Raffles are legal in Missouri, but only when a qualifying charitable or religious nonprofit runs them under the rules set by the Missouri Constitution, state statute, and the Missouri Gaming Commission. Voters amended the constitution in 1998 to carve this exception out of the state’s general ban on gambling, and the exception is narrow: wrong organization, paid help, or an oversized prize can turn a fundraiser into a felony.1Missouri Revisor of Statutes. Missouri Constitution Article III Section 39(f)
Who Can Legally Run a Raffle
Missouri limits raffles to two types of organizations: charities recognized under Section 501(c)(3) of the Internal Revenue Code, and religious organizations recognized under Section 501(c)(3) or Section 501(d).2Missouri Senate. SB 1021 – Introduced Bill Text For-profit businesses cannot hold raffles at all. Fraternal, veteran, and service groups can run bingo under a separate constitutional provision, but they do not automatically get raffle rights unless they also hold 501(c)(3) or 501(d) status.
The organization also has to exist primarily for something other than running drawings. A group formed mainly to hold raffles does not qualify.
Every person who manages or operates the raffle must be a bona fide member of the organization. That means at least six months of membership, age 18 or older, dues paid, and equal voting rights with other members.2Missouri Senate. SB 1021 – Introduced Bill Text These members have to volunteer. Paying anyone, member or outside professional, to run the raffle makes the whole event illegal.
When You Need a License
Licensing depends on prize volume. If your organization’s total prizes stay at or below $5,000 for the calendar year and you hold no more than four raffles, you don’t need a license from the Missouri Gaming Commission.2Missouri Senate. SB 1021 – Introduced Bill Text Multiple drawings held during a single fair, festival, or carnival can count as one event, but the $5,000 annual cap still applies to unlicensed groups.3Missouri Senate. SB 525 – Perfected Bill Text
Once prizes clear $5,000 in a year, or you plan more than four raffles, you must apply for a license. The application fee is $50, and licensed organizations pay a 2% tax on all prizes awarded.4Missouri Senate. SB 1021 – Requires Charitable Organizations Conducting Raffles
Unlicensed does not mean unregulated. Even organizations below the threshold have to keep their records and premises open to Gaming Commission inspection.
Prize Caps and the 50 Percent Rule
Missouri enforces three hard ceilings on raffle prizes:
- No single prize can exceed $300,000 in value.
- Total prizes in any one raffle cannot exceed $500,000.
- An organization’s combined prize value for the calendar year cannot exceed $3 million.
These are fair market value limits, not ticket revenue limits.3Missouri Senate. SB 525 – Perfected Bill Text
When any raffle offers prizes worth more than $15,000, at least 50% of gross ticket receipts has to be awarded as prizes. Donated items are valued at fair market value as determined by the Gaming Commission.3Missouri Senate. SB 525 – Perfected Bill Text That rule surprises organizers. Sell $40,000 in tickets with a single donated $18,000 car as the prize, and you have to award at least $20,000 in total prizes to stay legal.
Prizes have to be tangible items or cash. Mechanical or electronic gaming devices are not allowed as prizes. The winner is drawn at random from numbered tickets sold at a set price; no skill element can enter in.2Missouri Senate. SB 1021 – Introduced Bill Text
Records You Must Keep
Every organization that holds a raffle, licensed or not, has to keep detailed records for at least two years after each drawing. Those records must show:
- Gross ticket receipts for each raffle
- How the net proceeds were used
- The fair market value of every prize awarded
- Names of all winners who received prizes worth $100 or more
The Gaming Commission can inspect these records and the organization’s premises at any time.3Missouri Senate. SB 525 – Perfected Bill Text All net proceeds have to go to the organization’s charitable or religious purposes. Diverting raffle money to individuals or to activities outside the mission violates both the raffle statute and the terms of tax-exempt status.
Federal Tax Obligations
State compliance is only part of the picture. Federal rules add their own reporting, withholding, and tax layer.
