle laws are two layers, not one. Your state decides whether you can sell tickets, and how. The IRS decides what you owe when someone wins. Miss either layer and a fundraiser meant to help your mission can cost your 501(c)(3) real money six months later.

This guide covers both. You get the federal tax rules every 501(c)(3) needs to know, a clear breakdown of how raffles differ from sweepstakes and lotteries, and a state-by-state permit table with statute citations where they exist. For related help, see our companion guides on how to do a raffle and how to raise money for charity.

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Are raffles in the US legal?

Raffles in the US are regulated at the state level. Most states have laws that spell out:

• What types of organizations can host a raffle

• What purpose the raffle must serve (usually charitable)

• What rules and paperwork apply

• How many raffles an organization can host per year

For the most part, nonprofit and 501(c)(3) organizations can host raffles to raise money for their cause. But the rules vary a lot from state to state. Some states have strict licensing, prize caps, and record-keeping duties. Others (looking at you, Texas) ask for almost nothing. In states where raffles are illegal or heavily restricted, talk to your attorney or local government before you sell a ticket.

For a small nonprofit: the answer is "yes, probably, but verify your state cell in the table below." Do not run a raffle off a summary paragraph on any page, including this one.

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Who can host a raffle in the United States?

In 47 of the 50 US states, nonprofits and 501(c)(3) organizations can host a raffle. Two states ban them outright (Alabama and Utah), and Hawaii prohibits paid-entry raffles. The one rule that shows up in every state that allows raffles: only nonprofit and charitable organizations can host them. For-profit businesses cannot.

Not all 501(c) organizations are treated the same. Most states limit raffle eligibility to 501(c)(3) charitable organizations. Some also allow 501(c)(4) social welfare organizations, 501(c)(7) social clubs, and 501(c)(19) veterans' organizations. A few states extend to religious organizations or fraternal groups by name rather than IRS designation. Check your state row in the table below before you assume your designation qualifies.

For a small nonprofit: if you hold a current IRS 501(c)(3) determination letter, you are eligible in almost every state that permits raffles at all. If you are a state-registered nonprofit without 501(c)(3) status, check your state row twice.

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Federal IRS tax rules for nonprofit raffles

State licensing gets most of the attention when nonprofits plan a raffle, but federal tax rules apply no matter which state you operate in. Two of those rules quietly wreck small raffles more often than the $5,000 withholding cliff does:

• 1. The $600-and-300x W-2G threshold on a donated prize whose fair market value the board underestimated. A $2,000 gift basket someone donates still counts as a $2,000 prize.

• 2. The "raffle tickets are NOT tax-deductible" misconception that the treasurer keeps repeating at year-end. It has been wrong the whole time.

Three things to do before you sell a single ticket: log every ticket sale and winner in one place from day one; collect the winner's Social Security Number and mailing address before they take possession of any prize worth $600 or more at fair market value; and print "This raffle ticket purchase is not tax-deductible" on the ticket itself.

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IRS Rules for 501(c)(3) Raffle Prizes

Understanding the federal rules upfront prevents costly surprises after your event and keeps your 501(c)(3) status protected. The primary IRS reference for gaming at tax-exempt organizations is IRS Publication 3079, Tax-Exempt Organizations and Gaming.

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Form W-2G: Reporting Prize Winnings

When a raffle prize meets both conditions below, your organization must report the winnings to the IRS using Form W-2G, Certain Gambling Winnings:

• Prize value is $600 or more, and

• Prize value is at least 300 times the ticket price

Both conditions must be met, not just one. This is how IRS Notice 1340 defines the reporting threshold, and it is why a $600 prize on a $2 ticket triggers W-2G but a $600 prize on a $5 ticket does not (600 divided by 5 is only 120x).

When the threshold is triggered, you must:

• Collect the winner's name, address, and Social Security Number (or Tax Identification Number)

• Issue a completed Form W-2G to the winner by January 31 of the following year

• File Copy A with the IRS by the applicable deadline (see the Form W-2G instructions)

This applies to each individual prize that meets both thresholds, not to your total prize pool. If a winner refuses to provide their SSN or TIN, you must apply backup withholding at 24% of the prize value.

For a small nonprofit: the W-2G rule is the one you will actually hit. A donated grand prize valued at $600 or more on a $2 ticket clears both thresholds. Get the winner's SSN and address on the paperwork before you hand over the prize, or you will be chasing them down in January.

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Withholding on Large Prizes

For raffle prizes valued at more than $5,000 (after subtracting the ticket price), your 501(c)(3) is required to withhold 24% of the prize value for federal income tax before the winner receives the prize. This 24% rate is current per the IRS Instructions for Forms W-2G and 5754. (You may see older references to a 25% rate. That figure was superseded when the Tax Cuts and Jobs Act took effect in 2018.)

