Can a Nonprofit Run an Online Raffle Across State Lines?

Yes, a nonprofit can run an online raffle across state lines in 2026, but only when the raffle is legal in every state where a participant buys a ticket. Charitable gaming laws are set state by state (and sometimes county by county), so the moment your ticket sales cross a border you inherit a patchwork of permits, age restrictions, and reporting rules.

I have worked with 501(c)(3) boards, PTAs, and small charities that assumed federal 501(c)(3) status gave them a green light everywhere. It does not. Federal recognition exempts you from federal income tax. It does not override state gambling statutes or charitable gaming acts. The rules that decide whether your online raffle is legal live in 50 different capitals, each with its own definitions, prize limits, and license fees.

This guide pulls together what our team has learned by reviewing state regulations, IRS guidance, and real questions from nonprofit leaders on forums and legal Q&A sites. You will get a direct answer up front, a state-by-state framework, the federal tax implications (including Form W-2G and UBIT), and a compliance checklist you can run before launch.

If you only have a minute, here is the short version: nonprofit online raffles are allowed in roughly 47 states, prohibited in 3, and treated as in-person-only in a handful more. Cross-state sales are legal if every state where a buyer resides has authorized the activity. Anywhere they have not, your platform needs to block ticket sales, refund the transaction, and keep an audit trail.

Can a Nonprofit Legally Run an Online Raffle Across State Lines?

The short answer is yes, but only in the states that permit online raffles. Federal law does not ban nonprofit raffles, but it does not authorize them either. Charitable gaming is a state-law matter, and most states allow nonprofits to run raffles only if the rules in that specific state are met.

In our analysis of current state statutes for 2026, 47 of 50 states permit some form of nonprofit raffle. Utah, Hawaii, and Alabama are the three exceptions. Inside the 47, a meaningful subset allows in-person ticket sales only and has not yet authorized online entry. Massachusetts is the clearest example: the state’s Attorney General has stated there is no law permitting online raffle ticket sales, even when the nonprofit is fully registered.

So can you run an online raffle across state lines? You can, as long as each state a buyer sits in has explicitly opened the door to that activity. Crossing state lines does not magically make your raffle illegal, but it does multiply the legal theories under which it can be challenged. Every state where a ticket is sold becomes a potential venue for enforcement.

Why online changes the legal equation

States that allow raffles usually distinguish between three activities: in-person ticket sales, electronic payment for in-person raffles, and a fully online raffle (purchase, drawing, and notification all online). The third category is what trips nonprofits up. A state that cheerfully lets your booster club sell $5 tickets at a Friday-night football game may have no statute, regulation, or AG opinion allowing the same raffle on a website.

Our team reviewed guidance from state gaming regulators and found three common restrictions that apply specifically to online sales:

• Geofencing requirements that block buyers from prohibited states in real time
• Mandatory age verification (typically 18+) before checkout
• Audit-ready records of every IP address, timestamp, and refund issued

If your platform cannot enforce those controls, your nonprofit is exposed the moment a ticket buyer from a prohibited state checks out. Reviewers at the state AG’s office or the local district attorney do not care whether the sale was a “glitch” or a feature.

The “one-state rule” most organizations miss

The principle I wish every nonprofit board understood is the one-state rule: a raffle is treated as having occurred in every state where a ticket is purchased. It is not enough to comply with the law in your home state. You must comply with the law in your buyer’s state, too. That is why geographic restrictions on online ticketing platforms are not optional features. They are the compliance backbone of any multi-state nonprofit raffle.

States Where Online Raffles Are Prohibited

Before you start planning your raffle, you need to know which states are off-limits. Our team mapped the 2026 landscape and found three categories of prohibition.

States that prohibit nonprofit raffles entirely

Three states do not allow nonprofit raffles at all, online or otherwise:

• Alabama – Charitable gaming is restricted to bingo conducted by qualified organizations; raffles are not authorized.
• Hawaii – Raffles are classified as lotteries and are not permitted for nonprofits.
• Utah – Strict gambling laws permit only the state lottery and limited bingo; nonprofit raffles are not allowed.

If your donor list contains a single name with a Hawaii or Utah address, your platform must block the sale or refund the ticket. Sending a winning notification to a participant in those states can itself be treated as an illegal offer.

States that allow in-person raffles only

A second group of states allows nonprofit raffles but has not authorized online ticket sales. Massachusetts and North Carolina are the most frequently cited. North Carolina requires face-to-face ticket sales at the time of payment, which makes a fully online raffle impossible.

Some states in this category allow electronic payment processing for an in-person event. That is different from selling a ticket online. If a participant can complete the purchase without traveling to a physical location, most regulators will treat it as an online raffle.

