Associations often, in conjunction with social events or annual meetings, want to raffle off prizes to encourage attendance or raise money for a specific cause.  The question then becomes whether the association must obtain a raffle license to hold such a raffle.  The answer depends on whether the association wants to charge a fee for participants to purchase a raffle ticket.  If so, the association must have a raffle license.  If not, no license is necessary.

Licensing Requirements 
Colorado law (C.R.S. §12-9-102(19.3)) defines a raffle as a game in which a participant buys a ticket for a chance at a prize with the winner determined by a random drawing to take place at a set location and date.  Only licensed organizations can hold a raffle.  Furthermore, only certain organizations are eligible to obtain a raffle license.  Eligible organizations are limited to bona fide religious, charitable, labor, fraternal, educational, voluntary firemen’s, and veterans’ organizations.  In addition to falling into one of these categories, eligible organizations must be within Colorado, operate without profit to its members, and have been in existence continuously for five years immediately prior to the application for a raffle license. 
 
Is it possible for associations to fall within the definitions of one of the eligible organizations? Although questionable, an association that has its heart set on selling raffle tickets (as opposed to forgoing charging a fee) may try to make the case that it qualifies as a charitable organization. Charitable organizations are defined as organizations that operate not for pecuniary profit and for the purpose of relieving poverty, distress, or other condition of public concern within the state.  An association may attempt to show that it operates for the purpose of relieving a condition of public concern within the state, such as providing services to owners normally provided by a city, county or the state, for example. An association who wishes to do so must file this application with the Secretary of State.
 
First time applicants are required to attach copies of articles, bylaws, charter, rules, constitution and/or similar organizational documents, dated and executed at least 5 years ago that show membership qualifications and purposes. In addition, applicants must attach dated items in the organization’s name, at least one from each of the past 5 years to show organizational continuity. (Documents that would accomplish this include bank statements, checks, corporate reports, tax returns etc.) In addition, the application must show the specific purpose of the raffle and how the proceeds will be spent. A member must also be specified as the individual who will supervise and manage the games and will be responsible for ensuring that the raffle meets all the law’s requirements. This individual must be trained and certified by the secretary of state’s office before assuming any supervisory duties.
 
In light of all these requirements, an association may want to consider hiring a licensed organization to hold the raffle for the association.

Exemption from Licensing Requirements 
Fortunately, there is a way for associations raffle off prizes without the effort of obtaining a raffle license to make association events more memorable and well-attended. Colorado law does not require a raffle license if participants are not required to buy a raffle ticket.  The law specifically provides that product giveaways using free chances to advertise, create goodwill, promote new products, or the collect names are not subject to regulation under the raffle law.  Accordingly, associations can give raffle tickets away at association events without a license as long as nothing of value is exchanged to get a raffle ticket.  So, to avoid licensing requirements entirely, remember the legalese at the end of so many promotional commercials, “No purchase necessary.”

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