EP 17: Raffling for a Cause: Navigating Nonprofit Raffle Regulations, with Ed Chansky

Jeff: Welcome to the Elevate Your Event podcast, where we talk about how to plan and execute an unforgettable event that will dazzle your guests and generate more income for your organization. From fundraising and securing trendy auction items to event production and logistics, get the best tips and advice from seasoned fundraising and event professionals who have been in your shoes.

Jeff: Welcome back to the Elevate Your Event podcast, where we talk about all the ways we can help you improve your next fundraising event. And I am absolutely thrilled to have a special guest on the podcast with us today. This is Ed Chansky, and Ed and I met under those circumstances that most companies don't want to meet under, which is discussing raffle laws and legal matters. Fortunately, Handbid came upon Ed in his law practice, and we've just learned a ton. So much that when we were talking about other topics for this podcast, we said we need to come back and revisit this, because raffles are just one of those things where there's a lot that's not well understood. So joining me in the studio today to chat with Ed is Kristen Wheeler. Say hi, Kristen.

Kristen: Hi, Kristen.

Jeff: And Ed, why don't you go ahead and introduce yourself and talk a little bit about your background?

Ed: Well, Jeff and Kristen, thank you for inviting me today. My name is Ed Chansky. I'm with Greenberg Traurig. We're a global law firm with close to 50 offices all around the world. I'm in the firm's Las Vegas office. I've been here about 15 years, and I typically describe my practice as sweepstakes, contests, rebates, coupons, trinkets, and trash.

Jeff: Love it.

Ed: Promotion and advertising, things that are consumer-facing, particularly with promotional offers, free gifts, gift cards, prizes, whatever. Along with that, a subset of that area is the law of charitable sales promotions and cause marketing -- the marrying up of charitable fundraising with commerce. We've all seen this kind of thing. In October, every product in the supermarket turns pink: buy this item, some money goes to charity. Through that world, I've become very active over the last 30 years in advising both charities and businesses on many aspects of charitable fundraising. So that's how I come to this world. And a caution today: while I'm happy to talk about the raffle laws, nothing today is intended as legal advice. This is for general educational purposes, and if you have an individual situation, you should of course consult your own lawyer.

Jeff: Okay, well, end of the cautionary disclosure. No problem there. And definitely, if you are looking for an attorney who knows a lot about this -- shameless plug for Ed and his law firm -- and we'll make sure that you guys have that information. But let's dive into this. I think in most cases -- and I've founded charities -- I would say that most of them just probably don't have a clue when they start out about what the regulations and laws are. At least we didn't. We were a small charity focused on -- this was the Prader-Willi Syndrome Association of Colorado, the first one we started. And then I ended up involved in growing and getting going the Foundation for Prader-Willi Research. In all of those areas, there was a lot of "oh, we ran into this issue" or "we ran into this regulation or restriction." And then when we built Handbid, people started asking us things like, "Do I charge tax on auction items? Do I have to register? What does that look like?" We had kind of stumbled and stubbed our toe a few times, so we had a little bit of advice to give. But we learned the hard way in the state of Colorado -- we decided we were going to do a raffle, and somebody pointed out to me, "You need to have a license for that." Well, I think the overall attitude with charities and nonprofits, especially the smaller ones, is "Okay, sure, but who's going to actually come after little old us for our raffle?" And Ed, I'm sure you have had some experience with that.

Ed: Yeah, well, with both of those issues. So why don't we spend just a couple of moments to place charitable raffles in context in the legal regulatory world.

Jeff: Sure.

Ed: And then we can shift into the enforcement and kind of practical risk issue. Kristen, in the spirit of your question -- gee, am I only driving 56 miles an hour? Is the sheriff really going to care?

Kristen: Right.