If the prize is non-cash (a car, a vacation package), your organization and the winner have to work out how the withholding is paid. Typically the winner covers the tax liability in cash before taking possession of the prize.

For a small nonprofit: most small raffles never hit the $5,000 cliff. But if a donated grand prize is worth $10,000, someone has to write a check for $2,400 of withholding before the keys change hands. Plan the paperwork before you announce the prize.

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Raffle Ticket Purchases Are NOT Tax-Deductible

This is one of the most common misunderstandings in nonprofit fundraising: raffle ticket purchases cannot be claimed as charitable contributions by the buyer. Because the buyer receives something of value in return (the chance to win a prize), the IRS does not consider the purchase a donation. IRS Rev. Rul. 83-130 sets this out, and the IRS Charitable Contributions guidance restates it.

Communicate this clearly to your supporters. Print it on the ticket. Say it out loud at the event. It is the single easiest source-of-truth mistake in nonprofit raffles.

For orgs whose state prohibits raffles entirely, or for supporters who want a tax receipt, Zeffy's fee-free donation forms are the simple alternative: an actual charitable donation IS deductible, and the donor gets a receipt.

For a small nonprofit: put the non-deductible language on the ticket itself, not just the website. It is the one line of copy that saves you a January email from a confused donor.

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Reporting Raffle Income on Form 990

Raffle proceeds must be reported on your organization's Form 990 as gross income from gaming activities. Specifically:

• Report gross revenue from raffle ticket sales on Schedule G, Supplemental Information Regarding Fundraising or Gaming Activities, if your gross gaming revenue exceeds $15,000 during the year

• Expenses related to running the raffle (prizes, printing, licensing fees) are reported against that revenue

• Net gaming income flows through to your organization's overall revenue totals

Accurate recordkeeping throughout the raffle, including ticket sales, prize costs, and winner documentation, makes this reporting straightforward and audit-ready. A raffle platform that tracks participant and sales data captures the winner name, contact info, ticket number, and ticket price that W-2G and Schedule G both require, without a per-ticket fee. Because raffle proceeds aggregate with other gaming income across the year, you can also track donors and giving history in one dashboard so Schedule G aggregation is not a year-end scramble.

For a small nonprofit: if your total gaming revenue for the year stays under $15,000, Schedule G Part III is not required. But the underlying recordkeeping still is, because a single audit letter cares whether you can produce ticket-by-ticket data on request.

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UBIT Considerations for Raffle Income

In most cases, raffle proceeds are exempt from Unrelated Business Income Tax (UBIT) under IRC Section 513(f), which excludes qualified public entertainment activities including games of chance conducted by 501(c)(3) organizations. See IRS Publication 598 for the general UBIT framework. Two conditions apply:

• The raffle is not regularly carried on as an ongoing commercial activity

• It is conducted in a state where such activities are legal for nonprofits

A separate exemption under Section 513(a)(1) also applies if substantially all the labor is performed by volunteers. In practice, most nonprofit raffles qualify under both provisions. If your organization runs raffles so frequently that the IRS could characterize them as a regular trade or business, consult a nonprofit tax advisor.

For a small nonprofit: UBIT is almost never the problem. State licensing and the W-2G paperwork are. Treat UBIT as a check you do once a year, not a rule you plan around.

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Raffle vs. sweepstakes vs. lottery: the legal difference

Mixing up these three terms is not just a branding issue. It is a legal one.

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The three-element test

Under US law, a lottery requires all three of these elements:

• 1. Prize: something of value awarded to a winner

• 2. Chance: the winner is selected randomly

• 3. Consideration: participants pay or provide something of value to enter

If all three exist, it is a lottery. Only governments can run lotteries. Nonprofits cannot.

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How raffles fit in

Raffles have all three elements: a prize, random selection, and paid entry. That is why most states classify raffles as a form of lottery and regulate them specifically. States that allow nonprofit raffles have carved out an explicit exception to their general lottery prohibition. Your raffle is legal only because your state created that exemption.

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How sweepstakes differ

A sweepstakes removes the consideration element. No purchase or payment is required to enter. That is the key legal distinction. Because there is no paid entry, sweepstakes are not classified as lotteries and face far fewer restrictions. That is also why you see "no purchase necessary" on sweepstakes promotions. It is not marketing copy. It is a legal requirement.

Nonprofits can run sweepstakes where winners are selected by chance and entry is free. You can suggest a donation, but entry must be genuinely free for participants who do not donate.

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How contests differ

A contest removes the chance element. Winners are chosen based on skill or merit, not random selection. Essay contests, photo competitions, grant challenges. Because the outcome depends on skill, contests avoid lottery classification.

