Charitable Gambling in Arizona

Charitable Gambling in Arizona

Charitable Gambling in Arizona is a popular fundraising tool. However, charitable gaming in Arizona can easily violate Arizona’s gaming laws. Nonprofit organizations can raise money in a number of ways, including conducting raffles, bingo nights, and other forms of gambling. These events can be lucrative and generate goodwill for your business. In many states, however, gambling is strictly regulated, so nonprofits must be conscious of the rules surrounding these events. In Arizona, nonprofits may conduct four types of gambling: raffles, bingo, Arizona State Lottery pull-tabs, and horse racing events. Each has unique rules governing its use.

First, What is Gambling?

In most states gambling is illegal. However, Arizona carves out a few exceptions for charitable gambling. Gambling is defined as an act of risking or giving something of value for the opportunity to obtain a benefit. Notice the phrase “something of value.” This includes more than just money. Anything of value used as a bet for the opportunity to win something in return constitutes gambling in Arizona. If your nonprofit conducts gaming that meets the definition of gambling, it must comply with Arizona charitable gambling law.

Raffles

A common fundraising activity for nonprofits is raffling. Raffles are a form of gambling in Arizona but are permitted for most 501(c) organizations. These include nonprofit corporations, clubs, historical societies, religious institutions, and others. There are three rules governing raffles:

Rule 1: The organization must have operated in Arizona for at least 5 years. 

Rule 2: The sponsor of the raffle must be a nonprofit organization and no individual can benefit personally.

Rule 3: No person except a local member of the sponsoring organization may participate in the management, sales, or operation of the raffle. 

In practice, it can often be hard to distinguish between activities that are, and are not, allowed. These are some common mistakes nonprofits make when conducting a raffle:

  • Requiring a cover charge
  • Requiring a minimum purchase to participate (drinks, food, etc.)
  • Giving out a select number of free tickets
  • Selling tickets online through a third party 
  • Allowing individuals living outside of Arizona to purchase tickets
  • Hiring a catering service

Bingo

In Arizona, bingo is considered a gambling activity but may be conducted by licensed organizations. Nonprofits may apply for a license through the Arizona Department of Revenue. There are three classes of license a nonprofit may be eligible for, dependent primarily upon the amount expected to fundraise and how long the organization has been operating in Arizona. The Arizona Department of Revenue has established an extensive set of rules and procedures that must be followed when conducting bingo in the state. Licensed nonprofits will need to be aware of these rules for any fundraising activities.

Arizona State Lottery Pull-Tabs

The Arizona State Lottery offers Instant Tab games to nonprofits seeking to fundraise. Also called pull-tabs, these games are tickets containing three-to-five perforated window tabs that can be opened to reveal play symbols. Players who reveal a winning combination of symbols are entitled to prizes. Nonprofits may purchase these pull-tabs and resell them to the public as a permitted fundraising activity. 

Horse Racing Charity Days

Arizona operates three horse tracks across the state. Nonprofits can reach out to the Arizona Department of Gaming – Racing Division to learn more about the specific rules and regulations for hosting a horse racing charity fundraising event at any of their sites. 

Charitable gambling laws are confusing and technical, and violations can result in criminal charges. To avoid embarrassing and unnecessary mistakes, it is always best to consult a lawyer before conducting any fundraising event that involves gambling.

This post was authored by Kyler Mejia. Kyler Mejia is an ASU law student and an intern with  Caritas Law Group, P.C. Caritas advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations.  To schedule a consultation with a Caritas lawyer, call 602-456-0071 or email us through our contact form.

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