People, sometimes, need a little push to contribute to charity. One popular initiative to prompt more donations or increase fundraising towards a worthy cause is through online charitable gaming.

As in-person activities and events came to a halt due to the pandemic, many nonprofits turned to a virtual environment and set up to continue their fundraising efforts and retain donors.  

Since the generosity of the public is the blood of charity, using engaging and interesting mediums such as online lottery, raffles, and sweepstakes gives people an incentive to donate. That move can not only help with revenue generation but can also be a catalyst in meeting and exceeding your fundraising goals. 

Due to the nature of the games and the regulations governing each of these events, often the terms, “lottery”, “raffles”, and “gambling” may seem confusing. Let's take a deeper look into the definitions and differentiating factors for each of these event types.

What is an online charity lottery?

A charity lottery is a game of chance where players usually win a percentage of the total ticket sales or a fixed pre-decided amount. Most states/provinces in North America require organizations to have a valid license to run a lottery in any jurisdiction. Online lottery, with the primary purpose of fundraising funds for charity, is a fully digital version of the classic lottery. They are an effective way to reach audiences who don’t generally donate but like the idea of winning a prize as they support a cause.  

Lotteries are very similar to raffles in the way they are executed: tickets are sold and winning numbers are drawn. Individual(s) with a ticket that match the numbers drawn win a prize. In lotteries, there is a good chance that the winning ticket may not be sold. This is not the case with raffles, where the organizers ensure that only the tickets sold are entered in the draw, thus providing better odds of winning.

Related: Regulatory Guidance for U.S. States and Canadian Provinces and Territories

What is an online charity raffle?

An online charity raffle is a virtual event where a draw is held to raise money and prizes are awarded to the winner(s). Online raffles (also known as electronic raffles) use computers/technology for the sale of tickets, winner selection, and prize distribution. 

Popular raffles such as the 50/50 and Catch the Ace are commonly held to raise funds for charities. People obtain digital numbered tickets, each of which has a chance of winning a cash prize. Similar to lotteries, the winnings are usually a percentage of the total funds collected through sale of tickets. The remaining amount goes to the nonprofit organizing the event. One of the main reasons that makes online charity raffles so attractive is that donors get a chance to win money while supporting a cause.

An online raffle is held virtually by setting up a dedicated webpage and online payment options for purchase of tickets. Online raffles can run for a single day or weeks or months, thus providing ample time and opportunity for the organization to raise funds.

Similar to lotteries, raffles are a form of gambling and are regulated in most U.S. states and Canadian provinces; some states/provinces consider them to be illegal. Usually, to run a raffle, a state or province-issued license is required.  

Raffles might be the right option for you if your fundraising strategy and goals are focused on a specific geography such as a state or province.

Related: Fundraising 101: Difference Between Online Charity Raffles and Sweepstakes

What is gambling?

Gambling can be defined as a game or mutual bet according to set rules where participants seeking monetary gain voluntarily undertake a risk of losing money. In gambling, winners and losers are determined by chance, by an event, or by the result of a competition. Players usually compete individually against the gambling operator. Similar to lotteries and raffles, gambling can be conducted in-person or online. Casino games such as slots, poker, blackjack, roulette, etc. and sports betting are ideal examples of gambling. Profits and revenue generated from gambling generally don’t support nonprofit causes.  

Compared to lotteries and raffles, the outcome is not solely based on luck, but other factors involving skill and knowledge come into play to ensure your victory.

Online charity lottery vs. Online charity raffles vs. Gambling

There are many similarities in the way online charity lotteries, raffles and gambling events operate. The overlap in their execution and format can make it difficult to differentiate among the three. Here are some key parameters that can help you gain clarity. 

1. Goal or objective of running the event

Like the name suggests, online charity lotteries or charity raffles are run with the intention of raising money for a noble cause. This usually isn’t the case with gambling events—these can generally be categorized as for-profit events. 

2. Intended audience

The target demographic for lotteries and raffles are usually individuals seeking monetary motivation in return for contributing to a cause. The core intention of gamblers is to make money for themselves while taking on various levels of risk, rather than donating to a cause. Gamblers stand a chance to lose a significant amount of money for an opportunity to win. 

Geographically, the intended audience for a charity lottery or raffle is limited to a specific jurisdiction. This is not necessarily the case for gambling; depending on whether it’s an in-person or online gambling event and the respective regulations governing those types of events, players may be from any jurisdiction. 

3. Mode of operation

Online charity lotteries: Players can choose their numbers/tickets. All possible number combinations are entered in the draw, meaning the winning number/ticket may not be sold. All tickets are priced the same and each ticket has the same chance of winning. 

Online charity raffles: Tickets are numbered and players don’t have the freedom to select a specific combination of numbered tickets. Only the tickets that are sold are entered in the draw which increases a participant’s probability of winning. Raffles can have tickets priced at varying amounts with certain price points offering a better chance of winning.

Gambling: Players compete against “the house” and bet on numbers, cards, etc. to win a share of the prize pool. The stakes are usually much higher while gambling; participants can win or lose a huge amount.   

4. Perception

Historically, gambling has been linked to a variety of crimes in society—this is one of the reasons why any form of gambling or games of chance are heavily regulated by authorities. Because gambling is similar to lotteries and raffles, the negative perception used to blend over. This, however, is changing. In the nonprofit world, well-defined regulations for games of chance such as 50/50, Catch the Ace, and Sweepstakes along with the evolution of fundraising and the immense fundraising potential they offer have helped shift the perception of online charitable gaming to a more favourable one.  

5. Legal requirements

In the U.S. and Canada, most states/provinces regulate online charity lotteries, raffles and gambling activities. To conduct a charity raffle or lottery, usually a license or a permit is needed. The same is true for a gambling operator. The requirements to apply for a license or permit differ by type of event and jurisdiction. Some states/provinces may even consider these events to be illegal or may only permit certain forms of raffles or gambling. This is why as a nonprofit or charity, it is essential to consult with legal counsel regarding your specific situation.   

Lottery, raffles, and gambling are similar in the way they operate. However, the intention of the player as well as the organizer is key in determining precise categorization and running a successful event.