Sweepstakes vs. Raffles: 5 Reasons Sweepstakes are More Effective for Online Fundraising
There’s a reason sweepstakes and raffles are so popular among nonprofit fundraisers – they work! Not only are these fundraising methods very effective in raising significant funds, they also add a strong element of excitement, momentum and fun to a nonprofit’s fundraising efforts.
Donors simply love sweepstakes and raffles, and in fact, these fundraising methods are known for reactivating lapsed donors and generating high engagement from new and current donors. The chance to win a highly desirable prize, coupled with the feel-good emotions around supporting an important cause, make donating via sweepstakes or raffle a win-win-win for the nonprofit, the donor, and the cause. That’s why we love them!
That said, while sweepstakes and raffles may seem similar, they are not the same — at all. In this blog post, we’ll look at the defining differences between the two, including five reasons why sweepstakes are ultimately the better tool for your nonprofit to fundraise online.
1. Long-Term Donor Engagement: Sweepstakes are Highly Engaging and Tend to Raise More Money Year After Year
There’s something exciting about a sweepstakes that stirs the imaginations of donors, especially when you choose a highly desirable prize (like a Sprinter Van, an incredible getaway experience, or shopping spree). Donors are captivated by sweepstakes fundraisers, and the numbers prove it!
Sweepstakes fundraisers have a unique attribute – many donors will donate to enter more than once. That happens because, as the drawing date grows closer and the nonprofit continues to promote their sweepstakes, donors who had entered before get excited again and purchase more entries.
That is fantastic news for a nonprofit: rather than a one-time donation, donors are actually circling back and donating multiple times. In fact, nonprofits typically experience a massive spike in donations in the final weeks of the sweepstakes leading up to drawing a winner. Donors imagine themselves winning, and it motivates them to enter multiple times!
It gets even better. Sweepstakes fundraisers are particularly good at attracting new donors for nonprofits. The chance to win a highly desirable prize attracts people who may not have been in the nonprofit’s orbit previously.
Not only that, but when nonprofits run a similar sweepstakes year after year, they’re able to continue building their donor list and the amount of money they raise. One nonprofit museum started by giving away a Corvette in 2019. They raised $245,000 — pretty amazing! When they ran a similar sweepstakes in 2020, they raised $592,650… and in 2021, they raised $723,450. And they are on track to smash that record in 2022. Can you imagine where they’ll be in five years!?
Sweepstakes fundraisers generate a high levels of donor engagement and excitement, and in truth, raffles can do the same thing. However, let’s look more closely at some of the legal restrictions with raffles, and what makes sweepstakes the more practical fundraising option.
2. Legal: Sweepstakes are Not Gaming, so a Sweepstakes is Much Easier to Run than a Raffle
Unlike raffles, sweepstakes are not classified as gaming (gambling) by regulators, which makes a huge difference for nonprofit fundraisers. The result is that sweepstakes are much, much easier to run than raffles.
From selecting a prize, to collecting funds, to awarding your winner, every aspect of running a sweepstakes is easier and less bureaucratic than a raffle. Let’s take a look:
Sweepstakes fundraisers are legal in all 50 states and U.S. Territories
On the other hand, several states, including Utah, Alabama, and Hawaii, prohibit raffles altogether — even if they are raising money for a nonprofit.
Sweepstakes are regulated by federal law and there are no registration or licensing requirements
Raffles are gaming, with different regulations and requirements in each state. This means that nonprofits running a fundraising raffle must register with, and get a license from their state’s secretary of state office. And, in many cases, you must either hire or train someone on your team to function as a gaming manager.
Sweepstakes allow you to give away (almost) any prize
If you want to give away an exotic sports car, a million dollar vacation home, or even a private jet ride, with a sweepstakes, you can! There are only a couple of restrictions for sweepstakes giveaways: no alcohol, and no guns. Other than that, you’re in the clear. On the other hand, in many states where raffles are legal, the value of the prize is often restricted. For example, in Pennsylvania, the value of any single prize awarded must not exceed $1,000!
Sweepstakes can be marketed online
The freedom to market your sweepstakes across state and even international lines is crucial to successful fundraising. Raffles severely restrict your ability to promote your contest. Federal regulations prohibit promoting a raffle across state lines – and that means no promotions on social media or websites. Since sweepstakes are not gaming, there are no restrictions on online advertising or promotion, so your sweepstakes can reach many more potential donors than a raffle can.
Sweepstakes prizes can be purchased on consignment
Nonprofits have the freedom to source their prizes on consignment, meaning they don’t have to purchase the prize before beginning their sweepstakes. With a raffles, on the other hand, Many states require nonprofits to document that they own the prize before the start of the contest. This can get really tricky, especially if the prize is expensive. What if you don’t raise enough to make your money back? With a sweepstakes, this is never an issue — prizes on consignment guarantee that the nonprofit is never left in a financial bind, because the grand prize is only awarded if a minimum amount of money is raised (more on this later).
Sweepstakes impose no restrictions on how or when the money raised is spent
Along with no need to register your sweepstakes there is no requirement to report income from a sweepstakes to the secretary of state. And there are no restrictions on how you spend money raised with a sweepstakes so you are free to put those funds to work right away supporting your cause. On the other hand, in many states, proceeds from a raffle must remain in escrow for months until the prize is awarded. Imagine successfully raising a large sum of money and not being able to touch it for months —not even to purchase your raffle prize!
Sweepstakes must have a free entry option
Sweepstakes are required to offer a free entry option. This requirement ensures that the sweepstakes is not classified as gaming. But don’t worry — as long as you actively promote your sweepstakes, experience has proven that generous donors will out-number free entrants.
