If a Texas nonprofit gives away raffle tickets for free but asks for a donation, is it running an illegal lottery?

Texas AG Opinion JM-513: When a Charity Drawing Becomes an Illegal Lottery

Plain-English summary

The Jefferson County Criminal District Attorney asked whether it is a lottery when a nonprofit gives away paintings to holders of numbered tickets, chooses winners at random, and asks each ticket holder to make a donation. Tickets would be available at no cost, but each would bear the statement "Donations of $5.00 requested." A second question asked whether the answer would change if donors received more tickets, and thus more chances, than non-donors. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0513.pdf

JM-513 concluded this is a lottery. Section 47.01(6) of the Texas Penal Code defines a lottery as a scheme distributing prizes by chance among persons who have paid or promised consideration for a chance to win. That has three elements: a prize, distribution by chance, and payment of consideration. A charitable purpose does not save it; as one court put it, a lottery is no less a lottery if the proceeds go to charity. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0513.pdf

The key issue was consideration. The requester argued there was no consideration because a ticket could be obtained without donating. The AG disagreed. Earlier cases finding no lottery involved promotions where no charge of any kind was exacted from anyone, unlike this one. Following Attorney General Opinion H-820 and the Texas Supreme Court's reasoning in City of Wink v. Griffith Amusement Co., the opinion reasoned that the average person will seldom suffer the embarrassment of asking for a free ticket, so a requested donation is really a disguised sale. Once any person actually donates for a chance to win, the drawing is a lottery. If literally no one donated, no lottery would occur, but as a practical matter a nonprofit would not hold the drawing if it did not expect donations. Because the answer to the first question was yes, the AG did not reach the second. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0513.pdf

Currency note

This opinion was issued in 1986. Since then, Texas amended its constitution and enacted the Charitable Raffle Enabling Act, which now allows qualified nonprofit organizations to conduct raffles under specific conditions. That framework did not exist when this opinion issued. Treat this page as historical context, not current legal advice, and check the current Charitable Raffle Enabling Act and Penal Code before running any drawing.

Common questions

Is a charity raffle automatically legal because the money goes to a good cause?

Not under the law this opinion applied. JM-513 quoted the rule that a lottery is no less a lottery if the proceeds are used for charitable purposes. Whether a drawing is an illegal lottery turns on the three statutory elements, not on the worthiness of the cause. (Note that Texas has since enacted the Charitable Raffle Enabling Act, which changes this for qualified nonprofits; see the currency note.) Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0513.pdf

If tickets are free, is there really "consideration"?

The AG said yes, in practice. Making tickets nominally free but asking for a donation is, in the opinion's words, indistinguishable from an outright sale of tickets. Drawing on City of Wink v. Griffith Amusement Co., it reasoned that most people will not endure the embarrassment of asking for a free ticket, so the requested donation functions as the price. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0513.pdf

When exactly does the drawing become an illegal lottery?

Once any person actually makes a donation for a chance to win. The opinion said that if in fact no one ever donated, no lottery would occur, but it treated that as unrealistic because the organization would not hold the drawing unless it anticipated donations. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0513.pdf

What kinds of promotions did courts find were NOT lotteries?

Ones where no charge of any kind was exacted from any registrant. The opinion cited Brice v. State, Griffith Amusement Co. v. Morgan, and State v. Socony Mobil Oil Company as examples where the consideration element was missing because participation was genuinely free. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0513.pdf

Was there any exception for charities at the time?

Only a narrow one. The opinion noted a limited "bingo" exception for charities under article III, section 47(b) of the Texas Constitution and V.T.C.S. article 179d. That bingo exception did not cover the artwork drawing described here. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0513.pdf

Background and statutory framework

The controlling text is Penal Code section 47.01(6), which defines a lottery as any scheme or procedure whereby one or more prizes are distributed by chance among persons who have paid or promised consideration for a chance to win, whatever it is called. That statutory definition echoes the definition under article III, section 47 of the Texas Constitution. The opinion broke it into three elements: a prize, distribution by chance, and consideration. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0513.pdf

On the charitable-purpose point, the AG cited State v. Amvets Post Number 80 and Attorney General Opinion H-820 (1976), and noted the only charity carve-out then available was the limited bingo exception under article III, section 47(b) and V.T.C.S. article 179d. On consideration, it distinguished Brice v. State, Griffith Amusement Co. v. Morgan, and State v. Socony Mobil Oil Company, where no charge was exacted, and relied on H-820 (which held that distributing tickets to those who make a designated "donation" is indistinguishable from a sale) and on the Texas Supreme Court's practical reasoning in City of Wink v. Griffith Amusement Co. about the embarrassment of asking for a free registration. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0513.pdf

Citations and references

The opinion cited the following authorities. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0513.pdf

Constitutional and statutory provisions:

• Tex. Penal Code § 47.01(6)
• Tex. Const. art. III, § 47 (including the § 47(b) bingo exception)
• V.T.C.S. art. 179d

Cases:

• State v. Amvets Post Number 80, 541 S.W.2d 481, 483 (Tex. Civ. App. - Dallas 1976, no writ)
• Brice v. State, 242 S.W.2d 433, 434 (Tex. Crim. App. 1951)
• Griffith Amusement Co. v. Morgan, 98 S.W.2d 844, 845 (Tex. Civ. App. - Austin 1936, no writ)
• State v. Socony Mobil Oil Company, Inc., 386 S.W.2d 169 (Tex. Civ. App. - San Antonio 1964, writ ref'd n.r.e.)
• City of Wink v. Griffith Amusement Co., 100 S.W.2d 695, 697 (Tex. 1936)

The opinion also cited Attorney General Opinion H-820 (1976).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0513
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0513.pdf

Original opinion text

Best-effort transcription from a scanned PDF via OCR. Minor OCR errors may remain; the linked PDF is authoritative.

