Alabama Raffle Laws for Nonprofit: Are Raffles Legal in Alabama? [2024]

Raffles are a great way for nonprofits to raise money, but are raffles legal in Alabama?

The answer is that raffles are illegal in Alabama, even for nonprofit fundraising. However, the Alabama government is discussing potential updates in the coming years that might turn things around.

Whether you're new to hosting raffles or a seasoned pro, staying current on the legal aspects is always essential. The good news is that while current legislation bans raffles, many legal options exist to engage communities in Alabama.

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This article breaks it all down for you:

• Learn why raffles are not legal in Alabama
• Understand specific Alabama raffle regulations and laws
• Stay updated on recent Alabama raffle and lottery movement in congress
• Raise money with legal raffle alternatives and simple fundraising ideas

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Are raffles legal in Alabama?

Under Alabama state law, all lotteries are illegal. IRS Notice 1340 defines a raffle as a form of lottery because it distributes prizes to people who pay for the chance to win.

The State of Alabama Criminal Code prohibits any type of lottery, raffle, or gambling dating back to 1901. It's one of a select group of states, including Mississippi and Utah, where lotteries aren't allowed.

The rules have been a point of contention for many Alabama residents, and we'll discuss the updated conversations about evolving the legislation in favor of raffles below.

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Why is a raffle considered a lottery?

A raffle typically requires individuals to buy tickets to win a prize. It’s a lottery system in which a winner is selected randomly from those who've paid to enter.

Raffles are legally considered lotteries because they involve the key elements of prizes, luck, and consideration. Many nonprofits may wonder if calling their raffle events by other names, such as drawings, giveaways, or door prizes, can circumvent this.

To be safe, you must adhere to the technicalities of your state to avoid penalties and fines.

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Why are lotteries illegal in Alabama?

Alabama has bans on lotteries and games of chance to prevent the spread of gambling enterprises established under its initial state constitution.

Unlawful lotteries under Alabama state law meet the following key criteria:

• Players pay or agree to pay something of value for chances, which are represented and differentiated by numbers, combinations of numbers, or some other determinant. 
• A drawing or another luck-based method determines the winning chances.
• The holders of the winning chances are to receive something of value. 

Raffles meet the criteria and are, therefore, part of illegal activity and subject to criminal offenses as of 2024.

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Alabama raffle laws your nonprofit should know 

Let's break down Alabama law a bit further on raffles. Here are the biggest highlights of prohibited activity from Alabama Code Title 13A. Criminal Code § 13A-12-20:

• Gambling is any time an individual risks or bets something they value in exchange for participation in a contest of chance or opportunity for gains out of their control. Purchasing a raffle ticket without knowing if someone will win a prize falls under this category.
• Players are considered people who engage in gambling without guarantee of profit outside of their winnings or contributions to the organization running the gambling activity. Raffle participants are players under this legislation.
• Profits from gambling activity are any money or property accepted from gambling by players. Nonprofits or other organizations that sell raffle tickets and raise funds are considered to have profits from gambling activity.

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Progress on Alabama state lotteries laws

Conversations about gambling in Alabama have evolved over the years to push for legislative change. The issue was last presented in 1999 but resurfaced as recently as 2024.

Alabama lawmakers proposed the legalization of a state lottery and casino-style gambling that would change the laws in 2015. In February of 2024, The Alabama House of Representatives passed a legislative package that will head to the Senate.

The ongoing push in Congress may result in state-regulated gaming and gambling being legalized in Alabama, directly impacting raffles.

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Who can host a raffle in the United States?

Now that you have more information about raffle legality in Alabama, you might wonder who can host a raffle in the United States. Raffles are a popular method of fundraising success in the many states that allow them, despite other states on their way to legalization.

Some states have few restrictions on nonprofits, schools, and other organizations that want to run a raffle. Others have more specific laws or heavy regulations that are worth checking into so you can focus on hosting the most successful raffle possible.

