Q:
We’d like to increase ticket sales for our raffle.
To do this we are thinking about promoting it
on our website. It certainly would make the
sales process easier as well. Our one concern
is if it’s legal.
A:
That’s a good question, with no good – or at
least no definitive – answer. There are several
indicators that suggest you should go for it.
There are others that raise some pretty big,
bright red flags.
ON THE “GO FOR IT” SIDE
If
you go net-surfing, you will find several companies
such as RaffleSoft.com, Events.org and TrueRaffles.com
that exist to facilitate nonprofit raffles online.
TrueRaffles.com is actually based in Florida. One would expect the site owners to have
thoroughly vetted their business plans. By extension, the individual nonprofit should
be able to proceed either through one of these
companies or on its own.
I
also spoke to two different people in Florida’s
Department of Consumer Affairs, the regulating
body for nonprofits in the State. Both said
conducting a raffle online was fine, as long
as the organization was registered as a nonprofit
with the State. When I raised the issue of
such online fund raising reaching people from
other states where the organization might not
be registered, I was told the Internet could
not be regulated so this should not be of concern.
ON THE “MAYBE YOU SHOULD
HOLD BACK” SIDE
RaffleSoft.com
has a page on its website indicating those states
that permit online raffles, those that do not
and those for which no clear answer was available
at this time. That page is updated as necessary.
Florida and Illinois
– for our readers there – fell in the category
of no clear answer available.
Then
there is the confusion at the Federal level.
While traditionally, states have been free to
set their own laws about gambling, the explosion
of Internet gambling, which encourages activity
across state lines, caused the Federal government
to take back regulation in this arena. It has
used the Wire Wager Act (1961) to successfully
crack down on those engaged in online gaming,
even though the law was designed for wire transmissions
and passed prior to common use of the Internet.
Typically, raffle participants have been given
a pass because lawyers and legislators have
successfully argued that the Wire Wager Act
was drafted neither to catch the causal bettor
nor to interfere in the placing of wagers in
states where betting is legal. However, the
official position of the Justice Department
– at least during the Clinton Administration
– and several state attorneys general is that
the Wire Wager Act should be interpreted broadly
and cover all forms of gambling.
Concerned
about some of the loopholes found in the Wire
Wager Act, the Internet Gambling Prohibition
Act of 1999 was enacted to prohibit all Internet
wagers. This includes contests or games of
chance. Currently on appeal, it is expected
to come before the courts soon and engender
heated debate. The safe “bet” might be to wait
for the ruling on this case.
Finally,
there is a question about whether income from
games of chance is subject to the Unrelated
Business Income Tax (UBIT). Here again this
may be of little real concern since UBIT generally
does not apply to the occasional money-making
activity. However, there is little doubt that
a raffle conducted online is more likely to
catch official attention than one promoted friend
to friend.
This
is clearly a case where each organization should
make its own decision with the help of an attorney.