Ed: Maybe. But you've got to look at the facts. For context, for over a century in the United States, every state in the country has laws making lotteries illegal. Private lotteries are illegal. A lottery is an activity that has three elements. You need all three. Chance -- okay, there's a drawing. Prize -- okay, we understand that. And consideration -- for purposes of today's discussion, that means paying money. Pay money for a chance to win something. Ding ding ding! You've met the definition; you have an illegal lottery. Now, starting about 50 years ago, individual states, because the state government makes the state law, said, "Well, we want to make money on this. We want to put the local mafia numbers runners out of business, so we're going to offer our own lotteries from the state." So to anyone who's going to say, "Chansky, what are you talking about? Lotteries are illegal. They're everywhere." Yeah, if you're the state. Are you the state? Probably not. Now, one other exception baked into state law in most states -- not all; Florida, for example, is different, and I'll come to that in a second. In most states, there are laws allowing charitable gaming. That could be bingo. It's very often raffles. And these laws were intended as an exception -- a narrow exception, a local exception -- a way for the local church bazaar to have their little fundraiser along with the bake sale and sell some 50-50 raffle tickets or whatever they were going to do, subject to many, many restrictions. And this is where people miss the boat very often, because they've all seen charity raffles and it's kind of imbued in our consciousness: "Oh, charity raffles, they're okay, everybody does them." Yeah, but in fact, in order to run a lawful charitable raffle, you have to look at the laws within your state and consider -- and we're going to go through a list of things now. First, as Jeff mentioned, in almost every state that allows charitable raffles, you have to apply for and get a permit. Where do you apply for and get that permit? Well, that will vary. In some states, it's at the state level, maybe from the Secretary of State's office. In other states, it's at the county level, maybe from the sheriff's office. In some states, it's at the municipal level, in town hall. The Connecticut law -- I practiced in Connecticut for 20 years before moving west -- has changed a little bit. But back when I was practicing there, the process looked like the following. And this isn't to dwell on any one state, but just to give you a flavor of how nitpicky and complex and arcane these laws are. I'm going to go fast because the details don't matter. You had to go to the chief of police in the municipality where you were going to hold the drawing and submit your application. If approved by the chief of police, it would then go to the special revenue division of the state police, where they would ask to review the copy that would be written on the sequentially numbered paper tickets that would be issued and sold only by volunteer members of the organization. No other form of sale was allowed. And when you held the drawing eventually in the municipality where you first went to the chief of police, you had to do it using a receptacle from which you drew the numbers that you rented from a list of vendors approved by the state police. That's how complex this can be. That's just an example.

Kristen: That's crazy.

Ed: Right. Now, the permit that you get -- where is it valid? Well, in some places, statewide. In some places, like in Nevada, in the county where you got it and the geographically contiguous counties, but nowhere else. And in some states, only in the municipality. Illinois is an example of that. And by the way, only a charitable organization resident within that state -- it has to be local -- can apply for and obtain the permit. So now that you've gotten your permit and you're only going to sell within the geographic footprint where that permit is valid, you also have to consider: does the state allow online sales? Some do, some don't. Most states also have a provision that prohibits paying anyone to assist in the administration of the program. Again, the fear was that by authorizing and allowing the local church bazaar raffle, it would become a front for the local mafia numbers runner, and the money would get siphoned off and it would all be a sham. That was the concern. Oh, by the way, in California, 90% of the revenue received has to be used in-state for the charitable mission purposes of the charity, further limiting the amount that can be laid out for acquisition of prizes, printing, advertising materials, et cetera. One other thing -- I mentioned Florida before. Florida is one of a small minority of states where even if you've jumped through all of these hoops, threaded all of those needles, and gotten to the promised land where you've got your permit, you're offering it only in the geographic area where it's allowed, you're using only permitted methods of sale, maybe you're renting your drawing receptacle from an approved vendor, and you're not paying anybody else to do it -- in Florida, you have to offer a free alternate method of entry. You cannot require a purchase of the ticket, even for a licensed charitable raffle.

Kristen: So could that be an entry with purchase of your event ticket?

Ed: Oh, no. No, no, no, no. That costs money. Free means free.

Jeff: So this sounds like the prize drawing workaround that a lot of our charity clients bring to us, which is: "Oh, I'm not going to run a raffle, Ed. I'm going to have a prize drawing, and I'm going to put 'suggested donation' on the page, and who's really going to come up to me and demand free tickets?" Does that get them off the hook?

Ed: Well, possibly. You're going to have to scratch a little deeper into the facts, but you're on the right path. And let's take a detour for a moment. Do an imaginary visit to a fast food restaurant -- take your pick: KFC, McDonald's, it doesn't matter because they all do this. With every item that you buy this month, you get a scratch card for a chance to win, or you're entered in a drawing for a chance to win. What are the first three words in the advertising?

Jeff: Purchase not necessary.