Because of the freedom that sweepstakes offer nonprofits, many organizations are switching from a raffle model to a sweepstakes model and seeing increased raises and growth in their donor base.
3. Financial: Online Sweepstakes are Designed to Eliminate Financial Risk for Nonprofits
Unlike raffles, sweepstakes can be designed to ensure that a nonprofit will not lose money with this type of fundraiser. How? Two key points: Sweepstakes have no upfront costs and sweepstakes are affordable to run.
No upfront costs – sweepstakes prizes can be purchased on consignment
Raffle regulations require you to document that your nonprofit owns the prize outright before the contest even begins. Sweepstakes have the advantage of being able to purchase prizes on consignment until a winner is drawn.
Here’s how that works. Your nonprofit works with a vendor or partner to source a prize on consignment. Let’s say your organization is involved in outdoor adventure, so you want to give away a new snowmobile. Your nonprofit will reach an agreement with a snowmobile retailer, stating that they will reserve a special snowmobile that you can give away in your sweepstakes.
You set a minimum amount of money that has to be raised for the snowmobile to be awarded. The “minimum raise” ensures that your costs are covered, no matter what. So if a new snowmobile costs $12,000, you could set your minimum raise at $24,000 to make sure you can pay for the prize and still raise the money you need to support your cause.
If, at the end of the sweepstakes, you reach your “minimum raise,” your nonprofit will purchase the snowmobile and give it to the winner. If you don’t reach your minimum, no worries – the retailer will simply sell the prize as usual. Vendors love this kind of arrangement because it means that they have the opportunity to give back to a nonprofit beyond making a cash donation.
TapKat recommends an alternative cash prize if you don’t reach your minimum raise. This ensures that there is always a happy sweepstakes winner! The cash prize is a percentage of the net proceeds of the sweepstakes fundraiser. So your nonprofit still raises a good amount of money and, your winner will be delighted to find out that they’ll be getting a big fat check in the mail!
Costs of running an online sweepstakes are very affordable
When you run your fundraiser on an online sweepstakes platform such as TapKat, there are no upfront fees or other costs. Modest platform fees and credit card fees are charged only when when donations are made.
There is no need to print and keep track of thousands of raffle tickets or buy one of those big ticket drums. When a donor enters your sweepstakes, the platform automatically assigns their entry numbers and emails a donation receipt. Plus your sweepstakes donor database has all the entry records in order and ready to draw your winner with just one click when the sweepstakes closes. That means your team can focus on promoting the sweepstakes rather than laboring over all the tedious administrative to-dos of the typical raffle.
4. Sweepstakes Offer Nonprofits Greater Financial Freedom
Your nonprofit is free to spend or save the money raised with a sweepstakes in any way it sees fit, with no limitations, restrictions, or escrow requirements. With sweepstakes, your nonprofit starts making money as soon as that first donor enters and funds are deposited directly into your bank account (minus a transaction fee). That means you can pay for promotional campaigns with the money that is raised with your sweepstakes fundraiser.
On the other hand, restrictions on the state-level can make accessing the funds you raise with a raffle much more complicated. Many states require that the funds go into escrow for a certain period of time; for instance, until the prize is awarded. That means that your nonprofit won’t have access to the funds you raise… even to pay for the prize you plan to give away!
Raffles typically set a limit on the number of tickets that will be sold, setting a ceiling on the amount of money that can be raised. Sweepstakes, in contrast, do not have a limit on entries sold and, most importantly, the amount of money that can be raised. Many TapKat nonprofits are generating game-changing raises including: The Shelby American Collection, which raised $1.5 million in 2021; The National Sprint Car Hall of Fame & Museum, which raised over $700,000 in 2021; and Backcountry Discovery Routes, which raised nearly $300,000 in 2021.
5. Promotion: There are No Restrictions on Marketing a Sweepstakes
Unlike raffles, there are no legal restrictions on how your nonprofit can market a sweepstakes, which is critical in our online world. It’s actually illegal to market raffles across state lines, which means it is very difficult to host a raffle online since practically impossible to restrict who enters.
Additionally, marketing a raffle online is also a no-go, which means no social media, online ads or website promotion. With a sweepstakes, those limitations disappear, opening up the possibilities for marketing via email, social media, paid online advertising, and more.
This becomes especially important if your nonprofit is interested in reaching new donors. Sweepstakes fundraisers have proven to be an excellent method for bringing in new donors because it is so easy to market to a wide audience of potential supporters on the Internet. Once you’ve selected your prize, you can connect with lots of people who are interested in that prize. When they find out they have the opportunity to win their dream car/travel experience/celebrity meet and greet/etc., they’ll want to enter — and join your donor base.
When it comes to promoting your fundraiser, the question of raffle vs. sweepstakes becomes very clear. Sweepstakes allow you to leverage the power of online promotions to reach donors. And, with a sweepstakes, there are no potential legal issues to worry about.
Conclusion: Sweepstakes Are Just All-Around Easier and More Effective for Fundraising
With almost no legal restrictions on sweepstakes, no need to hire a gaming manager, or own your prize upfront, sweepstakes are just plain easier! Your staff and volunteers won’t have to spend time on all the administrative details required to run a raffle. Sweepstakes fundraisers free up your team to focus on more impactful activities, like promoting the fundraiser.
When you choose a great prize that your donor base will love, design a sweepstakes site that they’ll find highly appealing, and promote the heck out of it via email, social media, and live events, your sweepstakes has the potential to be a highly effective fundraising tool for your nonprofit – raising more money year after year.
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The advantages of sweepstakes for online fundraising are obvious. To get started on a TapKat sweepstakes fundraising site for your nonprofit click here!
