Kentucky Charitable Gaming: Licenses, Game Limits & Penalties

Kentucky charitable gaming rules require any nonprofit that wants to run bingo, raffles, pull-tabs, or casino-style fundraisers to hold a license from the Department of Charitable Gaming (DCG), keep gaming money in a dedicated account, use only unpaid workers, and follow specific limits on prizes, frequency, and player age. A narrow set of small raffles is exempt from licensing, but almost every other activity is regulated in detail, and violations carry both criminal and administrative penalties.

Which Organizations Need a License

Your organization must hold federal tax-exempt status under 26 U.S.C. sections 501(c)(3), 501(c)(4), 501(c)(8), 501(c)(10), or 501(c)(19), or be covered under an IRS group ruling under one of those sections.¹ You also must have been established and continuously operating in Kentucky for charitable purposes other than gaming for at least three years before you apply, with a physical office in the state throughout that period. A national organization operating in more than ten states can qualify differently but still needs an office in the Kentucky county where gaming will occur for at least one year before applying.

The application requires your IRS determination letter (or equivalent document granting tax-exempt status), your articles of incorporation if you’re incorporated, and a description of the charitable purposes gaming proceeds will fund.¹

Small Raffle Exemptions

Not every raffle needs a full license. A qualifying nonprofit that runs raffles bringing in no more than $25,000 in gross receipts per year is exempt from licensing for those raffles.¹ A separate exemption covers groups that don’t meet the standard nonprofit qualifications at all: they may hold a raffle without a license if gross receipts stay under $500, all proceeds go to a charitable organization, and they hold no more than three raffles per year. Even exempt organizations must file an annual report with the DCG on Form CG-FIN-EXE before January 31 each year.²

Background Checks and Disqualifying Convictions

The DCG runs a state criminal history background check on every applicant, and can require an FBI check if it deems one reasonably necessary. The check applies to your chief executive officer, chief financial officer or director, the designated chairperson of gaming activities, and anyone with a 10 percent or greater financial interest in the organization.³

A license will be denied or revoked if any of those individuals has been convicted within the preceding ten years of a felony, a gambling offense, criminal fraud, forgery, theft, falsifying business records, or any two misdemeanors.³ Check this before you invest time in the paperwork.

License Fees

Annual license fees are tiered by gaming revenue and non-refundable:

$100 for gross receipts of $100,000 or less
$200 for gross receipts between $100,000 and $250,000
$300 for gross receipts above $250,000²

What You Can Run and the Limits on Each Game

Kentucky defines charitable gaming as bingo, charity game tickets (pull-tabs), raffles, and charity fundraising events run by licensed organizations.⁴ Casino-style events (often called Monte Carlo or casino nights) are allowed as special limited charity fundraising events, subject to additional rules.

Bingo

Bingo is the most restricted activity. A licensed organization is limited to one session per day, three sessions per week, no more than five consecutive hours in a day, and fifteen total hours per week.⁵ Total prizes cannot exceed $5,000 in fair market value in any 24-hour period, including door prizes.⁶ Card-minding devices are permitted but must be DCG-approved. Progressive jackpots carrying forward between sessions are allowed, but must be tracked separately in the organization’s records.⁷

Raffles and Pull-Tabs

Raffles must follow DCG raffle standards under KRS 238.545, and any organization holding a special event raffle license must get written DCG approval before selling the first ticket.¹ Prizes must be awarded as publicized.

Pull-tabs (charity game tickets) may not be purchased or opened by anyone under 18.⁸ They must be bought from DCG-licensed distributors, and all proceeds must support the charitable purposes stated in the license application.

Electronic Pull-Tab Devices

Electronic pull-tab devices are allowed but heavily restricted. They must be handheld or fixed-base computing devices that do not mimic slot machines in any way: no spinning reels, pull handles, flashing lights, or coin dispensers.⁹ Each individual ticket can cost no more than $5, and each game set is capped at 25,000 tickets. Outcomes must be determined by a central computer system, not by the device.

Organizations can operate up to 35 electronic pull-tab devices at their primary office, or up to 50 during a bingo session or at a licensed charitable gaming facility. Each player uses only one device at a time, and must prove they’re at least 18 before using it. Fixed-base devices cannot accept credit or debit cards. Before any first-time use, confirm the specific system, device, and software version have been DCG-approved for Kentucky.⁹

Who Can Work the Games, and Age Rules for Players

Gaming must be run solely by officers, members, and bona fide employees of the licensed organization. Volunteers may help but must be readily identifiable as volunteers. The rule that catches many groups off guard: no one involved in conducting or administering charitable gaming may receive any compensation for those services, including tips. Attempting to disguise compensation as something else is treated as an unauthorized diversion of funds and triggers penalties under KRS 238.995.¹⁰

Age rules vary by activity. Pull-tabs are 18-and-over. A minor may play bingo only if accompanied by a parent or legal guardian, and only if prizes are noncash and worth $10 or less. Minors cannot play bingo at a charity fundraising event unless the event’s rules specifically allow it under that same noncash-prize exception. At casino night events, no one under 18 may play or help run any game.⁸

Handling the Money

Kentucky treats the financial side of gaming with particular seriousness, and the rules govern every dollar from the moment it comes in.