Kristen: Or no purchase necessary.

Ed: That's right. And that's where your charities are aiming to be -- to replicate what the commercial sweepstakes operator is doing, because remember, to be an illegal lottery, you need chance, prize, and consideration. So if you knock out that third element, if you say, "Yeah, look, we make it fast and easy -- you're automatically entered when you purchase your Big Mac or whatever, which is nice but not necessary. You can also write to a P.O. Box, or you can go online and fill out the form, and you'll also be entered with an equal" -- I emphasize equal -- "chance to win."

Jeff: Yep.

Ed: If those facts are true, then yes, you are outside of the raffle laws, but now you'd better make sure that you're complying with all of the laws governing commercial sweepstakes programs.

Jeff: That sounds like another podcast.

Ed: Well, not really, because it's far simpler. You generally don't need the permits and all that. And if a charity is doing it, you also avoid registration and posting of bonds in New York and Florida. They have laws that say if you're offering total prizes -- total combined aggregate, not just the biggest one -- total prizes over $5,000, in New York and Florida the company, whether it's Heinz ketchup, Coca-Cola, or American Airlines, has to post a bond and register the program with the state. That's when you're promoting commercial goods and services. If you're a charity, you don't go that route, you go the raffle route. But what I mean in Florida is with the free entry option, and in all other states you just call it a sweepstakes or an opportunity drawing -- people use all kinds of terms for it -- but you have to make sure that the free entry option is equal. And here's an interesting little story about that. If the sale of the tickets is just one at a time -- buy the ticket, it's ten dollars -- and hey, you skinflint person who doesn't want to support the charity but still wants a chance to win the prize, yes, feel awful about yourself, you can submit a form here and you can also have an equal chance. Not a problem. What happens if you have the very common situation of saying it's $10 for a ticket, but for $20 we'll give you three, and for $50 we'll give you 10, and that kind of progression? Well, for each free entry request, how many tickets are you going to give?

Jeff: Right. One.

Ed: Well, most people would give one, right? And most people might have a problem in some states if they do that, depending on the facts. Let me discuss the Big Macs and the popsicles so that you can understand what I'm talking about.

Kristen: Don't you love all of this food stuff? It's making me hungry.

Ed: There you go. So what am I talking about? All right. In a Big Mac promotion -- and I'm not picking on McDonald's or any company, just by example -- let's go back to my example, the million dollar game. Every time you buy a Big Mac this month, you are entered in the drawing for a million dollars. No purchase necessary, also write to P.O. Box, whatever. Fine. Big Macs typically, generally, most of the time, regularly are sold one at a time. Now, it is true I could be hungry and buy two. Or I could have my kid's softball team with me and buy 40. But is that the regular purchase pattern? No. Is it a pattern that is being packaged and offered directly by the restaurant? No. On those facts, a one-for-one -- because the normal purchase pattern is one at a time -- a free entry request would replicate the real-world experience. That's the main idea. Okay, so that's one-to-one. Now close that eye and open your other eye and be in the supermarket at the freezer cabinet, and you see a box of popsicles. The popsicles say, "Hey, this month when you buy these, lick down the popsicle and on the stick look to see whether you win a prize." The popsicles are sold twelve in a box. They're only sold in boxes, not individually. Therefore any purchaser will receive how many chances?

Jeff: Twelve.

Ed: Therefore anyone writing in for the free alternate method should receive how many chances?

Jeff: Twelve.

Ed: Exactly. So the popsicles and the Big Macs illustrate that the number of free entries that you give with each request may vary and will vary depending upon how you most closely replicate the purchase experience to maintain what is often referred to as "equal dignity" between the free and the paying method. Now, let's get a little fancier. Years ago, I had a client in the early days of smart credit cards, and they were going to give one entry in a monthly drawing for every dollar you spent on the card. Well, what they had to do was figure out what the median transaction was -- the typical, middle-of-the-bell-curve transaction -- and it turned out it was $43 on a single transaction. Some could be less, some could be more, but as a rough justice approximation of the real-world purchase experience, every free entry request resulted in 43 entries. To try to replicate that typical, middle-of-the-bell-curve, most common level of entries that a paying player would get.

