Arizona raffle laws treat every raffle as gambling and therefore illegal, unless the organization running it fits one of three narrow exemptions in Arizona Revised Statutes § 13-3302: a tax-exempt nonprofit under Section 501 of the Internal Revenue Code, a historical society formally designated by the state or a local government, or a booster, civic, or political club that meets specific nonprofit-purpose requirements. Fall outside those categories, or slip up on the operational rules, and the fundraiser becomes a criminal offense for both the organization and the people who ran it.
Which Organizations Can Legally Hold a Raffle
The statute creates three separate paths, and each has its own conditions.
A 501(c) nonprofit qualifies if it has existed continuously in Arizona for at least one year before the raffle. The one-year clock runs from the date the organization was established in Arizona, not from the date the IRS issued its determination letter. This category is broad: 501(c)(3) charities, 501(c)(4) civic leagues, 501(c)(7) social clubs, 501(c)(19) veterans’ organizations, and every other 501(c) subsection are covered.1Arizona Legislature. Arizona Code Title 13 – Section 13-3302
A historical society qualifies if it has been formally designated by the state or by a county, city, or town to conduct a raffle. Historical societies operate under their own subsection but face the same prohibition on personal benefit that applies to nonprofits.2Arizona Legislature. Arizona Revised Statutes 13-3302 – Exclusions
A booster club, civic club, or political club can hold a raffle without 501(c) status, but only if the group is organized and operated exclusively for pleasure, recreation, or another nonprofit purpose, with no net earnings benefiting any individual. Political clubs must be formally affiliated with a recognized Arizona political party. No minimum age is set for these groups, but all raffles they hold together are capped at a combined annual benefit of $10,000.2Arizona Legislature. Arizona Revised Statutes 13-3302 – Exclusions
If your organization does not fit one of these three descriptions, it cannot hold a raffle in Arizona, regardless of how worthy the cause.
The No-Personal-Benefit Rule
One rule cuts across every category and defeats more raffles than any other. No member, director, officer, employee, or agent of the sponsoring organization may receive any direct or indirect financial benefit from the raffle. The only permitted involvement is buying a ticket on the same terms as any other participant.1Arizona Legislature. Arizona Code Title 13 – Section 13-3302
All net proceeds must go to the organization’s charitable or lawful nonprofit purposes. A single side payment, bonus, or cut to an organizer collapses the exemption, and the event becomes unlawful gambling. For a 501(c) organization, diverting proceeds outside its exempt purposes can also put its federal tax-exempt status at risk.
No State License, but Keep Detailed Records
Arizona does not require a state gambling license, gaming permit, or any pre-approval before an eligible organization holds a raffle. There is no application to file with the Arizona Department of Gaming, the Department of Revenue, or the Secretary of State. Arizona repealed its charitable solicitation registration requirement in 2013, so no filing is needed with the Attorney General either.
The absence of licensing is not the same as informality. Because the exemption lives entirely in the statute, the organization’s records are the only proof the raffle was legal. Keep documentation of current 501(c) status or other qualifying status, a written plan naming the raffle manager and setting ticket sale dates, drawing dates, and locations, estimated and actual gross proceeds, and a breakdown of expenses and how net proceeds were used. Retain these records for at least four years in case of an IRS audit or a state inquiry.1Arizona Legislature. Arizona Code Title 13 – Section 13-3302
Verify tax-exempt status before the raffle, not after. The IRS Tax Exempt Organization Search tool confirms current standing, flags automatic revocations, and shows recent Form 990 filings.3Internal Revenue Service. Tax Exempt Organization Search An organization whose 501(c) status has lapsed cannot legally hold a raffle, even if every dollar would go to charity.
How the Raffle Must Be Run
Members Only
Only bona fide local members of the sponsoring organization may participate directly or indirectly in managing, selling tickets for, or operating the raffle. You cannot hire outside event staff, borrow volunteers from a sister organization, or bring in a third-party vendor. The people selling tickets, handling cash, running the drawing, and coordinating logistics all have to be genuine members.1Arizona Legislature. Arizona Code Title 13 – Section 13-3302
Two narrow statutory exceptions allow outside agents: certain hospitals and cardiovascular research foundations, and 501(c)(3) organizations with at least a 20-year history of comprehensive child abuse prevention and victim advocacy work. Both are capped at three raffles per year and an agent fee of no more than 15 percent of net proceeds.2Arizona Legislature. Arizona Revised Statutes 13-3302 – Exclusions Every other organization must run the raffle with its own members.
Online Ticket Sales
Online sales are allowed, but only through a website the organization itself owns and operates. Third-party platforms, social-media marketplaces, and other groups’ sites are off limits. Buyers must be physically located in Arizona at the time of purchase, which in practice means geolocation, not just an Arizona shipping address.1Arizona Legislature. Arizona Code Title 13 – Section 13-3302
Prize Values and Revenue Caps
For 501(c) organizations, Arizona sets no maximum prize value and no ceiling on total raffle revenue. A car, a house, or a vacation package is fine as a prize, provided every dollar of net proceeds funds the organization’s exempt purposes.
