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Rules around raffles: Don’t get sent up the river for sending rubber duckies down the river

rafflesRaffles (or, properly speaking, raffle lotteries) can be a fun, efficient, and relatively non-labour-intensive means of making moderate amounts of money for a not-for-profit or charity. Did you know, however, that the regulatory framework governing raffles (charitable gaming) ultimately flows from the Criminal Code? That’s right; if you don’t want to get sent up the river for sending a flotilla of little rubber ducks down the river, you need to fulfill your legal obligations.

In Ontario, the Alcohol and Gaming Commission of Ontario (AGCO) regulates the province’s alcohol, gaming (including charitable gaming), and horse racing sectors, and produces the Lottery Licensing Policy Manual, a 256-page comprehensive guide to lottery licensing. The Registrar of Alcohol and Gaming issues rules for each type of licensed lottery event, and it together with municipal councils have the power to issue licenses. Depending on what your organization seeks to do and where, you turn to either the Registrar or your local municipality for a license.

What is a lottery?

The AGCO manual explains that “a lottery scheme exists if money is paid or some other consideration is given for a chance to win a prize.” There are many different kinds of lotteries an organization can obtain a license for, including wheels of fortune, bingo, penny auction raffles, social gaming as a component of a dinner or dance, break-open tickets, etc.

 What is a raffle?

Raffles involve selling tickets for a chance to win a prize (whether merchandise or cash, or a combination) in a draw, and are usually named after the method of determining the winner. The AGCO manual provides orientation on several kinds of raffle draws: “Elimination,” “Calendar,” “50/50,” and the more vividly named “Golf Ball Drop,” “Rubber Duck Race,” “Meat Spin/Turkey Roll”  and “Bossy Bingo/Cow Patty Bingo.” There is also a blanket raffle license with which you could conduct and manage more than one type of raffle in the course of one event.

What do I need to do to hold a raffle in Ontario?

Let’s say your organization is a not-for-profit formed by a group of business people who want to contribute in various ways to their community. It is not a charity because it has a mixture of charitable and non-charitable objects, and does not exist exclusively for fundraising. It has the know-how and the people-power for running a fundraising event, and wants a licence for a stub-draw raffle to raise money for the drama program of the high school which is actually in the neighbouring municipality. Is it eligible for a license?

Your organization needs to be approved before it can apply for a license. Since it has some purposes, objects, and activities which fall under at least one of the four heads of charity (in this case, the advancement of education), it is eligible to apply for a license. Then, in a second step, if your organization’s proposed use of the proceeds is consistent with those purposes, objects and activities, and also fall within the eligible uses of proceeds for the class and type of organization as set out by the AGCO, the relevant licensing body will pose one more question. Are the proposed uses of proceeds related to the direct delivery of programs and services to the eligible beneficiaries? Your organization’s drama club plans mean a yes to this question, so the licensor is likely to approve your application your use of the proceeds. (Note, proceeds cannot be used to fund core programs or services of an organization.)

Your organization would have to inform itself about and follow the general and specific (provincial or municipal) licensing procedures that may apply, as well as guidelines around advertising, and prizes (prohibited crossbows, for example, must not be used as prizes, but loyalty program points may—as long as there is a cash alternative prize.

Note especially that the proceeds of your organization’s raffle must only be used for the drama club and cannot be accumulated (without approval) over time and other purposes. Once licensed, your organization must set up a designated lottery trust account, which the licensing authority will monitor. There are rules around the trust account, including that records for the account must be kept for a minimum of four years.

Where to apply?

Eligible to apply for a raffle license, your organization might consider several factors as to where it should hold it. How much money do you want the raffle to raise? The general rule is that municipalities grant licenses for raffle lotteries for up to $50,000. Some townships, however, set the limit for the raffle prize board at a lower amount and therefore cannot accommodate your fundraising goals. Will the raffle be part of an event at the high school, for example, or will the draw simply take place at your registered office? Some municipalities do not require an organization to be located within its boundaries as long as the majority of the activity takes place there, but if you wanted to hold the draw at the high school, you would want to make sure that municipality can accommodate you. Finally, licensing fees can vary by municipality (though always within a limit set by the Registrar).

By: Kara Johnson

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Drache Aptowitzer LLP

Tax and Charity Lawyers at Drache Aptowitzer LLP
Drache Aptowitzer LLP is one of Canada’s foremost experts in the law related to charities and non-profit organizations. Their team of bloggers is led by Adam Aptowitzer LLB. He is a lawyer practicing in the areas of charity and tax law. He is a member of both the bars of Alberta and Ontario. He has been speaking and writing on the topic of charity law for several years and been published in numerous publications including the Canadian Taxpayer, the Canadian Fundraiser and the Not-for-Profit News and has been cited as an expert in many publications including the National Post.Read more here
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