Nonprofit organizations often look to events like raffles to help raise money. However, many are unaware that this is generally a highly regulated area with varying treatment among the states—and an organization may find out only after the fact that it has conducted an illegal raffle and could be subject to penalties. Being familiar with the applicable legal rules is a crucial first step for organizations considering raising money in these ways.
Here in Colorado, the state constitution generally prohibits gambling and games of chance, subject to exceptions such as the limited-stakes gaming that is allowed in Black Hawk, Central City and Cripple Creek. It also allows for certain games of chance like bingo and raffles to be conducted by nonprofits that are first licensed by the Secretary of State. In order to be licensed, nonprofit must meet certain requirements:
- The nonprofit must be (i) a bona fide chartered branch, lodge, or chapter of a national or state organization; or (ii) a bona fide religious, charitable, labor, fraternal, educational, voluntary firefighters’, or veterans’ organization;
- The nonprofit must be operating without profit to their members and have been in existence continuously for a period of five years before applying for a license;
- The nonprofit must have had, during the entire five-year period, a dues-paying membership that has been carrying out the objects of the organization;
- The nonprofit must designate a games manager who is certified by the Secretary of State, and submit a roster of members who will assist in gaming activities.
In addition, the organization must renew its license annually, and also must meet additional requirements around prize amounts and raffle reporting. The Colorado Secretary of State has an online brochure for planning a raffle that includes more information on post-raffle procedures.
Problem areas for organizations in this area tend to be not being aware that they need to be in existence for five years with a dues-paying membership (as noted above) in order to get a license, and not realizing that they are conducting a game of chance. For example, the definitions under the raffle laws can encompass less traditional methods of selecting a winner or awarding prizes.
However, the Colorado Secretary of State recently announced new initiatives to make it a bit easier for qualifying nonprofit organizations to raise money through raffles and bingo, while still complying with state law. It now costs only $1 to both obtain and renew bingo and raffle licenses. Also, games manager training and certification can now be completed online, and the fee is only $1. In addition, organizations can request one-on-one assistance with the Secretary of State’s Office to complete their applications, with the hope that this will reduce the number of rejected applications and ultimately boost efficiency while cutting costs.