A 50/50 raffle works by pooling the money from ticket sales and splitting it in half: one randomly drawn ticket holder wins 50 percent of the pot, and the nonprofit running the event keeps the other 50 percent. There is no fixed jackpot. The prize grows with every ticket sold, which is why the format shows up so often at sporting events, banquets, and community fundraisers. The simplicity hides a fair amount of regulation, though, because federal tax law, state licensing rules, and a federal ban on mailing raffle tickets all apply.
How the Split Works
The math is direct. If ticket sales total $8,000, the winner takes home $4,000 and the organization keeps $4,000. Sell $12,400, and the winner’s share is $6,200. Because the prize is always half of gross sales, the organization’s cost is predictable and the rising jackpot number becomes its own advertising as the event goes on.
That structure is the main difference from a traditional raffle, where the prize is a donated item or a set cash amount and the nonprofit’s take is whatever is left after covering the prize. In a 50/50, the prize is defined by the sales, not the other way around.
Some organizations run 60/40 or 70/30 splits to keep a larger share for the cause. Those work the same way mechanically, but only the even split is technically a “50/50.” The ratio matters legally in some places: a handful of states, including California, require 90 percent of ticket revenue to go to charitable purposes, which effectively rules out the 50/50 format because half the money leaves as a prize.
Who Can Legally Run One
Most states treat raffles as regulated gambling. Typically only registered 501(c)(3) nonprofits or similar tax-exempt organizations can host one, and many states require the group to have been operating for one to three years before it qualifies. For-profit companies and informal groups generally cannot run a legal raffle at all.
Before selling any tickets, the organization usually needs a permit from a state gaming commission, secretary of state, or attorney general’s office. The application asks about the group’s finances, expected revenue, and planned use of the funds. Fees typically run from $5 to $150 depending on the state and the size of the event. Running a raffle without authorization can bring misdemeanor charges, fines, and in serious cases the loss of tax-exempt status.
State rules vary widely. Some states cap prize values, some limit how many raffles a group can hold each year, and some prohibit cash-prize raffles entirely. The only reliable way to know what applies is to check with the state agency that licenses charitable gaming before planning the event.
Tickets, Sales, and the Drawing
Organizers set a ticket price and often add volume pricing, such as one for $5 or five for $20, to push larger purchases. Tickets are almost always two-part: the buyer keeps one stub with a number, and the matching stub goes into the drawing container. That pairing is what makes the drawing verifiable.
Many states require specific information on the ticket itself, commonly the drawing date, the organization’s name, the permit number, and a description of the prize. Some states also require language telling the buyer that the ticket is not a tax-deductible charitable contribution and that any winnings are taxable income.
Good records matter more than most organizers expect. Volunteers should log the sequence of ticket numbers sold, cash collected per shift, and the count of stubs going into the container. Those records are the organization’s defense if regulators ever ask questions.
When sales close, someone with no stake in the outcome draws a single stub, and the matching number wins. Some states require the drawing to happen in front of attendees. Before paying out, the organization should do a final count of the money collected to confirm the actual jackpot, since the running total on a display board is only an estimate. Most raffles require the winner to be present or to claim the prize within a short window. What happens to an unclaimed prize depends on the organization’s published rules and state law; some states eventually route unclaimed funds through their unclaimed property system.
The Federal Ban on Mailing Tickets
This is the rule that catches organizers off guard. Federal law flatly prohibits sending raffle tickets through the U.S. mail. Under 18 U.S.C. § 1302, it is a crime to mail any lottery or raffle ticket, any advertisement for one, or even a list of raffle winners. A first offense carries up to two years in federal prison plus a fine, with longer terms for repeat offenses.1Office of the Law Revision Counsel. 18 USC 1302 – Mailing Lottery Tickets or Related Matter
The prohibition sweeps in more than the tickets themselves. A flyer promoting the raffle, a letter with an order form, or a newsletter announcing the winner all fall inside the statute if they go through the postal service. Organizations that rely on direct-mail fundraising need to keep raffle promotions completely out of anything they mail. Private carriers like FedEx and UPS are not covered by this specific statute, but using them can still run into other federal or state gambling rules.