Booster clubs, civic clubs, and political clubs are different. Their combined benefit from all raffles in a single year cannot exceed $10,000. The cap applies to the benefit the organization receives, so it effectively limits net proceeds rather than gross ticket sales.2Arizona Legislature. Arizona Revised Statutes 13-3302 – Exclusions
You Cannot Mail Raffle Tickets or Flyers
Federal law prohibits using the U.S. mail to send raffle tickets, promotional materials about a raffle, or payment for tickets. The ban in 18 U.S.C. § 1302 covers any lottery or game of chance, including state-authorized charitable raffles. Penalties reach two years in prison for a first offense and five years for subsequent offenses.4Office of the Law Revision Counsel. 18 U.S. Code 1302 – Mailing Lottery Tickets or Related Matter
Arizona’s authorization does not override this federal restriction. Distribute tickets in person or through your organization’s website. Even mailing a flyer that mentions the raffle and encourages ticket purchases can violate the statute.
Reporting Prizes to the IRS
When Form W-2G Is Required
For prizes awarded in 2026, the organization must file Form W-2G when two conditions are both met: the prize value minus the ticket price is $2,000 or more, and the prize is at least 300 times the ticket price. For a typical raffle with ticket prices of a few dollars, any prize worth $2,000 or more will trigger both. Send Form W-2G to the winner by January 31 of the following year and file copies with the IRS by the last day of February.5Internal Revenue Service. Instructions for Forms W-2G and 5754 (Rev. January 2026)
The $2,000 threshold is new for 2026 and replaces the previous $600 threshold. Update any procedures or software still keyed to the old number.
Withholding on Larger Prizes
When the prize value minus the ticket price exceeds $5,000, the organization must withhold 24 percent of the net winnings and remit it to the IRS. For cash, withhold before paying. For a non-cash prize such as a car, the winner must pay the organization 24 percent of the fair market value (less the ticket price) before receiving the prize. An organization that chooses to cover the tax itself must gross up the reported amount and pay a higher withholding rate.5Internal Revenue Service. Instructions for Forms W-2G and 5754 (Rev. January 2026)
If a winner refuses or fails to provide a correct taxpayer identification number, backup withholding at 24 percent applies to any prize that hits the W-2G reporting threshold, even below the $5,000 regular withholding line.6Internal Revenue Service. Tax-Exempt Organizations and Raffle Prizes – Reporting Requirements and Federal Income Tax Withholding
The Organization’s Own Tax Filings
An organization filing Form 990 or Form 990-EZ must complete Schedule G, Part III, if gross income from gaming activities (including raffles) exceeds $15,000. The schedule requires detailed information about gaming revenue, expenses, and how proceeds were used.7IRS.gov. Instructions for Schedule G (Form 990)
Raffle income can also be treated as unrelated business taxable income, which triggers Form 990-T. Most charitable raffles escape this because substantially all the work is done by volunteers, and the volunteer exception under IRC Section 513(a)(1) shields the income. If the organization pays staff or contractors to run the raffle where Arizona law allows it, that shield may drop.8Internal Revenue Service. Exempt Organization Gaming and Unrelated Business Taxable Income When unrelated business taxable income applies, Form 990-T is due once gross income from the raffle reaches $1,000, though a $1,000 specific deduction means an organization at exactly that amount would file but owe no tax.9Internal Revenue Service. Instructions for Form 990-T (2025)
If the Prize Is a Firearm
Firearms carry extra federal requirements that override the normal hand-over. A firearm won in a raffle must be transferred through a Federal Firearms Licensee, and the FFL will run a background check through the National Instant Criminal Background Check System (NICS) before releasing the firearm. If NICS denies the winner, the firearm cannot be transferred, winning ticket or not.10ATF eRegulations. 27 CFR 478.102 – Sales or Deliveries of Firearms On and After November 30, 1998
The background check is valid for 30 calendar days from the date NICS is contacted. A winner who does not complete the transfer within that window needs a new check. For winners under 21, an additional investigatory period of up to ten business days may apply through September 30, 2032. Build the FFL fee and background-check timeline into your prize-claim process before the drawing.
What Happens When the Rules Are Broken
Failure to meet the statutory requirements does not produce a warning or an administrative fine. The exemption vanishes, and the raffle becomes unlawful gambling under Arizona’s criminal code. Promotion of gambling and benefiting from gambling are separate offenses under ARS §§ 13-3303 and 13-3304, and the individuals who organized the event can face personal criminal liability alongside the organization.
Most failures come from a small set of mistakes: letting non-members sell tickets, allowing an organizer to take a cut, mailing tickets or flyers, or holding the raffle after 501(c) status has lapsed through a missed Form 990. None of these require bad intent. Confirm exempt status before every raffle, keep operations members-only, distribute tickets through channels other than the mail, and document each step in writing.