Jeff: Right. That makes sense. So how many free entries are you required to give? Let's go through a couple of scenarios. Scenario number one: I call in or I submit and I ask for a free entry, and you give me my 43 entries. Can I do it again, or is the organization not obligated to give it to you a second time?

Ed: That depends. The guiding principle is equal dignity and equal parallel treatment to the paying world. Can a paying person get more than 43? If they pay for them. Well, you cannot impose a limit on the free world any more restrictive than what you impose on the paying world.

Jeff: Okay, so I have my prize drawing, and you show up and you buy the three for 20. You can turn around and then say, "I want another free submission," so you would get three more for free.

Ed: And I can keep submitting those free requests until the cows come home unless you impose some kind of parallel limit on the paying player.

Jeff: Got it. What if the paying player says, "Not here's 20 bucks -- here's $20,000"?

Ed: No, I get it. I mean, this is helpful for our audience who's trying to figure out how to make this work legally, but what are going to be the pros and cons of that? Is it worth it?

Jeff: Yeah. Well, that's right.

Ed: And somebody mentioned earlier, just keep in mind, we're going to come back to California. We've got a special issue for California that we're going to come back to, okay? Hold that thought. But you're talking about on the more global level of "Oh my God, if I have to offer a free entry option, didn't I just kill my whole program? Am I going to get flooded with free entry requests, and people are going to say, 'Well, why should I make the voluntary donation at all?'" Well, maybe. But if that's true, then why does McDonald's bother when they have to offer a free entry option?

Jeff: Right.

Ed: It's been shown that whether it's inertia or whether people want to support your charity and are going to do it anyway, you still may make money off of the program.

Jeff: Sure.

Ed: Also, the number of free entry requests you're going to get -- and by the way, there are sweepstakes clubs out there that scour the internet and look for offerings, whether they're from charities, fast food restaurants, or credit card companies. Doesn't matter. They share the information, and there are people who have nothing better to do -- they sit and look for the ones where they think they have the best chance to win and where it's worth their time to fill out requests by mail and put stamps on them and mail them in. One of the biggest factors is how big is the prize. If you're offering a $100 gift card or an iPad or something like that -- very nice, not casting aspersions on those prizes -- you're not going to spur a nationwide outpouring of free entry requests. It's not worth licking a bunch of stamps and mailing in envelopes just for that. You offer a million dollar prize, you're going to get flooded, because word will get out there and people will know about it. But imagine a different context. Let's say your raffle is going to be offered on-site at your annual fundraising event. So you have 300 of your loyal supporters who are there for the dinner. They've bought a ticket. And you announce during the evening, "Hey, you can buy tickets for this." You didn't get a permit, so you're offering a free entry option. And you stinkers who don't want to support us, go sit there in the corner with the dunce cap on and fill out the free entry forms. You can do it, but we will publicly shame you with a scarlet letter, if you will.

Kristen: That's right.

Ed: How many -- are you really concerned in that context that people are going to abuse the free entry method? Probably not. Especially not if it's like a front row parking space at the school that you're supporting and raising money for.

Jeff: Right. Again, that goes back to this is not a million dollar prize. It's not going to attract strangers from halfway across the country. They can't even use that prize anyway, let alone with the value of it.

Ed: So I'm going to jump back to California just for a second because it's very important to know about equal treatment. We talked about when you have this kind of open-ended situation. It's not just like Big Macs. It's not just like one ticket for $10, two tickets for $20. And you've got this progression program where it's three for $20, ten for $50, and that kind of thing. I would have said -- and I still would say -- that I believe the correct position is like the $43: what's the most typical transaction? As long as you're not limiting the number of times someone can engage in the transaction, then okay -- just like somebody who could continue to give you $100 at a time or give you $1,000, I could just submit a few more free entry requests, always at the middle of the bell curve. The 43 -- that's not a magic number, don't lock on to 43, it's just for memory purposes. And I would say that's the correct way to analyze this -- replicating the most common typical transaction. I can tell you from direct experience, the California Attorney General's office does not agree. They have looked at some of the online charitable sweepstakes websites, which operate in a more complex way -- we're not going to go into detail -- but on the one issue of equal treatment, they have taken the position that if the web page has prepackaged levels -- let's say one entry for $10, just stay with our same math, three for $20, ten for $50, and 50 for $100 or something like that -- their position is that each free entry request must give as many entries as the highest one-time donation level that's offered on the site. And that anything less than that is not equal, in their view, for this purpose. That is an extreme position. I understand where they're coming from, but I don't think it's really the right interpretation. But do you want to fight with the state, go to court, and spend years and hundreds of thousands of dollars in litigation to try to prove that?

