North Carolina Raffle Laws: Prize Caps, Proceeds, and Penalties

North Carolina raffle laws allow only four kinds of organizers to run a raffle: nonprofit organizations, candidates for public office, political committees, and government entities within the state. The controlling statute is N.C. General Statute § 14-309.15, and it sets hard caps on prize values, dictates how proceeds must be spent, and makes a violation a Class 2 misdemeanor. Federal law adds a separate prohibition on mailing raffle tickets and imposes tax-reporting duties on both the organization and the winner.¹

Who Can Legally Run a Raffle

Private individuals and for-profit businesses cannot hold raffles in North Carolina. The statute limits raffle authority to nonprofits, candidates, political committees, and in-state government entities.¹

The nonprofit category covers religious, charitable, civic, fraternal, patriotic, veterans’, and educational organizations that are tax-exempt under the Internal Revenue Code. Each regional or county chapter of a larger nonprofit qualifies independently of its parent organization, so a local chapter can hold its own raffle without approval from the national body.¹

Candidates and political committees must have filed their organization reports under Article 22A of Chapter 163 and be in good standing with the appropriate board of elections. Ticket purchases count as political contributions, and all raffle receipts and expenses must be reported under the same campaign-finance rules that govern other fundraising.¹

One common misconception: a nonprofit does not have to have existed for a year before it can hold a raffle. That requirement is in the bingo statute (§ 14-309.6), not the raffle statute. Nothing in § 14-309.15 sets a minimum age for the organization.

Prize Caps and Real Property Rules

A single raffle cannot offer more than $125,000 in cash. If the prize is merchandise that cannot be redeemed for cash, its fair market value can also go up to $125,000. Across all raffles held in a calendar year, a nonprofit’s total prizes, cash and non-redeemable merchandise combined, cannot exceed $250,000.¹

Real property adds extra obligations. A nonprofit offering land or a house as a prize must deliver the property free from all liens, provide an owner affidavit and indemnity agreement, and furnish a title commitment that participants can inspect on request.¹

How the Proceeds Must Be Spent

The statute defines “net proceeds” as total receipts minus the cost of prizes. At least 90 percent of net proceeds must go toward the nonprofit’s charitable, religious, educational, civic, or other nonprofit purposes.¹ That 90-percent floor is one of the tightest in the country.

None of the net proceeds can be used to pay anyone to conduct the raffle or to rent a building where tickets are sold or the drawing takes place.¹ This is where organizations trip up most often. Hiring an outside event coordinator and paying them from raffle revenue violates the statute, even if the coordinator is doing legitimate work. Volunteers run the show, or those costs come from a separate budget line.

What Counts as a Raffle

Under the statute, a raffle is a game where the prize is won by random drawing of the name or number of one or more persons who purchased chances.¹ Both elements have to be present: a purchase and a random drawing.

A few operational rules apply on top of that definition:

Raffles cannot be conducted in conjunction with bingo games.¹
Advertising a compliant raffle is expressly permitted by the statute.¹
A compliant raffle is excluded from the definition of gambling under North Carolina law.¹

Firearms and Alcohol as Prizes

A firearm can be raffled, but the winner must still complete a background check through a federally licensed dealer. Federal law requires the dealer to run a National Instant Criminal Background Check System (NICS) inquiry before transferring the weapon, and the winner must complete ATF Form 4473 as the actual transferee. If the check comes back denied, the organization cannot hand over the firearm regardless of the drawing result.

Alcohol can also appear as a raffle prize, but North Carolina ABC regulations require any alcoholic beverage won in a raffle to be for off-premises consumption, not consumed on the permitted premises where the raffle takes place.

Federal Ban on Mailing Raffle Tickets

Even though state law permits advertising, federal postal law is a hard stop on one common distribution method. Under 18 U.S.C. § 1302, it is a federal crime to deposit in the mail any raffle ticket, any circular advertising a raffle, any payment for raffle chances, or any publication listing raffle winners. The statute treats raffles as lotteries for mailing purposes.²

A first offense carries a fine and up to two years in federal prison. A subsequent offense raises the maximum to five years.² Mailing tickets to members alongside a newsletter is technically a federal offense, even when the underlying raffle is perfectly legal under North Carolina law. Distribute tickets in person or through channels that do not involve the U.S. Postal Service.

