Sweepstakes vs. Raffles: Which is the Right Fundraising Strategy for You?
Do you know the difference between a sweepstakes and a raffle?
More importantly, are you aware of the potential legal implications that holding a raffle could have for your nonprofit — even if you’re using it for fundraising purposes?
Here at TapKat, we’ve noticed that many nonprofits use the words “raffle” and “sweepstakes” interchangeably, when actually, the two are different in some important ways.
(Spoiler alert: if you’re considering a raffle fundraiser for your nonprofit, there is a chance — a good chance — that you’ll need to navigate heavy legal restrictions. More on this later.)
In today’s post, let’s explore the difference between both so you can make an informed decision about which format is best for your fundraising efforts.
What is a Raffle, Really?
In a raffle, every participant is required to purchase a ticket in order to play. At the end of the game, the nonprofit entity will select a winning ticket, and that person gets to take home the prize.
Seems like a great way to raise money, and it is, with a big caveat: raffles are considered gaming in the U.S. and every state has their own raffle regulations. Some states are more strict than others (you can imagine that Nevada is much looser than, say, Idaho), and some states have disallowed raffles completely.
So what does it mean for your nonprofit if you want to run a fundraising raffle? A few things:
To run a raffle, your nonprofit needs to receive a state-issued raffle license from the secretary of state.
Some states require that a certified gaming manager run the game.
Many states impose requirements that funds raised in a raffle are segregated into a separate bank account with restrictions on how and when the funds can be utilized, and how much can be raised.
In sum: raffles can get real complicated, real fast. And, perhaps most frustratingly, they also limit your ability to reach audiences across state lines.
However, a raffle could be a practical choice if these three criteria apply to your nonprofit:
You know for sure that your donors exclusively live within the borders of your state and…
You understand the gaming laws and regulations in your state and…
You are prepared to comply with all of those laws and regulations.
How to Run a Raffle
If you’ve determined that a raffle is the way to go, here are your next steps:
Step 1: Visit the Secretary of State Office in Your State
Find out what the state laws are around raffles. Some states allow raffles for fundraising purposes but impose restrictions on how much money can be raised.
Step 2: Consider Hiring a Third Party
In states that require a certified gaming manager to run your fundraiser, you may be best served by hiring someone to do it for you. Otherwise, consider having a member of your staff become a gaming manager.
Step 3: Determine if You Can Take Donations Online
Some states will allow you to take donations online via credit card, while others won’t. Find out what your state will allow and understand that this will have an impact on how you raise money; if your state doesn’t allow credit card transactions online, you’ll be limited to in-person transactions.
Of course, there’s much more to this process beyond the three steps outlined above, but if you’ve determined that the raffle route is best for your organization, it’s a good starting point. Please be aware that if you run a raffle online in one state, and someone from another state enters on via your website, that could be an issue even if your setup is compliant with your state’s laws and regulations.
Yep… it’s complicated! We’ve heard from many nonprofits who discover too late in the process that their raffle is actually not legal. Better to look closely at all your options beforehand.
Why TapKat Recommends Sweepstakes Instead of Raffles
As you may have concluded yourself, running a raffle quickly becomes a bigger endeavor than many nonprofits are prepared to tackle. However, a sweepstakes will allow your nonprofit to raise funds by selling entries to a contest that offers a prize at the end of the game (and there’s no limit to how much money you can raise).
Sweepstakes are legal in all 50 states, which allows you to market your fundraising campaign widely via social media, to your mailing list and to supporters who live in another U.S. state. Even people who live in other countries can enter your sweepstakes.
A sweepstakes allows you to reach out to a wide audience without the concerns of state by state regulations. When you sign up on the TapKat platform, the Rules are already written and automatically included, which means that you can spend your time building a solid campaign that excites your donor base (rather than slogging through legal paperwork).
So, why is a sweepstakes acceptable in states where raffles are so strictly managed?
It comes down to the option of entering without making a donation. In a raffle, the only way to play is to pay a dollar amount per entry, which makes it a form of gambling. In a sweepstakes, participants have the option to enter with what is called an “alternative method of entry” at no cost.
Don’t worry about the fact that a sweepstakes allows participants to enter for free. That certainly didn’t stop The Shelby American Collection from raising over $1,300,000 in their 2020 drawing (and their 2021 sweepstakes has already raised $960,400!), or the American Institute for Avalanche Research & Education raising $167,725 on their first sweepstakes, or the Boulder Climbing Community raising $12,650 with their sweepstakes.
As TapKat sweepstakes have proven over and over, the alternative entries aren’t going to break your sweepstakes. Actually, the opposite is true: when you allow alternative entries, the sky's the limit on how much money you can raise, and there are no geographic restrictions on where the money comes from.
For most nonprofits, choosing a sweepstakes over a raffle is the way to maximize the impact of their fundraiser.
How to Run a Sweepstakes
Now comes the fun part! When you’re ready to get your sweepstakes up and running, follow these three easy steps:
Sign up for an account at TapKat.com. You’ll quickly discover that our user-friendly platform gives you tons of flexibility to integrate your brand and track the progress of your drawing.
Find the prize you’d like to give away in your contest. It’s easier than you think! Prizes can be on consignment, which means that you don’t pay for the prize unless you raise a set minimum amount of money to cover the cost and meet your fundraising goal.
Easily create your sweepstakes campaign page on the TapKat website. You’ll need some splashy copy that describes your prize and your nonprofit, and 4-6 great images of the prize.
Launch your campaign and start fundraising. This is where the real fun begins. Promote your sweepstakes widely and watch the donations roll in. Payments are deposited directly to your nonprofit’s account on an ongoing basis, which means your organization receives an additional income stream throughout the campaign.
In case you’re wondering…
Do I need a tech person to set up the sweepstakes page?
Nope! Anyone with basic web skills will be able to build the sweepstakes page in very little time using our self-serve software platform.
What about legal stuff, like sweepstakes rules and disclaimers?
These are all built into the TapKat platform, so you don’t have to fuss with the legal details.
What about FAQs for donors?
As with all fundraisers, some donors have questions about how sweepstakes work (we’re used to that!) TapKat sweepstakes sites include a FAQ customized for your nonprofit to answer those questions. And that frees up your time and energy!
Sweepstakes vs. Raffles: 3 Key Takeaways
Sweepstakes are legal in all 50 states, whereas raffles are restricted in most states and illegal in some states.
Sweepstakes are the best option if you want to boost awareness for your nonprofit on a national level. If you plan to promote across state lines, or online via social media, your website, blog, email list or other online avenue, sweepstakes have none of the state-by-state restrictions that could have legal ramifications for a raffle.
Raffles will work if you plan to raise funds within your state and you have a clear understanding of state gaming laws. There are also Federal restrictions on marketing a raffle across state lines.
Ready to get started with your sweepstakes? It all starts on our easy-to-use sweepstakes fundraising platform for nonprofits TapKat.com.
Still have more questions about whether a sweepstakes is right for you? Schedule a demo with our expert fundraising support staff.
