We have all seen gun raffles at a charity event, but occasionally you will see a gun raffle for profit. There may be a firearm valued at $1,000 being offered in a raffle for $10 per ticket. The owner offers raffle tickets to 2,000 members of an online community and sells 500 tickets. The winner of the raffle obtains a gun for $10 and the owner just made a profit of $4,000. This type of gambling is not allowed in Texas and is considered an illegal lottery. Tex. Penal Code § 47.01(7). The person purchasing the illegal raffle (lottery) ticket could be charged with a Class C misdemeanor and the entity conducting the illegal raffle could be charged with a Class A misdemeanor. Tex. Penal Code §§ 47.02, 47.03. It is a defense for the purchaser if the purchaser reasonably believed the raffle was in compliance with the Charitable Raffle Enabling Act. There is no similar defense for the person conducting the raffle. It also is a defense if the raffle consisted entirely of participation in a drawing for the opportunity to participate in a hunting, fishing, or other recreational event conducted by the Parks and Wildlife Department. Tex. Penal Code § 47.02.

In Texas, raffles are governed by the Charitable Raffle Enabling Act. Tex. Occ. Code § 2002.01. Gun raffles at charity events are legal raffles as long as they are for charitable purposes, offered by a “qualified organization,” and they comply with the Gun Control Act. In summary, qualified organizations include a qualified religious society (in existence for at least 10 years and does not distribute income to its members except as reasonable compensation for services or reimbursement of expenses), a qualified volunteer fire department (does not pay its members compensation except nominal compensation and does not distribute income to members except to reimburse expenses), a qualified volunteer emergency medical service (does not pay its members compensation except nominal compensation and does not distribute income to members except to reimburse expenses), and a qualified nonprofit organization. Tex. Occ. Code § 2002.002.

An organization is considered a qualified nonprofit organization if it:

(1) does not distribute any of its income to its members, officers, or governing body, other than as reasonable compensation for services;

(2) has existed for the three preceding years;

(3) does not devote a substantial part of its activities to attempting to influence legislation and does not participate or intervene in any political campaign on behalf of any candidate for public office in any manner, including by publishing or distributing statements or making campaign contributions;

(4) qualifies for and has obtained an exemption from federal income tax from the Internal Revenue Service under Section 501(c), Internal Revenue Code of 1986;  and

(5) does not have or recognize any local chapter, affiliate, unit, or subsidiary organization in this state.

Tex. Occ. Code § 2002.003(a).

A local chapter, affiliate, unit, or subsidiary organization of a parent organization incorporated or holding a certificate of authority under the Texas Non-Profit Corporation Act may qualify if:

(1) neither the local organization nor the incorporated grand lodge or other institution or order distributes any of its income to its members, officers, or governing body, other than as reasonable compensation for services;

(2) the local organization has existed for the three preceding years and during those years:

(A) has had a governing body or officers elected by a vote of its members or by a vote of delegates elected by its members;  or

(B) has been formally recognized as a local chapter, affiliate, unit, or subordinate lodge of the grand lodge or other institution or order;

(3) neither the local organization nor the incorporated grand lodge or other institution or order:

(A) devotes a substantial part of its activities to attempting to influence legislation;  or

(B) participates or intervenes in any political campaign on behalf of any candidate for public office in any manner, including by publishing or distributing statements or making campaign contributions;  and

(4) either the local organization or the incorporated grand lodge or other institution or order qualifies for and has obtained an exemption from federal income tax from the Internal Revenue Service under Section 501(c), Internal Revenue Code of 1986, or other applicable provision.

Tex. Occ. Code § 2002.003(b-1). An organization is considered to devote a substantial part of its activities to attempting to influence legislation if, in any 12-month period in the preceding three years, more than 10 percent of the organization’s expenditures were made to influence legislation. Tex. Occ. Code § 2002.003(d).

An unincorporated organization, association, or society and a wildlife conservation association also may qualify as a qualified nonprofit organization if they meet similar requirements. Tex. Occ. Code § 2002.003(c), (e). A wildlife conservation association may qualify even if it devotes a substantial part of its activities to attempting to influence legislation or supporting a political campaign, but the proceeds of a raffle cannot be used for that purpose. Tex. Occ. Code § 2002.003(e).

In addition to be conducted by qualified organizations, raffles must meet certain requirements. The organization may only conduct two raffles per year, and they cannot be conducted at the same time. Tex. Occ. Code § 2002.052. All of the raffle proceeds must be spent on charitable purposes. Tex. Occ. Code § 2002.053. The organization cannot use paid advertising to promote the raffle or promote or advertise the raffle statewide other than through its website, email, newsletter or social media. Tex. Occ. Code § 2002.054.

The following information must be printed on each raffle ticket sold or offered for sale:

(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 to be awarded in the raffle;  and

(5) the date on which the raffle prize or prizes will be awarded.

Tex. Occ. Code § 2002.055.

Raffles provide a great opportunity for charities to raise money for themselves. Raffles are a bad idea in Texas for someone seeking to turn a profit by selling raffle tickets. It is an illegal lottery if it is not conducted by a qualified organization for charitable purposes only. We recommend that our clients not promote or participate in raffles that are not run by a charitable organization.