Raffles are legal in Texas, but only when held by certain nonprofit organizations that follow the Charitable Raffle Enabling Act in Chapter 2002 of the Occupations Code. For-profit businesses, individuals, and political groups cannot run raffles at all, and even qualifying nonprofits face tight rules on prizes, tickets, proceeds, and who conducts the event. Get any of those wrong and a fundraiser becomes illegal gambling.
Who Can Legally Hold a Raffle
Texas law recognizes four types of “qualified organization” under Section 2002.002 of the Occupations Code.1State of Texas. Texas Occupations Code 2002.002 – Definitions
- Religious societies that have existed in Texas for at least 10 years and do not distribute income to members or officers beyond reasonable compensation or expense reimbursement.
- Volunteer fire departments that actively fight fires, operate fire-fighting equipment, and pay members no more than nominal compensation.
- Volunteer emergency medical services that actively provide emergency medical, rescue, or ambulance services and pay members no more than nominal compensation.
- Nonprofit organizations that are tax-exempt under Section 501(c) of the Internal Revenue Code and have existed in Texas for at least the three preceding years.
Every category bars distributing income to insiders. If your group doesn’t fit one of these four descriptions, any raffle you run is illegal gambling under state law, no matter how good the cause.
How Often You Can Hold One and Where the Money Goes
A qualified organization can hold no more than two raffles in a calendar year under Section 2002.052.2Texas Legislature Online. Texas Occupations Code Chapter 2002 – Charitable Raffles Every dollar collected from ticket sales has to go to the organization’s charitable purposes. Proceeds cannot be paid out to individuals or treated as profit. The statute defines charitable purposes broadly enough to cover religious education, public works, and helping people in need, but the money has to genuinely serve one of those ends.1State of Texas. Texas Occupations Code 2002.002 – Definitions
Who Can Run the Raffle and Sell Tickets
No one can be paid, directly or indirectly, to organize, conduct, or sell tickets for the raffle. A paid employee who is also a member of the organization can help, but the raffle work has to be a de minimis part of their job.2Texas Legislature Online. Texas Occupations Code Chapter 2002 – Charitable Raffles Hiring an outside promoter is not allowed. Paying a volunteer specifically for raffle work is not allowed. Only people the organization has authorized may sell tickets.3State of Texas. Texas Occupations Code 2002.054 – Restrictions on Raffle Promotion and Ticket Sales
What the Ticket Must Say
Section 2002.055 requires every ticket sold or offered for sale to display four items:4State of Texas. Texas Occupations Code 2002.055 – Ticket Disclosures
- The name of the organization conducting the raffle.
- The ticket price.
- A general description of each prize worth more than $10.
- The date the prizes will be awarded.
Leaving any of these off is a compliance failure on its own, even if the rest of the raffle is run correctly.
What You Can Give Away as a Prize
The sharpest line in Texas raffle law is the ban on cash prizes. A raffle prize cannot be money, defined as coins, paper currency, or a negotiable instrument readily convertible to either.1State of Texas. Texas Occupations Code 2002.002 – Definitions That rules out checks and money orders. Tangible items like vehicles, electronics, and vacation packages are fine.
Value caps depend on how the organization got the prize:
- If the organization bought the prize or provided any consideration for it, the value cannot exceed $75,000.
- A residential dwelling the organization purchased as a prize cannot exceed $750,000.
- Fully donated prizes have no value cap.
- A prize of Texas state lottery tickets is capped at $75,000 in combined face value, regardless of what those tickets might win.
The organization also has to either possess the prize before selling tickets or post a bond with the county clerk for the full prize value.5State of Texas. Texas Occupations Code 2002.056 – Restrictions on Prizes Selling tickets for a prize you hope to line up later, without a bond, is not allowed.
Keep the Raffle Out of the Mail
A raffle that is fully legal in Texas can still create federal criminal exposure through the mail. Under 18 U.S.C. ยง 1302, mailing lottery or raffle tickets, or any circular, letter, or advertisement concerning a scheme that awards prizes by chance, is a federal crime.6Office of the Law Revision Counsel. 18 U.S. Code 1302 – Mailing Lottery Tickets or Related Matter A first offense carries up to two years in federal prison; a second offense, up to five. That covers mailing tickets to supporters, mailing flyers about the raffle, and mailing a list of winners. Including a raffle ticket order form in a direct-mail newsletter is a common way nonprofits stumble into this. Handle promotion and ticket distribution outside the postal system.
Taxes When Someone Wins
Raffle prizes carry federal tax obligations for both the winner and the organization. When a prize minus the ticket cost exceeds $5,000, the organization must withhold 24% of the net winnings for federal income tax and report the prize on IRS Form W-2G. For 2026, a prize valued at $2,000 or more triggers a Form W-2G reporting obligation even when withholding isn’t required at that level.7Internal Revenue Service. Instructions for Forms W-2G and 5754
Winners owe income tax on the fair market value of the prize regardless of whether the organization had to withhold. A car worth $40,000 is $40,000 in taxable income to the winner.
Organizations that file Form 990 or Form 990-EZ must complete Schedule G, Part III if they report more than $15,000 in gross gaming income for the year.8Internal Revenue Service. Instructions for Schedule G (Form 990) Two maximum-value raffles will easily cross that line.
What Happens If You Run an Unauthorized Raffle
An unauthorized raffle is illegal gambling. Promoting one, which includes organizing the event or selling tickets, is a Class A misdemeanor under Texas Penal Code 47.03, punishable by up to one year in jail, a fine of up to $4,000, or both.9State of Texas. Texas Penal Code 47.03 – Gambling Promotion The charge reaches anyone who knowingly helped promote the raffle or sold tickets, not just the person who set it up.
A county attorney, district attorney, or the Texas Attorney General can also bring a civil action to stop a raffle that violates CREA or to prevent future violations.10Office of the Attorney General. Charitable Raffles and Casino/Poker Nights An injunction can restrict future fundraising, not just the current event. Repeated gaming-law violations can also draw IRS attention and put an organization’s 501(c) tax-exempt status at risk, which would end its ability to receive tax-deductible donations and could disqualify it from grants and public funding.