Tax Duties for the Organization

A lawful raffle is not gambling under state law, but the IRS treats raffle income the same as any other gaming revenue. Raffle income generally qualifies as unrelated business taxable income (UBTI) when the activity is regularly carried on for profit. The IRS has been explicit that using the proceeds for exempt-purpose programs does not, by itself, make the raffle activity “related” to the organization’s mission.³ An organization with UBTI must file Form 990-T and pay tax on the net income.

The most useful exception is the volunteer labor exclusion under IRC § 513(a)(1). If substantially all the work of running the raffle is performed by unpaid volunteers, the income is not treated as UBTI.⁴ Because state law already bars paying anyone from raffle proceeds to conduct the raffle, most compliant organizations satisfy this test, though the IRS looks at total labor rather than just who is paid from raffle funds.

Federal wagering excise taxes can also apply. Section 501 exemption does not automatically exempt an organization from wagering taxes; the exemption applies only if no part of the net proceeds benefits any private individual. If that kind of inurement occurs, the excise tax applies to the entire amount wagered, not just the organization’s profit.⁵

Reporting Winners and Withholding

For 2026, the organization must file Form W-2G when a winner’s proceeds reach $2,000 and the winnings are at least 300 times the amount of the wager. That threshold is now indexed for inflation each year.⁶ When the winnings minus the wager exceed $5,000, the organization must withhold federal income tax at 24 percent.⁷

Non-cash prizes work a little differently. Withholding is calculated on the item’s fair market value minus the wager. If the winner pays the withholding, the rate is 24 percent. If the organization covers the withholding instead, the effective rate rises to 31.58 percent because the tax payment itself becomes additional income to the winner. When a winner does not provide a taxpayer identification number, 24 percent backup withholding applies to any reportable amount.⁷

Organizations must also file Form 945 annually to report all gambling withholding remitted to the IRS during the year.⁷

Tax Duties for the Winner

Raffle winnings are fully taxable income. The IRS requires winners to report all gambling winnings, including raffle prizes, on their federal return, even if no Form W-2G is issued.⁸

Penalties for Violating the Statute

Any person who conducts a raffle in violation of § 14-309.15 commits a Class 2 misdemeanor. A conviction also triggers a one-year ban on conducting any raffle.¹ A Class 2 misdemeanor can carry up to 60 days of active jail time under North Carolina’s structured sentencing rules, depending on the defendant’s prior conviction level.

The one-year ban tends to hurt organizations more than the fine. A misdemeanor fine is a one-time hit; losing the ability to hold raffles for a full year can cost a nonprofit far more in lost fundraising. And because the statute says “any person,” individual organizers face personal criminal liability, not just the organization.

Where the raffle also involves mailing tickets in violation of 18 U.S.C. § 1302, federal penalties stack on top: up to two years in prison for a first offense and up to five years for a repeat violation.²

Events That Are Not Raffles

Because the statute requires both a purchase and a random drawing, activities missing either element are not raffles and do not have to comply with § 14-309.15. A free giveaway where no one pays for a chance is not a raffle. A silent auction where the highest bidder wins a known item is not a raffle either, because there is no random drawing. Door prizes given to attendees who did not pay separately for a chance fall outside the definition for the same reason.

Organizations sometimes restructure events to eliminate one of the two elements and escape the prize caps and proceeds restrictions. That can be legitimate, but the line between a lawfully structured giveaway and an illegal lottery is thinner than most organizers think. If participants are effectively paying for a chance at a randomly awarded prize, relabeling the event will not help.

1
North Carolina General Assembly. North Carolina General Statutes 14-309.15 – Raffles
2
Office of the Law Revision Counsel. 18 U.S. Code 1302 – Mailing Lottery Tickets or Related Matter
3
Internal Revenue Service. Exempt Organization Gaming and Unrelated Business Taxable Income
4
Internal Revenue Service. Volunteer Labor Exclusion From Unrelated Trade or Business
5
IRS.gov. Update on Excise Tax and Occupational Tax on Wagering
6
IRS.gov. Instructions for Forms W-2G and 5754
7
Internal Revenue Service. Instructions for Forms W-2G and 5754
8
Internal Revenue Service. Topic No. 419, Gambling Income and Losses