Online Ticket Sales
Selling tickets online has become common, especially at professional sports venues. The federal Wire Act does not block it. A 2011 Department of Justice opinion concluded that the Wire Act applies only to sports betting, not to lotteries or similar games of chance.
State law is where the answer lives. Some states have created specific online raffle permits with their own timelines and disclosures. Others have not updated their raffle statutes to address digital sales at all, which leaves a gray area most compliance-minded organizations avoid. There is also a practical wrinkle: some payment processors prohibit raffle transactions in their terms of service, so even a legal online raffle may need a processor that explicitly allows them.
What the Winner Owes and What Gets Withheld
The IRS treats raffle winnings as gambling income, and the organization running the drawing has reporting duties that kick in at set dollar amounts.
The organization must file IRS Form W-2G and give a copy to the winner whenever the prize is $600 or more and at least 300 times the ticket price. A $5 ticket that wins $2,500 hits both triggers, so a W-2G is required.2Internal Revenue Service. Instructions for Forms W-2G and 5754
When the prize minus the ticket cost exceeds $5,000, the organization has to withhold 24 percent of the net winnings and send it to the federal government. On a $12,000 prize from a $5 ticket, that means withholding 24 percent of $11,995, or $2,878.80, and paying the winner the rest. The underlying statute is 26 U.S.C. § 3402(q), which treats raffles as wagering pools subject to withholding.2Internal Revenue Service. Instructions for Forms W-2G and 57543Office of the Law Revision Counsel. 26 USC 3402 – Income Tax Collected at Source If the winner refuses to provide a taxpayer identification number and the prize is above the reporting threshold but below $5,000, the organization must withhold 24 percent as backup withholding instead. To handle any of this, the organization needs the winner’s name, address, and TIN before paying out; the IRS suggests using Form W-9 to collect it.
For the winner, every dollar is taxable, whether or not a W-2G is issued. The IRS is explicit that all gambling winnings must be reported on the federal return, including amounts below the W-2G threshold.4Internal Revenue Service. Topic No. 419, Gambling Income and Losses Winnings go on Schedule 1 of Form 1040. State income tax often applies on top of that, so the total tax can be higher than the 24 percent federal withholding suggests. Gambling losses can offset winnings up to the amount won, but only if you itemize and can document the losses.
One point that surprises people: the ticket purchase itself is not a charitable contribution. Even though the money goes to a nonprofit, the IRS views it as a wager. The ticket price is not deductible.
What the Organization Owes
The nonprofit’s half of the pot is not automatically tax-free. The IRS generally treats gaming activities, including raffles, as an unrelated trade or business that can trigger unrelated business income tax.5Internal Revenue Service. Tax-Exempt Organizations and Gaming
The usual escape is the volunteer labor exception in IRC Section 513(a)(1): an activity is not treated as an unrelated business if substantially all the work is done by unpaid volunteers.6Internal Revenue Service. Exempt Organization Gaming and Unrelated Business Taxable Income Most small 50/50 raffles clear this easily. Groups that hire paid staff to run gaming events, or that lean on raffle revenue as a main funding source, face a harder analysis, and the IRS weighs total facts and circumstances including the size of the activity relative to the group’s overall budget.5Internal Revenue Service. Tax-Exempt Organizations and Gaming An organization that lets gaming revenue become a substantial part of its finances risks being reclassified or losing exempt status.
Post-Event Reporting
Beyond federal tax filings, most states want a post-raffle financial report sent to the agency that issued the permit. These reports typically list total ticket sales, the prize paid, expenses, and the net proceeds directed to the charitable purpose. Some states want the report within 30 days of the event, others fold everything into a single annual filing. Missing the deadline can bring fines, loss of the permit, or restrictions on future fundraising. Keeping the signed tax forms, W-2G copies, ticket logs, and bank deposit records together is the simplest way to stay out of trouble later.