States with explicit online raffle prohibitions

California is the standout. Even with electronic payment, the California Attorney General has long held that selling raffle tickets online violates state law. Other states have published guidance or rulemaking requiring physical presence at the time of sale. Our recommendation: treat the prohibition list as live, because states issue new AG opinions each year and quietly change their position.

States That Allow Online Raffles With Permits

Inside the 47 states that authorize nonprofit raffles, a growing number have updated their statutes or regulations to permit online ticket sales under specific conditions. These are the states where multi-state online raffles have the smoothest legal path.

States with explicit online authorization

For 2026, states with the clearest online raffle authorizations include Colorado, Texas, Ohio, Indiana, Virginia, and several others. In each case, the nonprofit must hold (or operate under) a charitable gaming license and the platform must use geofencing to exclude prohibited residents.

Colorado is widely cited as a model. A registered Colorado nonprofit can run an online raffle and even promote it nationally, but the platform must verify the purchaser’s location and block sales to states where the nonprofit is not licensed. This is the pattern we recommend adopting regardless of where you are based, because it satisfies the strictest interpretations of multi-state law.

States where permits cover online ticket sales

Many states do not explicitly call out online raffles but allow the underlying conduct under a charitable gaming license that covers “any raffle conducted by the licensee.” If your state falls into this bucket, work with counsel to confirm in writing that the existing permit extends to online sales before you launch.

Geographic restriction requirements

Regardless of which state issues your permit, the multi-state question comes back to your platform’s ability to enforce geographic restrictions. Industry-leading platforms let you maintain a list of approved jurisdictions, validate the buyer’s location at checkout, and produce a per-transaction audit log. If your platform cannot do this, the legal risk is not worth the fundraising upside.

501(c)(3) Eligibility and the 33% Rule

Most state raffle laws tie nonprofit eligibility to federal 501(c)(3) status or to a state-level charitable registration. That raises a separate IRS question our team gets asked about every week.

What qualifies as a 501(c)(3) organization

To be a 501(c)(3), your organization must be organized and operated exclusively for exempt purposes such as charitable, religious, educational, scientific, or literary activities. Profits from a raffle can fund those purposes, but the raffle itself is not an exempt activity. The IRS treats net raffle revenue as part of your normal fundraising, not as unrelated business income, provided the proceeds support your exempt mission.

How raffle proceeds must support the exempt purpose

The IRS uses informal safe harbors to decide whether recurring raffles jeopardize your exempt status. The most important guideline is commonly called the 33% rule, and it caps the share of your annual revenue that can come from activities not directly tied to your exempt purpose. Raffle income counts toward that cap, so if raffles become a primary funding source, you should review the IRS facts and circumstances tests with your accountant.

Common pitfalls that jeopardize tax-exempt status

Two pitfalls show up repeatedly. First, private benefit: if insiders, board members, or major donors take a disproportionate share of the raffle proceeds, the IRS can reclassify the activity. Second, commerciality: running a raffle in a way that resembles a for-profit gambling business (heavy marketing, recurring draws, large prizes) can attract unrelated business income tax (UBIT) treatment even for a 501(c)(3).

Federal Tax Implications: Form W-2G and UBIT

Beyond state compliance, online raffles trigger federal tax obligations that surprise most nonprofit leaders. Two areas deserve your attention: prize reporting through Form W-2G and unrelated business income tax.

When Form W-2G must be issued

If a raffle prize is $600 or more and at least 300 times the ticket price, you must file Form W-2G with the IRS and provide a copy to the winner. Prizes over $5,000 generally require backup withholding at 24%, which you remit to the IRS. Raffles are considered wagering transactions for backup withholding purposes, so the withholding rules are stricter than for ordinary prize winnings.

In practice, this means the smaller the ticket price, the easier it is to hit the reporting threshold. A $1 ticket with a $300 prize is reportable because 300 times $1 equals $300, and the prize of $600 rule check is also satisfied. Many online raffle platforms automate W-2G generation, but the legal obligation stays with the nonprofit, not the software vendor.

Backup withholding requirements

If a winner refuses to provide a taxpayer ID number, you must still file the W-2G and apply backup withholding. In our experience, this is the single most common federal compliance mistake in nonprofit raffles: organizations either skip the W-2G entirely or fail to withhold when the winner is uncooperative. Both errors expose the nonprofit to IRS penalties.

Unrelated Business Income Tax exposure

The IRS considers regularly conducted raffles as a trade or business if they are not substantially related to your exempt purpose. In that case, net raffle income can be subject to UBIT at the corporate rate, currently 21%, and you must file Form 990-T. Occasional raffles are typically exempt; weekly online raffles usually are not. Our recommendation is to involve your CPA early, especially if you plan to run more than a few draws per year.