The Attorney General of Texas

July 9, 1986

JIM MATTOX
Attorney General

Honorable James S. McGrath
Criminal District Attorney
P. O. Box 2553
Beaumont, Texas 77704

Opinion No. JM-513

Re: Whether a lottery occurs where persons make donations to a nonprofit organization and receive thereby a chance to win a painting

Dear Mr. McGrath:

You ask the following questions:

1. Is it a "lottery" if a nonprofit organization gives away artistic paintings to holders of numbered tickets, where the winners are chosen at random, and where each person receiving a numbered ticket is asked to make a donation for the purchase of art collections?

2. If your answer to question number 1 is "no," would your answer be different if persons making donations should be given more tickets and hence, more chances of winning than those who do not make donations?

You indicate that tickets for the drawing will be made available at no cost but that persons who want a ticket will be asked to make a "voluntary" donation. Your letter states that all tickets will in fact bear the statement "[d]onations of $5.00 requested."

A "lottery" is defined in section 47.01(6) of the Texas Penal Code as follows:

"Lottery" means any scheme or procedure whereby one or more prizes are distributed by chance among persons who have paid or promised consideration for a chance to win anything of value, whether such scheme or procedure is called a pool, lottery, raffle, gift, gift enterprise, sale, policy game, or some other name.

See also Tex. Const. art. III, § 47.

The promotion you describe is intended to raise money for a charitable purpose. Nevertheless, as the court stated in State v. Amvets Post Number 80, 541 S.W.2d 481, 483 (Tex. Civ. App. - Dallas 1976, no writ), "a lottery is no less a lottery if the proceeds are used for charitable purposes." See also Attorney General Opinion H-820 (1976). There is only a limited "bingo" exception for charities under article III, section 47(b). See V.T.C.S. art. 179d.

Under section 47.01(6), three elements comprise an illegal "lottery": (1) one or more prizes, (2) distribution of the prizes by chance, and (3) the payment or promise of consideration for the chance to win. This statutory definition echoes the established definition of a "lottery" under article III, section 47 of the Texas Constitution and under prior Penal Code provisions. See Brice v. State, 242 S.W.2d 433, 434 (Tex. Crim. App. 1951); Griffith Amusement Co. v. Morgan, 98 S.W.2d 844, 845 (Tex. Civ. App. - Austin 1936, no writ). You suggest that the element of consideration is lacking in the situation you describe because it is possible to obtain a ticket without making a donation. Although the courts in Brice v. State and Griffith Amusement Co. v. Morgan found that no "lottery" occurred, both cases involved promotions where no charge of any kind was exacted from any of the registrants. See also State v. Socony Mobil Oil Company, Inc., 386 S.W.2d 169 (Tex. Civ. App. - San Antonio 1964, writ ref'd n.r.e.).

Numerous Texas court cases and Attorney General Opinions have addressed proposals similar to the one you are investigating and have held that they constitute "lotteries." See Attorney General Opinion H-820 (1976) (and cases cited therein). In Attorney General Opinion H-820, this office determined that a proposal to distribute tickets to persons who make a charitable "donation" of a designated sum is indistinguishable from an outright sale of tickets. As the Texas Supreme Court stated in City of Wink v. Griffith Amusement Co., with regard to a similar drawing:

True, no doubt if anyone had applied for a free registration to the drawing, it would have been given, but human nature is such that the average person would seldom, if at all, suffer the natural embarrassment of asking for a free registration. (Emphasis in original).

100 S.W.2d 695, 697 (Tex. 1936).

Further, the fact that one person receives a chance to win for free while another person "pays" for the chance does not negate the fact that someone in the contest has paid consideration for the chance to win. Of course, if in fact no one actually makes a donation, then no lottery would occur. As a practical matter, we agree with the court in City of Wink. If the organization did not anticipate some donations, no drawing would be held.

Consequently, a drawing held by a nonprofit organization where tickets for the drawing are available for free but where persons who request tickets are asked to make a donation would constitute a "lottery" unless no one actually made a donation. Accordingly, we need not reach your second question.

SUMMARY

A random drawing for artwork, sponsored by a nonprofit organization, in which tickets are available for free but where persons who request tickets are asked to make a donation constitutes a "lottery" under section 47.01(6) of the Texas Penal Code once any person actually makes a donation for a ticket.

Very truly yours,

JIM MATTOX
Attorney General of Texas

JACK HIGHTOWER
First Assistant Attorney General

MARY KELLER
Executive Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jennifer Riggs
Assistant Attorney General