Important Rules for Charity Fundraising Raffles in California

Raffle Requirements for Nonprofit Organizations in California

In California, charities and certain other nonprofit organizations may conduct raffles to raise funds for beneficial or charitable purposes. This exception to the general constitutional prohibition against lotteries requires that at least 90 percent of the gross receipts from these raffles go directly to beneficial or charitable purposes in California. Which organizations qualify and how the raffles must be conducted are governed by California Penal Code section 320.5. If participants are required to purchase a ticket in order to have a chance to win a prize, the drawing is subject to the provisions of section 320.5 and related regulations.

Your Charity Must Register Before Conducting a Raffle

Unless specifically exempted, a nonprofit organization must register with the Attorney General's Registry of Charitable Trusts prior to conducting a raffle. In addition, the organization must file an aggregate financial disclosure report for all raffles held during the reporting year. Forms for registering and reporting activities are provided on the Attorney General’s website.

Know the Registration Period and the Rules for Conducting Raffles

The registration period for conducting raffles is September 1 through August 31 annually. Registration must be completed prior to conducting raffle-related activities, including the selling of raffle tickets. A nonprofit organization must obtain a confirmation letter from the Registry of Charitable Trusts prior to conducting any raffle activities. This includes selling tickets to an event that will be held in the future.

If a nonprofit organization wishes to conduct a drawing after September 1 of any year, but wishes to sell tickets prior to September 1 of that year, the organization must register for both years. An organization must file the raffle registration form (Form CT-NRP-1) and a filing fee at least 60 days before the scheduled date of the raffle in order to give Registry staff sufficient time to process the form. The Registry does not confirm receipt of raffle registration forms. An organization that wants confirmation that the Registry has received a form must submit the form to the Registry by requesting "certified receipt," a service available at the U.S. Post Office.

The 90/10 Rule for Raffles

As noted above, California laws require that 90 percent of the gross proceeds raised must go directly to beneficial or charitable programs (“90-10 Rule”). This means an organization is only allowed to utilize 10 percent of the gross proceeds to pay for expenses and the consignment cost of the raffled items. With the exception of eligible organizations defined in Penal Code section 320.6(c), charities must follow the 90-10 rule.

The organization is not precluded from using funds from sources other than the sale of raffle tickets to pay for the administration or other costs of conducting the raffle. However, the organization must exercise due care in using other funds. The misuse of restricted assets or the use of unrestricted assets which results in losses to the corporation may subject the board of directors to personal liability for breach of fiduciary duty.

Raffle Follow-Up Report to the Attorney General’s Office

A nonprofit organization that has registered to conduct raffles must file a single aggregate report (Form CT-NRP-2) on or before October 1st for all raffles held during the reporting year (September 1 through August 31), regardless of the number of raffles held. Precise record-keeping is required. Reports that include estimates of proceeds and expenses will not be accepted for filing. If a raffle is a part of a larger fundraising event, the organization has an obligation to keep the accounting of the raffle proceeds and expenses separate from the larger event.

Violation of the California Penal Code Section 320.5

Violations of Penal Code section 320.5 may be forwarded to the local district attorney, city attorney, or county counsel for enforcement. In addition, the Attorney General may take legal action under the provisions of the Nonprofit Corporation Law for breach of fiduciary duty or waste of charitable assets.

Need More Information on Raffle Rules and Restrictions?

For more information on raffle restrictions, eligible organizations, and registration requirements, please refer to the Attorney General’s website. The Attorney General's office updated Forms CT-NPR-1 and CT-NRP-2 on February 1, 2020. The updated forms can be found on the Attorney's General's website. If you need assistance registering your organization for a raffle, please contact nonprofit attorney Jonathan Grissom at the button below.