Jeff: It's not worth it.

Ed: No. But it's helpful information for California clients who need to understand how this works.

Jeff: Well, right, and not just California clients, but anyone offering a program, regardless of where they're located, if they have a purpose or likely effect of reaching a material number of people in California.

[Mid-roll: Hey, just want to let you know this event is brought to you by Handbid. Handbid is mobile bidding and auction technology software built by fundraisers for fundraisers, so we're able to help you with everything from ticketing and registration to mobile bidding to live auction recording appeals -- you name it. And the nice thing is, in addition to the software we provide, we have a ton of services we can offer. If you need help getting everything set up, if you need coaching, if you need counseling and advice on how to get through your event, if you need someone to show up and make sure it runs smoothly -- these are all the types of services that we offer. So if you want more information about what we do, click on the link below or reach out to us at handbid.com and we'd be happy to talk to you.]

Jeff: Yeah, and this has come up with us. This is one of the reasons why we met you originally. So let's talk about that for a second. You're talking about purpose and effect. I think some of our clients have probably been through the process of registering themselves in their respective states and then addressing or dealing with the topic of where else they need to be registered. And this has an impact here. Why don't you talk about that?

Ed: Yeah. Well, it's a great question. There are, I think, 39 states, give or take, plus D.C., that say if a charitable organization wishes to engage in fundraising from the people of their jurisdiction, then as a prerequisite, you must register with the state. Now, there are some exceptions for very small organizations that raise less than $25,000 a year. By the way, that's usually interpreted as total, not just from within that state, although some states interpret it that way. So you've got 39 states.

Jeff: And so, a small or medium-sized charity located in, let's say, upstate New York is wondering: do I have to register in California? Do I have to register in Ohio, in Florida, in Maine, in Hawaii?

Ed: And unfortunately, the answer is a squishy, fact-based analysis looking at purpose and effect.

Jeff: I love the legal term "squishy." I think that's great.

Ed: Oh yeah. I'll look up the Latin for it. I'm sure it'll sound even better. Just like the Big Macs and the popsicles, let's look at two fact situations on either end of the continuum to try to solidify that concept. I'm sitting here in Las Vegas, so let's assume we have the East Las Vegas Middle School PTA, a 501(c)(3) charitable organization, and they have a website with a "Donate Now" button to help support the East Las Vegas Middle School PTA. How many people in New York State, in Ohio, in Hawaii, in Maine, et cetera, do you think are ever going to log onto that page, see that page, care about, or donate to that organization?

Kristen: No one, unless they're a grandma or a grandpa probably.

Ed: Right. You might have a one-off fluke situation with some relative, but the purpose of that page is to reach people in Las Vegas, and the overwhelming effect is going to be only to attract local donors. That's the only place where there's a natural affiliation, affinity, and interest of any type. And the likelihood of any substantial impact on another state is negligible. I would say that organization does not have to register itself for fundraising anywhere else. Leaving out any other particular facts -- I mean, if they know, for example, and let's flip it around and put it in upstate New York, and they know that there's a substantial community of snowbirds who go down to Florida every winter, and they aim their annual fundraising campaign at those people -- well, maybe that organization might have to concern itself with Florida.

Jeff: But leaving that aside, now we're going to leave East Las Vegas and go to national headquarters of -- pick your organization: Komen for the Cure, Habitat for Humanity, the American Heart Association, the Audubon Society, take your pick, the Sierra Club. Those organizations have nationwide followings. When they put a "Donate Now" button on their site, who are they intending and hoping to reach?

Ed: People everywhere, nationwide. And as a practical matter, I bet if you looked, you would find that they are garnering and receiving substantial donations from most, if not all, states. They have to register everywhere.