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Quick comparison

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For a small nonprofit: if your state prohibits raffles or you cannot get a permit in time, a genuinely-free sweepstakes with a suggested donation is the workaround. "Suggested donation" has to actually mean suggested.

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Nonprofit raffle laws and regulations by state: A-C

The tables below cover all 50 states. Each row answers the three questions in order (are raffles legal, can you sell tickets online, can you sell in person and take a card), then gives a plain-English answer on whether Zeffy can be used for a raffle there, plus the permit requirements, the cost, and a direct link to the relevant state authority.

Two of those columns read "Not yet verified" for most states. That means what it says: we have not yet read the decisive statute or regulator page for that state, so we are not going to print an answer. It does not mean the answer is no. Where a cell is filled, the authority is named in the cell. Start with your state, then confirm current details with the linked agency before you sell a ticket.

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Nonprofit raffle laws and regulations by state: D-I

States in this section range from Delaware's low-threshold permit exemption to Indiana's recent credit-card approval update. Check the "Online ticket sales" column carefully — rules differ sharply even between neighboring states.

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Nonprofit raffle laws and regulations by state: K-M

This group includes several states with low-cost or no-permit pathways for small raffles. Minnesota's 501(c)(3) exception (no permit needed under $5,000 in prizes per event) is worth noting if you are planning a modest fundraiser.

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Nonprofit raffle laws and regulations by state: M-N

Missouri and Mississippi both allow raffles with no fee, but the regulatory contacts differ. New Jersey has one of the more involved permit processes, requiring both a state ID number and a separate municipal license.

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Nonprofit raffle laws and regulations by state: N-O

New York allows online raffle ticket sales conditionally, making it one of the more permissive states for digital fundraising. Ohio and Oklahoma both require no license and no fee, which keeps the barrier very low for smaller organizations.

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Nonprofit raffle laws and regulations by state: P-V

Pennsylvania is one of the stricter states for online ticket sales, barring them outright and limiting payment to cash, check, or money order in person. Washington takes a similar approach. Tennessee requires both state approval and a General Assembly review, making it one of the more involved permit processes in this group.

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Nonprofit raffle laws and regulations by state: V-W

Virginia's three-year existence requirement is one of the longer eligibility windows in the country. Washington is frequently cited as online-sales-prohibited, and that is correct: the Electronic Raffle Licence requires a sports-team affiliation and a home game, not a general online pathway.

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Is there a way to host a raffle without registering with the government?

Yes, often. Raffle laws vary by state, but there is almost always a path to hosting a small raffle without a full license.

Some states do not require any license at all. These include Florida, Maine, Montana, Ohio, Oklahoma, Texas, Vermont, and Wyoming. Most other states only require a permit once your raffle ticket sales or prize values exceed a certain threshold. Keeping your raffle small can mean staying below that line entirely.

Examples of low-threshold exemptions:

• Minnesota: no permit needed for 501(c)(3) organizations if prizes per event stay under $5,000

• Nebraska: no license needed for cash prizes under $1,000 or merchandise prizes under $5,000

• West Virginia: no license needed if total ticket sales stay under $15,000 per year and no single prize exceeds $4,000

• Delaware: no permit required if ticket price is $5 or less and total prize value is under $5,000

For a small nonprofit: check your state's prize and revenue thresholds before you assume you need a permit. Many first-time fundraising raffles fall under the exemption level. But the IRS rules in the section above apply regardless of whether your state requires a permit.

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Can you use Zeffy to run online raffles?

Three questions decide it, and only your state can answer them: are raffles legal there, can you sell tickets online, and can you sell in person and take a card. Zeffy does not change any of the three. The table above carries all three per state.

Yes, with an important caveat: whether your online raffle is legal depends entirely on your state, not on the platform you use. Zeffy's raffle tools are fully online, and they work wherever online ticket sales are permitted by state law.

Several states explicitly prohibit online ticket sales, including Pennsylvania (cash or money order only, in person), Washington (WSGC bars internet sales for standard raffles), Connecticut (third-party platforms barred), Georgia (premises rule), and Texas (statewide sales barred by statute). If your state is on that list, in-person sales are the route left open. Whether you may take a card at that in-person table is a separate question with its own answer, and it is the one most often assumed. Connecticut and New York permit cards in writing. Pennsylvania does not: 61 Pa. Code 901.506 excludes credit and debit cards from "cash", so a card at the ticket table is as prohibited as a card on a website. Iowa allows a debit card but not a credit card. Check the payment method for your own state before you set up the table, and do not assume a card is fine just because the raffle is.

States that allow online sales conditionally (Indiana, New York, Rhode Island, Montana with Form 46) require additional approval steps before you launch. Check your state row in the table above and contact the listed agency to confirm your specific situation.