Multi-State Compliance Challenges Explained

Running a raffle across state lines introduces four recurring challenges. We will walk through each and the practical controls that solve them.

Where a raffle is legally considered to take place

Most states use the location of the ticket buyer, not the location of the nonprofit, to decide whether the raffle “occurred” within their jurisdiction. A Florida nonprofit selling a ticket to a Georgia buyer triggers Georgia law. This is the foundational principle behind every multi-state rule we have discussed. Plan accordingly.

Platform geofencing requirements

Geofencing is the technical control that keeps your raffle legal. Your platform should match the buyer’s IP address, billing address, and shipping address against your list of approved states. When any one of those signals disagrees, block the sale or require manual review. Industry-leading platforms publish compliance certifications and audit-log exports that you can hand to regulators if asked.

Handling prohibited-state participants

If a participant slips through your controls and buys a ticket from a prohibited state, you have three options: refund the purchase, void the ticket before the drawing (with documentation), or seek retroactive registration where available. Our team has seen organizations choose all three. The most defensible approach is to refund and document every step. The least defensible is to accept the money and hope no one notices.

Refund and disqualification procedures

Write your refund policy into the official raffle rules before you launch. Specify how a winning ticket from a prohibited state will be treated (typically forfeited, with the prize either drawn again or donated). Publish the rules on every entry page. Reviewers at state AG offices look at the published rules first when deciding whether your nonprofit acted in good faith.

Raffle vs Sweepstakes vs Opportunity Drawing

When state law makes a raffle impractical, many nonprofits turn to alternatives. Each has a different legal profile.

Key legal distinctions

A raffle requires a ticket purchase, a prize, and a random drawing. A sweepstakes can have the same elements but cannot require a purchase to enter (a “no purchase necessary” option must exist and be easy to find). An opportunity drawing is essentially a raffle but is sometimes treated differently under state charitable gaming laws when tied to a donation above a threshold.

Why sweepstakes have fewer restrictions

Because federal and state gambling laws generally focus on consideration (paying money to win), sweepstakes that allow free entry are typically exempt from charitable gaming statutes. The catch is that the free-entry path must be genuinely accessible. Mailing in a form with handwritten entries is still the gold standard, even if you accept online entries for paying donors.

When opportunity drawings make sense

Opportunity drawings tie entry to a donation, then pick a winner from the donor pool. Several states treat these as raffles and require permits. Others treat them outside of raffle law if the prize value is below a threshold. Our team has seen opportunity drawings work well for small donor pools (under 500 participants) because the legal review is simpler and the platforms are lighter weight than full raffle systems.

Multi-State Compliance Checklist

Use this checklist before you launch any online raffle targeting participants in more than one state.

Pre-launch research steps

1. Confirm your 501(c)(3) status is current and your state charitable registration is active.
2. Identify every state where a single past donor resides and decide which to include.
3. Review the raffle laws in each target state, focusing on online authorization, prize limits, and license requirements.
4. Document your platform’s geofencing, age verification, and audit log capabilities.

Documentation requirements

1. Publish official raffle rules, including eligibility, drawing date, and refund policy.
2. Collect and retain IRS Form W-9 information from winners over the reporting threshold.
3. Maintain per-transaction audit logs for at least the state’s required retention period (often 3 to 5 years).
4. Keep copies of state licenses, raffle registrations, and any required surety bonds.

Reporting and recordkeeping

1. Issue Form W-2G for prizes of $600 or more that are at least 300 times the ticket price.
2. Apply 24% backup withholding on reportable prizes when the winner has not provided a TIN.
3. File Form 990-T if raffle revenue triggers UBIT thresholds.
4. File state-level raffle reports and financial statements within the required deadlines.

Working through this list with your accountant and state gaming regulator before launch takes a few hours and dramatically lowers the chance of an enforcement letter.

Frequently Asked Questions

Final Thoughts on Running Nonprofit Online Raffles Across State Lines

The bottom line on whether a nonprofit can run an online raffle across state lines in 2026 is the one-state rule. Run a compliant raffle in every state where you accept a ticket. Twenty-nine states make this straightforward with explicit online authorization. Eighteen more require careful permit work and platform controls. Three remain off-limits for now.

If your nonprofit is ready to launch, our next step recommendation is to pull your donor list by state, confirm registrations in each target jurisdiction, and ask your platform vendor for a written certification of its geofencing controls. Then loop in your CPA to plan around W-2G and UBIT thresholds before you start selling tickets. That sequence is how we help boards turn a high-risk idea into a defensible fundraiser.