Jeff: And we ran into this. As I was telling you earlier in the podcast, we founded the Prader-Willi Syndrome Association of Colorado. It's kind of self-explanatory who we're targeting. And I would say purpose-and-effect-wise, that kind of worked out -- the massive effect of what we're doing is centrally located here. But then I joined the board of the Foundation for Prader-Willi Research. That was very small at the time, but we were planning on running events everywhere, all across the United States. And then it came up: you need to register. We made a decision, even as a very small organization, that we had to register in all 50 states. And it is painful -- there's no doubt about that. I remember, wearing various hats as a board member, some of these states require you to physically sign documents. Colorado is nicely online, so you can just fill out some forms at the Secretary of State's website. But some states aren't as easy, and it's been a while since I've been involved in that. There was a URS that was created at some point to kind of simplify that process for charities -- it's almost like the Common App for college, where you can fill this thing out once -- but it wasn't supported by everybody. And I think it is still a challenge. We go to these fundraising conferences and there are companies whose sole job is to handle all of your annual registrations across the country. So I think it's still out there. Is it not?

Ed: Absolutely, and your description is spot on. I have very little to add to it. There's been discussion among the group of state regulators. They actually have an organization. It's a subset. There's one organization called the National Association of Attorneys General, with a great acronym: NAAG.

Jeff: I know.

Ed: I was trying to quickly calculate that. Some refer to it as the National Association of Aspiring Governors, but we'll leave that aside.

Jeff: Still NAAG.

Ed: Right. And there's a sub-organization within that, NASCO -- the National Association of State Charity Officers. NASCO -- some of them are from Secretary of State's offices, some from AG's offices. But these are the people in the 39 states who regulate charities this way, who review the paperwork that Jeff was talking about. And they understand -- they know that this is a complete patchwork, that there is very limited consistency and efficiency of scale. And they talk about, "Oh, we're going to create a single portal where one could go and just fill out one form online and be done. Think of it like TurboTax and you're done." But it has never happened. And unfortunately, there's an institutional bias against it. Because the more you simplify this, well, the people who are running these individual state offices may be legislating themselves out of a job.

Jeff: Self-preservation. Never seen that.

Ed: I'm not imputing any bad motives, but there's just the institutional process by which these individual state procedures built up, starting 50, 60, 70, 80 years ago, in an era before the internet, in an era before lots and lots of nationwide fundraising. The state-by-state individual process perhaps had more relevance. But in today's world, you do have to question: why do I have to fill out 39 different sets of forms and hand-sign them and spend $20,000 a year or more filing all of this paperwork everywhere? Why isn't it enough that if someone wants to look up my charity, they can just go on to Charity Navigator or GuideStar or the IRS site and look at my tax returns?

Jeff: Right, they can. But it circles back to the important piece here, which is: whether you call it an opportunity drawing or whatever, if you decide you're going to have the free entry option but you're still fundraising online, you're most likely using an online tool to do it. We'll come back to the platforms here in a second, but in those cases, you have a question to ask as an organizational board: should I be registering myself in these various states? Now, let me ask you a question on top of that. What if your platform allowed you to geo-restrict where people could come from? Does that alleviate the issue a little bit?

Ed: Sure. I mean, if you would only accept donations -- let's go back to East Las Vegas. Let's say you code the site and when someone wants to donate, they have to enter their zip code. And unless they enter an 890 zip code, which is the three-digit area zip code for around Las Vegas, they're going to get a message saying, "Sorry, you're not eligible. We appreciate your support, but we're only accepting local donations." If you did that, well, how would New York ever be able to say that you're fundraising in New York? At least via the online platform, you're not even accepting donations from there.

Jeff: Right. And is it where the user lives or is it where they're physically standing at the time that they try to place the donation? I mean, I'm getting a little technical here. Are we actually pulling somebody's location, or is it good enough just to say their address must contain these zip codes or these states?

Ed: It's a fair question. There's no definitive answer. I'll answer it this way. In the related context of online gambling -- a far more strict regime -- when online sports wagering became legalized in various states, if you download one of those apps, it's going to be state-specific. That's the way the law works. Let's say you're in New Jersey, and let's say that New York allows online sports wagering -- I don't remember the details. So you've got your New York app for wagering with your New York sports wagering company, and you start driving across the George Washington Bridge from Manhattan to New Jersey. You get halfway across the bridge, the satellite is going to geolocate where you are, and the app is going to shut off. By law, they have to do that because there's such concern about the gambling -- it has to be restricted within the state where it's allowed. So they use this really tight lock. Now, I've written the contracts between casinos and phone companies to provide that geolocation service. It's accurate to within like 10 feet, maybe even more now. It's incredible. That would be pretty extreme for purposes of charitable fundraising, because you're not talking about a mobile app. So how would you know?

