Legal Question in Business Law in California

Re: Liability of Holding a Raffle for a Non-Profit

Caution must be exercised in any drawing involving prizes so that it does not fall within the definition of a lottery prohibited under Section 319 of the California Penal Code, as follows: ". . . any scheme for the disposal or distribution of property by chance, among persons who have paid or promised to pay any valuable consideration for the chance of obtaining such property or a portion of it, or for any share or any interest in such property, upon any agreement, understanding, or expectation that it is to be distributed or disposed of by lot or chance, WHETHER CALLED A LOTTERY, RAFFLE, OR GIFT ENTERPRISE, OR BY WHATEVER NAME THE SAME MAY BE KNOWN." [Emphasis added].

In other words, if (1) a prize is given by a method involving 2) chance for a (3) consideration paid by the participant, the award of that prize would be considered an unlawful lottery.

If, however, prize tickets used in a raffle are available free upon request to the public, the element of consideration would be lacking and the distribution of prizes would not then constitute a lottery. The fact that a purchase is not necessary would have to be printed on all promotional materials and on the tickets thmselves.

There is an exception for certain charities in California, but prior registration with the Department of Justice and reporting requirements apply. See the following webpages for limitations and requirements:

http://caag.state.ca.us/charities/raffles.htm

http://caag.state.ca.us/charities/faq.htm#raffle1

Re: Liability of Holding a Raffle for a Non-Profit

Mr. Beal's answer is correct insofar as it goes, but read further in the Penal Code. Section 320.5 is expressly devoted to the subject of raffles by nonprofit organizations.

It's too lengthy to quote here, but is simple enough so the officers of the nonprofit can read, follow and presumably do what's necessary to stay out of trouble with the law.

In short, raffles are permissible if the nonprofit complies with this Section.

Among the requirements are that the organization has been qualified to do business in California for at least a year, that it has registered with the Department of Justice, and 90% of the proceeds go to qualifying uses.