Raffles: The Difference between Fundraising and Gambling in Illinois
Raffles are often used by organizations for fundraising purposes. However, Illinois law suggests that unless the raffle is licensed and operated in accordance with the Raffles and Poker Runs Act, 230 ILCS § 15/0.01et seq., (Raffles Act) and applicable local laws, raffles are illegal gambling subject to criminal fines and penalties. Below are five key considerations organizations need to understand to lawfully benefit from such fundraising efforts.
First, the Raffles Act requires an organization interested in holding a raffle to obtain a license from the local governing body, i.e. the municipality or county in which the organization desires to hold the raffle. 230 ILCS § § 15/2(a) & 3(1). Notably, local governing bodies are not required to allow raffles and, as a result, it may not be possible to obtain a raffle license in every location throughout the state. Each local governing body that offers raffle licenses must pass its own local laws permitting raffles and provide a license application for interested organizations. Id. at § 15/2(a). Although similar in some aspects, these local laws and applications differ from city to city and county to county, so it is important that an organization review the applicable local laws to understand licensing requirements.
Second, raffle licenses can only be issued to select nonprofit organizations. Specifically, the organizations must be "bona fide religious, charitable, labor, business, fraternal, educational or veterans' organizations that operate without profit to their members" and have been in existence for at least five years. 230 ILCS § 15/2(b). Nonprofits less than five years old cannot hold a raffle license nor can a for-profit organization, even if the proceeds are then donated to a nonprofit. The only other organizations eligible for a raffle license are non-profit fundraising organizations that are "organized for the sole purpose of providing financial assistance to an identified individual or group of individuals suffering extreme financial hardship as the result of an illness, disability, accident, or disaster." Id. Further, raffle licenses cannot be issued to organizations that employ or otherwise have as an officer or director someone who has been convicted of a felony, has been a professional gambler or gambling promoter, or is not of good moral character. Id.at§§ 15/3(5)(d) & (e). Raffle license applications may require a sworn statement from the organization testifying to the same.
Third, the actual operation of the raffle is subject to additional restrictions and requirements. Notably, local governing bodies are required within their ordinances to limit the amount that may be charged for a raffle ticket and the value of prizes to be awarded in a raffle. 230 ILCS § 15/2(a). For example, the Village of Morton's ordinance provides that raffle ticket prices cannot exceed $100 per ticket, and the total retail value of all prizes awarded in a raffle shall not exceed $40,000. Morton Municipal Code 3-3-15 & 16. Also of note, only bona fide members of the licensed organization may participate in the management or operation of the raffle and raffle tickets may only be sold within the area specified on a raffle license. 230 ILCS § 15/4(a)(5). Therefore, it is important that those who are selling raffle tickets are informed of the limited geographic area in which ticket sales are permitted.
Fourth, the proceeds from any raffle must go solely to the organization licensed to hold such raffle. 230 ILCS § 15/4(a)(1). As a result, nonprofit organizations should be wary of any request to share or split the proceeds from a raffle unless the organization with which it is sharing is also licensed to hold the same raffle.
Fifth, obligations continue after the raffle. Organizations licensed to hold a raffle must keep records of and report to the local governing body the gross receipts, expenses, and net proceeds from the raffle and how the proceeds were distributed. 230 ILCS § 15/6. The Raffles Act requires the licensed organization to maintain these records for three years. Id. § 15/6(d).
Despite the rules and restrictions, raffles should be and often are enticing to nonprofits in need of operating or program funds. To keep a raffle from becoming a legal liability, though, be sure to review the Raffles Act and applicable local laws.