Jeff: Well, I know a company that has a mobile app. I was just curious.

Ed: Yeah. And what if somebody's using a VPN connection? So you don't know physically where they are. Unlike the gambling situation, I would say that if you required people to enter a billing address and/or you were using IP addresses of where they came in, that would be a good enough approximation in the majority of situations to have reasonable comfort that you are not substantially going into another state. Yeah, can you have the one-off, the VPNs, and this and that? Eh, the world's not perfect. Unless you're a casino with online sports wagering -- then it has to be perfect, and then you have a contract with AT&T or Verizon and they are geolocating that device in real time.

Jeff: That makes sense. And this has been awesome. I've learned a ton, and I've had plenty of conversations with you. Every time I get on a chat with you, I learn even more. Let's wrap up real quick. I want to ask about platforms. And I'm not just specifically talking about Handbid, but a lot of charities these days are using some form of an online platform or tool, right? There's their website, but outside of their website they might be running raffles, sweepstakes, auctions, gala fundraisers, you name it, using online software. What recommendations do you have for them? And what's the platform's role in helping them understand this? Because I'll be very blunt -- we've taken a lot of grief from clients because we tell them, "You cannot run a raffle on our platform the way you want to run a raffle because it's a violation of your state laws." I'm not going to say we have any sort of legal protection in our contracts that states we're not responsible -- every client is responsible -- but we also have an ethical responsibility, I think, as a platform, to be able to tell people it's important to understand the laws in your state. So what's been your experience there, and what kind of advice do you have for charities around the types of platforms they partner with?

Ed: Well, that's a good question. You really have to think of it from both sides. I'm going to start with the platform's side. The platform is not going to wiggle out of the situation if a state decides that they don't like activity that's happening via the platform. The state is not likely to say, "Oh, well, we're going to ignore you, platform, and we're just going to go talk to that charity." You're going to get tagged with the situation too. And that is a good reason for the platform to adopt a prophylactic rule, for example, on raffles: that we just don't take them. The variation in the law, the complexity in the law, the number of hoops that the individual charity would have to have gone through, and whether this even works online -- we're not lawyers, we're not studying the 50 state laws down to county level and municipal level, and it's such a briar patch, we just don't accept them because it's more trouble than it's worth. Even though, in theory, in a limited case, maybe a charity could thread its way through the path and say, "Well, I have a permit, we're geo-fencing the offer, our state does allow online sales," et cetera. Maybe. But are the platform operators going to want to have to navigate and figure that out case by case? You don't have the bandwidth to get involved in that. So that's looking at it from the platform side. From the charity side, have a little bit of sympathy for your platform operator if that's their position, because there's a reason for it. They're going to get tagged. And a state may come and try to regulate the platform as a professional fundraiser or at least as a fundraising counsel. We haven't really talked about all of the different ways that advisors to charities and outside fundraising companies can be regulated. But platform operators historically have wanted to take the position -- and have taken the position, and it generally has worked in most states -- that Airbnb isn't a hotel, Uber isn't a taxi, and "I'm not a professional fundraiser. I'm providing a suite of technology tools to you, charity, for you to run your own program online. You're responsible for your own program online. I'm just giving you the soapbox to stand on."

Jeff: Right.

Ed: Well, some states, based on the facts, might look at it and say, "Yeah, but if the platform is providing more than just a hands-off platform, maybe they should be regulated as a form of professional fundraiser or as a fundraising counsel" -- meaning someone who advises but doesn't actually solicit or handle any of the money. And California has passed a new law to regulate platforms. Starting next year -- it's been delayed in the implementation -- the platform operator, even if they're not doing the asking, even if they're not actively advising, if they are providing the soapbox, they're going to have to register with the state as a platform. It's a unique new form of regulation. Hasn't existed anywhere before. To California's credit, it's acknowledging that this is a new form of facilitating fundraising by charities that didn't exist and doesn't really fit comfortably in the old categories. In that respect, I applaud California and support what they've done. Their current drafts of regulations I think are overly complex, and it remains to be seen how they're going to play out. So charities, when you're choosing to work with a platform, recognize that you still remain primarily responsible. Be sympathetic if the platform says there are certain kinds of campaigns that it won't carry, for all of the reasons we've talked about, particularly raffles. You can ask questions about what position the platform takes regarding regulation. Don't be surprised if they say, "Well, we think we're just a technology company." California might be relevant going forward. Look at the contract terms, but you have to make your own decision about which platforms you're comfortable working with.

