My turn: Charitable raffles should not become gambling operations

By Jan Masaoka

Jan Masaoka is chief executive officer of the California Association of Nonprofits, an alliance of more than 10,000 nonprofit organizations working to strengthen California communities, janm@calnonprofits.org. She wrote this commentary for CALmatters.

Until 2001, nonprofits were prohibited from holding raffles in California even though PTAs, churches, Rotary Clubs, preschools, high school bands, and others regularly used raffles to raise money.

We helped change that antiquated rule through a voter-approved ballot measure, Proposition 17 of 2000, allowing nonprofits — and only nonprofits — to conduct raffles, and then only if 90 percent of the gross receipts would go to “beneficial and charitable purposes.”

This “90/10” raffle provision allows charities to hold raffles and raise funds. With only 10 percent of cash receipts going to prizes, raffles hardly amount to gambling.

But three years ago, the Legislature passed a bill by then Sen. Isadore Hall, a Compton Democrat, creating a raffle carve-out with special rules for an exclusive set of nonprofit organizations: nonprofit affiliates of nine major sports leagues and their minor league teams, including National Football League and Major League Baseball franchises

The bill has changed the nature of raffles. A new bill would make it worse. First, some background.

Under Hall’s bill, affiliates of professional sports teams are authorized to hold large-scale raffles in which 50 percent of cash raffle receipts can be awarded to a winner.

We at the California Association of Nonprofits advocated against the 2015 bill. We worried the bill would turn charitable raffles into gambling, thereby putting at risk the public’s confidence that nonprofits are overwhelmingly community-based efforts.

Proponents of SB 549 included a three-year sunset and promised that the California Department of Justice would use that time to complete a report determining if the new raffles were benefiting communities.

Three years later, there’s no report. No government entity has conducted any sort of review of these raffles.

The only available resource to see if this experiment has worked are reports provided by the sports franchises annually to the Bureau of Gambling Control. These reports raise more questions than answers.

The teams’ reports for the first two years reveal that these raffles generated $10 million in 2017. Because there has been no government oversight, audit or review, the public has no idea how much of that money is benefiting charitable purposes, or whether that money supplants what the teams previously donated before there were raffles.

Many of the required reports to the Bureau of Gambling Control are incomplete, inaccurate, or were never even submitted.

Hall’s original bill called for a sunset to the program on Dec. 31, 2018, giving the Legislature an opportunity to review the program’s results before allowing it to continue.

However, a new bill, Assembly Bill 888, by Assemblymember Evan Low, a Campbell Democrat, seeks to delete the sunset and extend these raffles indefinitely despite the incomplete reporting, lack of oversight, and confusion about whether this experiment has actually worked.

In a rare move, Attorney General Xavier Becerra’s office testified at a recent Senate Appropriations Committee opposing these large-scale raffles. The AG’s representative noted that these carve-out raffles have operated without adequate oversight, and asked that the Legislature “give the DOJ a chance to do oversight before permanently authorizing 50/50 raffles.”

CalNonprofits agrees with the Attorney General, with veterans’ organizations and with many Native American tribes which are urging the Legislature to push the pause button.

Professional sports teams should not be permitted to run exclusive 50/50 raffles unless and until a comprehensive review and audit are conducted.

Raffles are an important revenue source for many small nonprofits. We need to protect them as a trusted charitable fundraising mechanism for authentic nonprofits operating in full transparency, not as a source of revenue for big businesses.