I recently saw an advertisement for a charity in New York where participants purchase tickets for a drawing. The prize is a set amount of money per week for two years.
I’m certainly no legal eagle, but I’m fairly certain that, were this not for a charity, it would certainly run afoul of New York State law.
My question is, does the fact that it’s a charity change anything? I know that charities often have fundraisers with elements of chance (Bingo nights, Chinese Auctions, etc.). Is there an exemption for these games, or are the laws regarding them just not enforced? Is there a limit to the prize amount allowed?
Thanks in advance for your help.
Zev Steinhardt (who is NOT planning a lottery in any capacity)
I teach a fundraising class and I just so happen to be in New York State and…uh, I don’t know the answer to this. But I can get back to you soon enough with the specific letter of the law. As I understand it the NYS Constitution defines “gambling” as “stak(ing) or risk(ing) something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome”, which would seemingly include charity games of chance. But there may be a loophole for 501(c)(3) organizations, though I haven’t found it yet.
I can tell you that in practice most big fundraisers clear things with the local authorities first. I’ve been involved in a few of these (and some of these have truly big-ticket items–one of them had a “grand prize” of a luxury box at a Buffalo Sabres game that must have retailed at over $5,000), and the police and local politicos were always involved. It would have been pretty embarrassing for the local police to be helping to run an event that later got busted for illegal gambling.
My WAG is that Chinese Auctions in particular are not considered gambling. Why? Because almost all baskets at a Chinese Auction are donated to the organization running the event, and therefore technically have a “value” of zero. I can’t guarantee that would pass a legal challenge, but again the local authorities don’t usually have a vested interest in busting cancer charities and the PTA.
I found an updated version of the rules you linked to here (PDF).
In the rules, it states:
No single prize awarded in a raffle shall exceed the sum or value of fifty thousand dollars, except that an authorized organization may award by raffle a single prize having a value of up to and including one hundred thousand dollars if its application for a license includes a statement of its intent to award a prize having such value (See Sections 5622.12 and 5622.13 of the Rules);
and
The aggregate fair market value of all prizes to be offered or awarded by a licensee in raffles in any one calendar year (license period) shall not exceed $100,000;
This particular raffle’s prize is over $100,000 put is paid out over two years. Would that contravene the rules?