Zeffy's raffle platform is free. There is no per-ticket fee, no platform fee, and no transaction fee. The donor receipt, winner tracking, ticket numbering, and sales data you need for W-2G and Schedule G are all captured automatically.

For a small nonprofit: if your state allows online sales, Zeffy is a straightforward, zero-cost way to run them. If your state restricts online sales, sell in person, confirm separately whether your state lets you take a card for a raffle ticket, and keep your paperwork the same way regardless.

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How to legally hold a raffle for your nonprofit

• 1. Confirm your state's rules. Use the state table above to find your state's row. Check whether raffles are legal, what permit is required, whether online ticket sales are allowed, and what the cost is. Then go directly to the linked state agency to confirm current details before you do anything else.

• 2. Apply for your permit or license. Submit the application to the relevant state or local authority. Many states require proof of your 501(c)(3) determination letter. Some require proof of how long your organization has been operating. Give yourself at least four to six weeks before your event date.

• 3. Set your ticket price and prize structure before you design the ticket. The W-2G threshold depends on both the ticket price and the prize value. A $2 ticket and a $600 prize will trigger W-2G; a $5 ticket and the same $600 prize will not. Know your math before you print anything.

• 4. Print compliant tickets. Every ticket must include: the name of your organization, the date and location of the drawing, the ticket price, the prize description, and the statement "This raffle ticket purchase is not tax-deductible." See the full checklist below.

• 5. Track every sale and every winner from day one. Collect winner name, mailing address, and Social Security Number or Tax Identification Number before you hand over any prize worth $600 or more at fair market value. Do this at the event, not afterward.

• 6. Handle withholding on large prizes. If a prize is worth more than $5,000 net of the ticket price, you must withhold 24% before the winner takes possession. For non-cash prizes, work out the payment arrangement with the winner in advance.

• 7. File Form W-2G by January 31. Issue the form to any winner whose prize met both thresholds ($600+ and 300x the ticket price). File Copy A with the IRS by the applicable deadline.

• 8. Report raffle income on Form 990. If your total gaming revenue for the year exceeded $15,000, complete Schedule G. Even if it did not, keep your records in a format that supports an audit request.

For a small nonprofit: steps 1 and 5 are the two most skipped. Most compliance problems trace back to one of them.

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Common 501(c)(3) raffle compliance mistakes

• Skipping the W-2G paperwork because the prize was donated. A donated prize still has a fair market value, and that value is what the IRS uses to determine whether W-2G applies. A donated gift basket worth $600 on a $2 ticket clears both thresholds.

• Telling donors their ticket is tax-deductible. It is not. The buyer receives consideration in return (the chance to win), so the IRS treats the purchase as a transaction, not a donation. Put the non-deductible language on the ticket.

• Assuming last year's permit is still valid. Many state permits are event-specific or expire annually. Check before each raffle, not just before your first one.

• Not collecting SSN at the event. Chasing a winner's Social Security Number in January is far harder than getting it on the night. Set up a winner-verification step as part of your prize handoff.

• Selling tickets online in a state that prohibits it. Pennsylvania, Washington, Connecticut, Georgia, and Texas are the most common states where nonprofits run into this problem. The state table above lists the online-sales column for every state.

• Underestimating a non-cash prize's fair market value. The IRS uses fair market value, not the price your organization paid or the price a sponsor provided. Get a written appraisal or use the retail value for any donated prize worth more than $500.

• Running a raffle in Alabama or Utah. Both states prohibit them entirely. If your organization operates in either state, a free-entry sweepstakes is the compliant alternative.

For a small nonprofit: the two mistakes that cost the most time to fix after the fact are the SSN collection failure and the online-sales compliance failure. Both are avoidable with one verification step before you launch.

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What to include on your raffle ticket

Most states that require a permit also specify what information must appear on every ticket sold. Even in states that do not require a permit, including this information protects your organization from questions after the event.

• Name and address of your nonprofit organization

• Date, time, and location of the drawing

• Ticket price

• Prize description (use fair market value for donated items)

• Ticket number (sequential, for audit purposes)

• Name of the permit authority and permit number, if applicable

• The statement: "This raffle ticket purchase is not tax-deductible."

Some states add requirements: Georgia requires the county sheriff's permit number; New Jersey requires your LGCCC ID number and municipal license number; Connecticut requires the permit number and the name of the organization issuing the permit. Check your state's linked authority for the full list.

For a small nonprofit: the non-deductible statement is the one line most tickets omit. It is also the one line that prevents the most post-event confusion. Print it on every ticket, in readable type, not footnote-sized text.

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Frequently Asked Questions - US Raffle Laws

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