The Dedicated Gaming Account

All gross gaming receipts must be deposited into a single checking account used exclusively for gaming, within five business days after each event or session. The account must be named the “charitable gaming account,” maintained at a Kentucky financial institution, and hold no other funds. All gaming expenses, prize purchases, and charitable donations from gaming proceeds must be paid from this account. Checks must be imprinted with “charitable gaming account” and the organization’s license number.¹¹

Commingling gaming funds with general operating funds is one of the fastest ways to draw DCG scrutiny. Keep them completely separate.

Records and Reports

Your chief financial officer is custodian of gaming records and responsible for keeping them accurate, complete, and available for inspection. Session records, monthly bank statements, reconciliations, and returned checks must be retained for three years. Gross receipts tracking has to account for every revenue stream: bingo card sales, pull-tab sales, raffle tickets, card-minding device fees, and charity fundraising event games.⁷

Licensed organizations file financial reports with the DCG as required by KRS 238.550, using the DCG’s standardized worksheets and forms. Organizations operating under an exemption still file the annual Form CG-FIN-EXE before January 31.²

Taxes on Prizes and Gaming Income

Running charitable gaming does not automatically shield the proceeds or the prizes from taxation.

Reporting Prizes to the IRS

For 2026, organizations must file IRS Form W-2G for gambling winnings that meet or exceed $2,000, a threshold now adjusted annually for inflation. For sweepstakes, raffles, and lottery-type games, reporting is triggered when winnings are at least 300 times the wager. Mandatory federal income tax withholding applies when winnings minus the wager exceed $5,000.¹²

Unrelated Business Taxable Income

Gaming income received by a tax-exempt organization is generally treated as unrelated business taxable income unless an exclusion applies. Two matter most for Kentucky charities. Bingo is excluded as long as the games don’t violate state or local law, so compliant Kentucky bingo qualifies. And if substantially all the work running the gaming is done by volunteers, the income is excluded regardless of the game type.¹³ Because Kentucky prohibits compensating gaming workers, most licensed organizations will naturally meet the volunteer-labor exclusion.

Kentucky Withholding

Kentucky requires withholding on gambling winnings at the state’s maximum income tax rate. The state uses the same definition of reportable gambling winnings as the IRS under 26 U.S.C. 3402(q), so a prize that triggers federal reporting also triggers Kentucky withholding.¹⁴

Penalties and How to Appeal a Violation

Kentucky enforces charitable gaming law through both criminal penalties and administrative sanctions, and the DCG conducts regular audits and inspections.

Criminal Penalties

Operating charitable gaming without the required license is a Class A misdemeanor, and a second offense within five years becomes a Class D felony. Making materially false statements on a license application or in required reports, or willfully failing to maintain required records, is also a Class A misdemeanor that escalates to a Class D felony on a second offense within five years.¹⁵

Rigging the outcome of a game or diverting gaming funds for personal benefit starts as a Class B misdemeanor when the amount is under $500, becomes a Class A misdemeanor at $500 up to $1,000, and reaches Class D felony at $1,000 or more, or after three convictions within five years.¹⁵ Making false entries in a charitable organization’s business records or destroying true entries is separately classified as a Class A misdemeanor.

Administrative Fines and License Actions

The DCG can impose administrative fines that typically run from $250 to $500 per violation, with a maximum of $1,000. It can also suspend or revoke a gaming license, and when a violation is serious enough that continued gaming threatens the public interest, it can impose an immediate suspension.¹⁶

The 10-Day Appeal Window

If your organization receives a notice of violation, you have 10 days from receipt to submit a written notice of appeal to the DCG. The appeal must be filed by an officer of the organization or an attorney and must state the reason for the appeal. The penalty does not take effect while the appeal is pending. If no settlement is reached with DCG legal staff, the case goes to the Public Protection Cabinet’s Office of Administrative Hearings; a recommended order follows, the DCG commissioner enters a final order, and the organization can then appeal to circuit court.¹⁶ Treat any notice of violation as urgent and consult an attorney promptly. Ten days goes quickly.

1
Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 238.535 – Licensing of Charitable Organizations Conducting Charitable Gaming
2
Kentucky Legislative Research Commission. 820 KAR 1:005 – Charitable Gaming Licenses and Exemptions
3
Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 238.525 – Licensing Requirements, Criminal History Background Check, Disqualification
4
Justia. Kentucky Code 238.505 – Definitions for Chapter
5
Justia. Kentucky Code 238.545 – Restrictions on Frequency, Prizes, and Participants for Various Types of Charitable Gaming
6
Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 238.545 – Restrictions on Frequency, Prizes, and Participants
7
Kentucky Legislative Research Commission. 820 KAR 1:057 – Recordkeeping
8
Kentucky Legislative Research Commission. SB 190 – An Act Relating to Charitable Gaming
9
Kentucky Legislative Research Commission. 820 KAR 1:032 – Pulltabs
10
Kentucky Legislative Research Commission. Chapter 28 (SB 190) – An Act Relating to Charitable Gaming
11
Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 238.550 – Standards for Management and Accounting of Funds
12
Internal Revenue Service. Instructions for Forms W-2G and 5754 (Rev. January 2026)
13
Internal Revenue Service. Exempt Organization Gaming and Unrelated Business Taxable Income
14
Cornell Law School. 103 KAR 18:070 – Supplemental Wages and Other Payments Subject to Withholding
15
Kentucky Legislative Research Commission. Kentucky Revised Statutes KRS 238.995 – Penalties
16
TRAINING MANUAL – Department of Charitable Gaming. Violations – The Administrative Case Process