50/50 Raffles Now Permitted Under California Law

 

rafflesIn early October of 2015, California Governor Jerry Brown signed Senate Bill 549 into law. This new law allows certain eligible organizations (foundations affiliated with professional sports franchises) to conduct 50/50 raffles (raffles where a lucky winner takes home 50% of all the proceeds from raffle ticket sales).

Pursuant to California Penal Code Section 320.5, certain non-profit organizations are permitted to undertake charitable raffles as long as those raffles are pre-registered with the California Attorney General (Form CT-NRP-1) and the raffle results are reported after the raffle is conducted (Form CT-NRP-2). Additionally, nonprofit organizations are required (pursuant to California Penal Code Section 320.5) to expend a minimum of 90% of the raffle gross proceeds to directly conduct beneficial or charitable activities. Accordingly, before the enactment of SB 549, a maximum of 10% of the raffle gross proceeds could be utilized for non-charitable or exempt purpose expenditures. As such, an organization could not “split the pot” 50/50 because such would be a violation of the California Penal Code.

This new law now permits a small segment of the exempt organization universe (charities associated with professional sports franchises) to legally conduct a raffle even if at least 90% of the gross proceeds are not spent on charitable or exempt purpose endeavors.

There are many particular requirements of this new law; one of the most significant requirements is that the charity associated with the professional sports franchise would be required to pay the remaining 50% directly to a charitable purpose or to another “private nonprofit” organization. An eligible organization conducting the 50/50 raffle will also have to address strict registration and filing requirements with the California Attorney General. Additionally, the fees to register 50/50 raffles will be $5,000 a year, with an additional $100 fee for each 50/50 raffle to be conducted.

While nothing has changed from a legislative perspective here in California, if a nonprofit (exempt) organization is not associated with a professional sports franchise, such organization can still legally conduct a 50/50 raffle in California if they tread carefully and follow certain exacting procedures.

If you would like any more information about conducting 50/50 raffles in California, please contact Brian Yacker at byacker@yhadvisors.com.