At the state level, governments can determine:

• The types of organizations that can host raffles
• The purpose(s) behind a raffle
• Rules and regulations to host a raffle
• The amount of raffles that can be hosted each year 

View a full list of US raffle laws by state

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How to legally hold a raffle for your nonprofit

A drawing or giveaway that does not accept money from participants is a great and legal option. You might immediately wonder what the value of a drawing or giveaway would be if you can't accept donations or funding. 

Nonprofits can exchange entries or participation for non-monetary support like:

• Advocacy for your cause and mission
• Idea generation and creativity 
• Awareness in a social media-dominated giving landscape

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A successful nonprofit giveaway example 

The United Way of Central Alabama is an excellent example of a nonprofit that ran a social media challenge that was legally considered a giveaway. Students participated at no monetary cost but won a $2,500 check.

Instead of purchasing a ticket like a traditional raffle, students across five university teams shared new ideas about spreading awareness among younger generations. All they had to do was post on Instagram and Facebook using #ThisUnitesUs with a creative approach.

The winners could then present their campaign ideas to inspire their peers to participate in philanthropy to United Way's board of directors. The organization built awareness on social media with its target audience (younger donors) and received a new perspective on its fundraising approach.

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More legal fundraising alternatives to a raffle 

Nonprofits have several opportunities to build legal relationships with donors outside of giveaways, raffles, and drawings. 

More fundraising options that build excitement and raise money include:

• Peer-to-peer fundraising: A great way to help individuals reach more people on behalf of your organization and allow supporters to ask their community to contribute.
• Recurring donations and memberships: Turn an individual’s one-time donation into a longer-term giving behavior for a reliable income stream.
• eCommerce: Individuals can purchase merchandise from your nonprofit's online store to benefit your programs and initiatives.
• Ticket sales and events: Selling tickets to events, gatherings, and experiences can be another avenue to collect individual donations. 
• Online and mobile donations: You can share a mobile-friendly donation page through QR codes, social media links, and other places people can access from their phones.

Learn how to kick off highly effective fundraising campaigns for free with Zeffy

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Raffle FAQs

Is there a way to host a raffle without registering with the government?

You can host a raffle without registering with the government based on legislation and requirements in your state. In Alabama, raffles are illegal if you accept money and are subject to penalties under the State of Alabama Criminal Code.

Learn about raffle laws by state

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What's the difference between a raffle and a drawing?

The difference between a raffle and a drawing is the requirement to enter. A raffle will present the chance to win a prize to those who pay for a ticket, while a drawing does not require a monetary contribution.

In Alabama, a drawing that does not accept money in any form from participants is permitted.  

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What is the difference between a raffle and a giveaway?

The difference between a raffle and a giveaway is the exchange of money for participation. A raffle typically requires someone to purchase a ticket to win a prize.

A giveaway does not require someone to pay anything to enter an opportunity to win a prize. Usually, a giveaway will ask instead for someone to fill out a form, engage on social media, or complete a challenge that is considered non-monetary.

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Does a raffle count as gambling?

Raffles count as gambling in states like Alabama, where such actions are illegal under Alabama Code Title 13A. Criminal Code § 13A-12-20. Purchasing a raffle ticket without knowing if someone will win a prize falls under gambling.

Under Alabama legislation, gambling is any time an individual risks or bets something they value in exchange for participation in a contest of chance or opportunity for gains out of their control. 

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Can nonprofits give prizes?

Nonprofits can give prizes out for raffles, giveaways, and drawings. The legal component looks specifically at the money someone pays to enter into a running for that prize.

Use this list of 33 unique prize ideas

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Are nonprofit raffles tax deductible?

Nonprofit raffles are not tax deductible for money spent to enter. However, the IRS requires organizations that pay raffle prizes to participants to withhold and report 25% of winnings over $5,000.

If an organization fails to withhold a portion of the winnings, it may be liable to pay the taxes instead of the winner.