One popular method of raising funds for not-for-profit corporations and other similar organizations, including school-related clubs and groups, is through raffles and 50/50s (formally known as “Games of Chance”). Ultimately, such activities are authorized under Article 9-A of the General Municipal Law—as long as the municipality in which the Games are conducted has specifically authorized them by local law. As discussed below, however, an organization conducting these Games must ensure that it is strictly complying with any applicable requirements and reporting obligations.
To conduct a Game of Chance, an organization must be considered an “authorized organization” within the meaning of the General Municipal Law. Among other types of organizations, an “authorized organization” includes a charitable organization, which operates without profit to its members, and has been serving its purpose for at least three years prior to conducting the Game. Further, the organization must have among its “dominant purposes” one or more “lawful purposes”—as defined in the General Municipal Law. Among the “lawful purposes” that qualify under the law are purposes that benefit “deserving persons…by enhancing their opportunity for…educational advancement…or by contributing to their physical wellbeing.”[1]
While local laws that permit Games of Chance within a given municipality will often mirror the General Municipal Law, that is not always the case. A particular municipality may enact rules that are more stringent than State law, for example, in which case an organization would have to comply with those more stringent rules. As a result, organizations offering Games of Chance should carefully review the local laws that they are subject to.
The licensing and reporting obligations that apply to a Game of Chance will often be determined by the amount of net proceeds that an organization expects to realize. This estimate is based on a good faith determination of the amount that is likely to be raised:
- If a single game will derive over $30,000 in net proceeds: The group conducting the game will have to obtain an identification number from the New York State Gaming Commission (Form 1A) and a license from the Town Clerk of the municipality in which the game is being conducted (Forms GC-2, GC-2A and GC-2B).
- If a single game will derive less than $30,000 in net proceeds: The group conducting the game will have to submit a Verified Statement to both the Gaming Commission and the Town Clerk attesting to the fact that it believes in good faith that it will not derive more than $30,000 from the Game (Form GCVS-1). Additionally, it may have to complete a Raffle Consent Form (Form GC-RCF) if it plans on selling tickets or conducting the Game outside of the municipality which received the Verified Statement. Finally, it will have to submit another Verified Statement by January 30th of the year following the Game to report its actual proceeds (Form GCVS-2).
Necessary forms for filings with the State of New York can be obtained from the New York State Gaming Commission. In addition, organizations should keep in mind that there is an exception to the general rules discussed above for smaller Games of Chance that are only intended to generate limited revenues. Specifically, if a single Game of Chance will derive less than $5,000 and the total Games offered by an organization throughout the calendar year will derive less than $30,000 in total, there are no New York State filings that are required at all—and the organization is exempt from having to obtain a license. For groups engaged in more limited fundraising, this can significantly reduce the administrative burden of these types of activities.
Finally, it is important to keep in mind, especially since Games of Chance are often conducted by school groups, that the General Municipal Law prohibits persons under the age of 18 from playing, operating or assisting in a Game of Chance. While the law allows, for example, parents to sell raffle tickets—to other adult spectators—at a weekend sporting event, the law would not allow for raffle tickets to be sold by children or to children during the school day. Further, local municipalities may enact their own sets of rules by local law. And if a Game of Chance is conducted within the limits of a village, it is possible that the organization will need to comply with both the village’s local law as well as any local law enacted by the town in which the village is located.
Conducting Games of Chance can be highly beneficial for both ”authorized organizations”—and for the causes they support. The law in this area, however, is extensive, nuanced, and particular to the locality in which in the Game is being conducted. As a result, organizations intending to conduct Games of Chance for fund raising purposes should carefully consider applicable restrictions and obligations—and may want to consult with an attorney prior to holding an event.
[1] General Municipal Law § 186(5)(a).