What the Organization Reports and Withholds
For 2026, a raffle prize triggers Form W-2G reporting when the winnings reach at least $2,000 and are at least 300 times the ticket price. That threshold is adjusted annually for inflation starting in 2026.5Internal Revenue Service. Instructions for Forms W-2G and 5754 (Rev. January 2026)
When a prize meets the threshold, the organization withholds federal income tax at 24% of winnings above the ticket cost. If the winner won’t provide a correct taxpayer identification number, backup withholding kicks in at the same 24% rate.6Internal Revenue Service. Instructions for Forms W-2G and 5754 For non-cash prizes like a car, the winner typically pays the organization 25% of the fair market value minus the ticket cost. If the organization instead agrees to cover that withholding, the effective rate rises to 33.33% of fair market value under the IRS gross-up formula.7Internal Revenue Service. Tax-Exempt Organizations and Raffle Prizes – Reporting Requirements and Federal Income Tax Withholding
W-2Gs go to winners by January 31 of the following year, with copies filed with the IRS (transmitted on Form 1096) by the last day of February. Withheld taxes are reported and paid on Form 945, due January 31.7Internal Revenue Service. Tax-Exempt Organizations and Raffle Prizes – Reporting Requirements and Federal Income Tax Withholding
Unrelated Business Income
The IRS treats gaming income, including raffle revenue, as unrelated business taxable income for 501(c)(3) organizations, because gaming is not an inherently charitable activity even when the money funds charitable work. One exclusion saves most Missouri raffles: if substantially all the work is done by unpaid volunteers, the income is excluded under IRC Section 513(a)(1).8Internal Revenue Service. Exempt Organization Gaming and Unrelated Business Taxable Income Since Missouri already requires uncompensated bona fide members to run the raffle, qualifying organizations usually meet the federal exclusion automatically.
What the Winner Owes
Every dollar of raffle winnings is taxable, whether or not the amount triggers a W-2G. A $500 gift card from a church raffle won’t generate a form, but the IRS still expects it on the winner’s return.9Internal Revenue Service. Gambling Income and Expenses Non-cash prize winners owe tax on fair market value, which is where big-ticket prizes create real strain. Winning a $50,000 truck means a tax bill that could exceed $12,000 depending on bracket, and the money may be due before the vehicle can be registered.
Online Ticket Sales
Missouri’s raffle statute predates online fundraising and doesn’t address internet ticket sales. Federal law complicates matters: the Unlawful Internet Gambling Enforcement Act defines a bet or wager to include buying a chance to win a prize that is predominantly subject to chance, which fits a raffle ticket.10eCFR. Part 132 – Prohibition on Funding of Unlawful Internet Gambling Payment processors like PayPal require pre-approval for gambling-related transactions and restrict activity to jurisdictions where legality is clear.11PayPal. Acceptable Use Policy Many Missouri organizations stick to in-person sales to avoid the gray area. If you’re planning an online component, talk to an attorney familiar with both Missouri gaming law and federal internet gambling rules first.
What Makes a Raffle Illegal in Missouri
A raffle crosses into illegal gambling when it misses any of the statutory requirements. The common violations:
- Running one without 501(c)(3) or 501(d) status, or as a for-profit
- Paying anyone to manage or operate the raffle
- Using proceeds for anything outside the organization’s charitable or religious mission
- Awarding a prize over $300,000, a per-raffle total over $500,000, or an annual total over $3 million
- Running raffles above the $5,000 or four-event thresholds without a license
- Failing to keep two years of records or refusing inspection
Licensed organizations that skip the 2% prize tax face fines of up to three times the unpaid amount.2Missouri Senate. SB 1021 – Introduced Bill Text Beyond the raffle-specific penalties, an unauthorized raffle falls under Missouri’s general gambling statutes. Promoting gambling in the first degree is a Class E felony that carries up to four years in prison, and the definition reaches anyone who knowingly advances gambling activity by organizing or managing it.12Missouri Revisor of Statutes. Missouri Revised Statutes Section 572.030 That is exactly what running an unlicensed raffle looks like to a prosecutor.