Jeff: No, that's good advice. It's one of those things where I think for any charity out there, it's important to also understand what the platform is telling you. Like we do -- we have a policy: we don't allow people to run raffles on our platform. And we've taken some grief for it. I'll get the question a lot: "Well, some of your competitors do." And I'll say, "Well, that doesn't matter. They don't have any sort of permit that I don't have." It's worth determining who's looking out for your best interest. If you want to run a raffle and you feel like you've got everything in place, then great, go for it. In most of the cases for our Handbid clients -- and I have studied this, these come in all the time -- "Hey, these people are in Texas, they want to run a raffle." And then you try to explain to them that you cannot have an online raffle that is solicited statewide, and then try to explain what "statewide" means and how you define that. When we started looking at all these rules, we realized, to your point, it's complex. It is not easily understood. And not only that, we want to keep our platform fees reasonable, right? You want to pay a reasonable fee for a software fundraising platform. Well, don't require that they involve all these lawyers in every decision that comes in. Raffles are kind of one of those situations. So it's been an adventure for us and our clients as well, but I think it's ultimately put everybody in a better spot. People are a lot more aware of what they're obligated to do and what they're not permitted to do. And that's been helpful too. And we've gotten as many -- I don't want you to think that all of our clients are saying, "Hey, we want to run raffles and you won't let us." We've had a lot of clients tell us that they appreciate the fact that we've opened their eyes to some of the things that they were not doing correctly.

Ed: Yeah, you're helping keep them out of harm's way. And I want to loop back because we kind of deferred it with Kristen way back near the beginning of this conversation. Maybe it's a good place to wrap up on: well, how are these laws actually enforced in practice? And I would agree that for the most part, most of the time, most state regulators have better things to worry about than whether the XYZ charity is running a raffle that didn't dot every I and cross every T. I mean, there are more serious matters going on that I would hope the law enforcement authorities in this country are focused on. That said, if something does come to the attention of the charity regulators -- and maybe it's your arch competitor who decides to blow the whistle on you, maybe it's just somebody in that state office having a bad day who stumbled across your offer and cross-checked their files and said, "Wait a minute, this isn't right." Who knows? Or maybe, like in California, it becomes a policy decision: "Hey, we want to crack down on this, we want to set an example for the country, we want to establish a first-of-its-kind law and we're going to start off by going after the so-called charitable sweepstakes platforms and force them to change how they do their free entry option and force them to register as professional fundraisers" -- all of which happened. What's the old expression? "Nine in ten, you're fine; one in ten, you're mine." Who knows whether the sheriff is going to be setting up the speed trap on your stretch of the road and deciding that day that 56 miles an hour is too much.

Jeff: Right, you never know.

Kristen: You never know. Our hearts are with those who are initiating or in the middle of that process. I have raffled a Harley Davidson motorcycle and went through that process, and it is not easy. So if you're in the middle of that, we're thinking of you. And add it to your LinkedIn profile when it gets approved, because that is an accomplishment.

Jeff: Certification. Certified raffle technician. Yeah, Colorado, it's $100, Ed, and it's like a three-hour class you have to attend.

Ed: Yeah, and again -- is it only volunteer members of the organization? Is online allowed or not allowed? Are you paying outside people? Are there restrictions on where and how the money can be used? Are you observing the geographical limits? All of that has to be considered anytime someone gets into raffle land.

Kristen: Yes. And a lot of those are required in Colorado, I learned.

Ed: Yeah, and it's going to be different in every state. It's crazy.

Jeff: Well, this has been amazing. This has been super helpful. Thank you, Ed, for joining us today. I know that our audience greatly appreciates the non-legal educational insights that you shared.

Ed: Absolutely my pleasure. It's been a delight. Jeff, Kristen, thank you for inviting me. And I hope that there was at least something helpful.

Jeff: Oh, for sure. All right. Well, thanks everybody for joining this episode of the Elevate Your Event podcast. We'll be back with more ways that we can help you improve your fundraising events in the future.