Raffle Secrets the Texas Attorney General doesn’t want you to know

50/50 Raffles are Illegal in Texas...(this is an example of laws many Texans don't know)

Did you know 50/50 raffles are illegal in Texas except for professional sports teams' foundations?  Most people wouldn't know this because 50/50's are prolific in the state.  Every 50/50 that you see (except at pro sports games) are in fact illegal.  Money cannot be offered as a prize in a Texas raffle.  There are other rules that at face value can be problematic...however if you were to hire an experienced gaming lawyer familiar with the regulatory environment of Texas (as I have done), there are many jewels one discovers that would be hidden to the layperson.  I will take a couple subjects right from the AG's website and I will drill down to point out what the Attorney General doesn't tell you, but you should know.  Here goes: 

Prizes Offered and Proceeds from Ticket Sales

A qualified organization may offer any prize except money. “Money” is defined as coins, paper currency, or a negotiable instrument that represents and is readily convertible to coins or paper currency. If the raffle organizers offer a prize which they have purchased or have given other consideration for, the value of the prize may not exceed $50,000, or $250,000 if the purchased prize is a residential dwelling. There is no value limit on prizes donated to the organization.*

*The attorney general doesn't tell you that the attorney general itself ruled that a prepaid visa card is not considered cash.  They also don't tell you that a prize may not exceed $50,000, but you can have multiple prizes worth $50,000 in the same raffle.

Restrictions

A qualified organization is not required to register with the State before conducting a raffle. However certain restrictions apply.

  • A qualified organization may hold only two raffles per calendar year and only one raffle at a time.
  • Raffle tickets may not be advertised statewide** or through paid advertisements. Each raffle ticket must state: 1) the name of the organization conducting the raffle; 2) the address of the organization or of a named officer of the organization; 3) the ticket price; 4) a general description of each prize having a value of more than $10; and 5) the date on which the raffle prize(s) will be awarded.
  • No one may be compensated directly or indirectly for organizing or conducting a raffle or for selling raffle tickets.***

**The attorney general does not tell you that for online sales, parts of Texas can be carved out and not allowed to purchase tickets and therefore the raffle would not be statewide.  Geolocation technology can do this quite easily.

***ALL net proceeds have to go directly to the charitable purpose (and not to any future raffles or fund-raising efforts).  The TX AG has interpreted the phrase “all proceeds” as used in the constitution and the CREA to mean net proceeds after payment of reasonable, incidental, and necessary expenses. Accordingly, an organization may use raffle proceeds to pay the reasonable, incidental, and necessary expenses of conducting the raffle from which the proceeds were raised. Tex. Att'y Gen. Op. JC-0046 (1999). 

My thoughts on Texas Regulations

Canada is the birthplace of electronic raffles/electronic 50/50 raffles.  There is a far greater appetite for raffles in Canada than in the US because Canada does not tax raffle/lottery winnings.  As such, the Canadian charitable gaming sector is more evolved than that of the US.  This can be good and it can be bad.  It's good in you know exactly where you stand on every issue, as the rules are laid out for you, and the regulators are pro-active in telling you what you can do and what you can't do.  It's bad for the very same reasons...often the answers you receive are "NO".  In Texas and in many states, this is not the case.  Often the attorney general quotes some state laws and they have a disclaimer on their site, that they don't take questions, and that charities have to get the use of a lawyer if they have concerns/issues they are concerned with.  Texas does not require the charity/non-profit to get a license for their raffle as stated above.  This should be part of the due diligence process for the attorney general and any issues would be flagged.  In my opinion this is not a fair process for the charity.  Most charities cannot afford a lawyer and may very well be breaking state laws.

I'm not a lawyer, but I am fairly well versed in various regulatory jurisdictions.  I think for charities, the more laissez faire approach to regulation on a whole is good for charities, but it doesn't take many bad apples to ruin it for everyone.  Nobody wants big brother breathing down their neck, but there certainly is a case for some oversight when it comes to charitable gaming.  I think Texas has been pro-active in the last couple years in adding Proposition 4 and Proposition 5 and I think it's a matter of time before these types of raffles become more mainstream.  One step at a time...but nudging may help too!!

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