Online Raffles Are Chancy, At Best

March 17, 2015       Richard H. Levey      

Online raffles might seem like lower-effort fundraising alternatives to web-based auctions, but even these have their hazards. Raffles, unlike sweepstakes, require some sort of consideration in exchange for a chance to win. Thus, gambling statutes often regulate such events.

How can an organization lessen the likelihood of running afoul of these statutes, which can vary not just state-by-state, but county-by-county? “What I expect charities to do is not consummate transactions online,” said Tyree Collier, an attorney at the firm Thompson and Knight in Dallas, Texas.

According to Collier, even organizations where managers try to keep online raffles in-state to limit compliance issues could run afoul of the law. Texas, for example, does not permit statewide raffles. Organizations have attempted to get around this by blocking residents in a few of the least-populous ZIP codes, Collier said.

That might work if raffles are allowed at all. Take New York, where the right to run lotteries is claimed solely by the state, according to Steven C. Bennett, a partner at New York City law firm Park Jensen Bennett. Language such as void where prohibited offers an organization some — but only some — coverage.

Bennett offered a further caution: “Consideration does not have to be financial consideration,” he said. “Registration information, such as where you are going to deliver the prize, is obviously necessary. But beyond that, if you say ‘to enter, you have to give me some amount of detailed information which is not strictly for registration,’ that’s potentially a problem.

“This is a matter that should be reviewed with counsel. You can’t assume your good intentions are going to solve all your problems.”

As a start, Bennett suggests organizations contact charity bureaus within state attorneys general offices or whichever state office oversees charities.

Some organizations began exploring online auctions because of economic necessity. New York City-based Rush Philanthropic Arts Foundation began working with online auction platform Charitybuzz, also of New York City, in 2008, when “the economy was in a really tough place,” said Tangie Murray, the organization’s executive director.

“We had, prior to that time, never had an online auction,” Murray said. “[Bringing the auction online] really helped us raise the bar and get a lot more reach for our packages. We didn’t have to rely on people who had already dug deep to buy tables to our event.”

Rush initially kept a few items offline. “In the first year, we did a hybrid. We kept around 10 or 20 lots so attendees could still bid, and we put the rest of the lots online,” Murray said. Rush needn’t have bothered. Attendees were bidding for the online lots, although, “Most of the winning bids for the items on Charitybuzz were from people who had not come to the event,” Murray said.