Raffles are legal in Texas, but only when a qualifying nonprofit runs them under the Charitable Raffle Enabling Act (CREA) in Chapter 2002 of the Texas Occupations Code. For-profit businesses, individuals, and political groups cannot hold raffles at all. Even eligible organizations face hard rules on prizes, tickets, frequency, and how the money is used, and getting any of them wrong turns the fundraiser into a criminal gambling offense.
Who Can Legally Hold a Raffle
Texas recognizes four types of “qualified organizations” under Section 2002.002.1State of Texas. Texas Occupations Code 2002.002 – Definitions
- A religious society that has existed in Texas for at least 10 years and does not distribute income to members or officers beyond reasonable compensation.
- A volunteer fire department that actively provides fire-fighting services and pays members no more than nominal compensation.
- A volunteer emergency medical service that actively provides emergency medical, rescue, or ambulance services and pays members no more than nominal compensation.
- A nonprofit organization that is tax-exempt under Section 501(c) of the Internal Revenue Code and has existed in Texas for at least three preceding years. Most community groups fall here.
If your organization does not fit one of these four categories, any raffle you run is illegal gambling under state law, no matter how good the cause.
Prize Rules
The sharpest line in CREA is on prizes. A raffle prize cannot be money. The statute defines money as coins, paper currency, or a negotiable instrument readily convertible to coins or paper currency, which rules out checks, money orders, and similar instruments.1State of Texas. Texas Occupations Code 2002.002 – Definitions Tangible items like vehicles, electronics, and vacation packages are fine.
Value caps depend on how the organization got the prize:
- A prize the organization purchased or gave any consideration for cannot exceed $75,000 in value.
- A residential dwelling the organization purchased as a prize cannot exceed $750,000.
- A fully donated prize has no value cap.
- A prize consisting of Texas state lottery tickets is capped at $75,000 in combined face value, regardless of any jackpot those tickets might win.
Before selling a single ticket, the organization must either have the prize in hand or post a bond with the county clerk for the full value of the prize.2State of Texas. Texas Occupations Code 2002.056 – Restrictions on Prizes Selling tickets for a prize you plan to acquire later, without the bond, is a violation.
Ticket Requirements
Section 2002.055 requires every raffle ticket sold or offered for sale to print:3State 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
Only people authorized by the organization can sell tickets. Handing ticket sales to a third party the organization has not approved violates the law.4State of Texas. Texas Occupations Code 2002.054 – Restrictions on Raffle Promotion and Ticket Sales
How Often, and Who Runs It
A qualified organization can hold no more than two raffles per calendar year under Section 2002.052, and every dollar of ticket revenue must be spent on the organization’s charitable purposes.5Texas Legislature Online. Texas Occupations Code Chapter 2002 – Charitable Raffles Proceeds cannot be paid to individuals or diverted to purposes outside the mission.
No one can be paid, directly or indirectly, for organizing, conducting, or selling tickets for a raffle. A paid employee who is also a member of the organization can help, but the raffle-related work must be a “de minimis” part of their job.5Texas Legislature Online. Texas Occupations Code Chapter 2002 – Charitable Raffles Hiring an outside promoter or paying a volunteer specifically for raffle work is a violation. The event has to run on volunteer effort or on staff whose primary duties lie elsewhere.
Do Not Use the Mail
A raffle that complies with every Texas rule can still land the organization in federal trouble. 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 carries up to five.
That means no mailing raffle tickets to supporters, no mailed flyers advertising the raffle, and no mailed list of winners. Nonprofits often stumble by tucking a raffle order form into a direct-mail newsletter. Keep raffle promotion and ticket distribution off the postal service entirely.
Taxes on Prizes
Running a raffle creates federal tax duties that small organizations often miss. When a raffle 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, any prize valued at $2,000 or more triggers a Form W-2G reporting obligation even without withholding.7Internal Revenue Service. Instructions for Forms W-2G and 5754 If the winner does not provide a valid taxpayer identification number and the prize sits between the reporting threshold and the $5,000 withholding threshold, backup withholding at 24% applies.
Winners owe income tax on the fair market value of the prize regardless of whether the organization withheld. A $40,000 car is $40,000 in taxable income to the person who wins it.
Organizations that file Form 990 or 990-EZ and report more than $15,000 in gross gaming income must complete Schedule G, Part III, which asks for detailed revenue and expense information on gaming activities.8Internal Revenue Service. Instructions for Schedule G (Form 990)
Penalties for an Unauthorized Raffle
Any raffle outside CREA is illegal gambling. Promoting one, which includes setting it up, organizing it, or selling tickets, is a Class A misdemeanor carrying 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 planned it.
A county attorney, district attorney, or the Texas Attorney General can also sue in state court to stop a raffle that violates CREA or to block future violations.10Office of the Attorney General. Charitable Raffles and Casino/Poker Nights An injunction can restrict the organization’s future fundraising, not just the current event. Repeated gaming-law violations also expose a nonprofit to IRS scrutiny and possible loss of 501(c) status, which ends tax-deductible giving and can disqualify the group from grants and public funding.