Lotteries. Charitable Raffles. Legislative Constitutional Amendment.
	Analysis by the Legislative Analyst

Background

A lottery is a game where a person pays for a chance to win a prize. The State Constitution authorizes the California State Lottery, but prohibits any other lottery. (Under federal law, however, Indian tribes can negotiate with the state to operate lotteries on tribal lands.)

Raffles are often held by charitable groups and usually involve the selling of tickets for a chance to win prizes. ("Door prizes" are a common form of raffle.) Raffles that require payment for a chance to win a prize are a form of lottery and, thus, are illegal under state law.

Charitable Gambling in California. Charitable gambling serves as a fund-raiser for nonprofit organizations. In California, bingo is the only legal gambling activity for charity fund-raising. Organizations operating bingo games must do so in keeping with state and local laws. In general, these laws specify when, where, and at what times bingo games can be operated.

Proposal

This proposition amends the State Constitution to allow private nonprofit groups to conduct raffles under certain conditions. To qualify, at least 90 percent of the gross receipts from the raffle must go directly to charitable purposes in California. (This percentage could be changed with a two-thirds vote of the Legislature and approval by the Governor.) Also, the proposition specifies that any person who receives compensation in connection with the operation of a raffle must be an employee of the organization conducting the raffle.

Raffles could not be conducted unless a law is subsequently adopted specifically authorizing these charitable raffles. The law could also (1) define which organizations were eligible to conduct such raffles and (2) provide for "reasonable regulation" of these raffles, including regulatory fees.

Fiscal Effect

This proposition would only have a fiscal impact on the state or local governments if these raffles are subsequently authorized by law. If that occurs, the proposition would have some--mainly indirect--effects on state and local revenues. For instance, if the level of gambling on raffles grew significantly, that might reduce other types of gambling--such as the State Lottery and horse racing. These types of gambling are taxed by the state, so revenues could decline somewhat. At least in the near term, however, we estimate that the proposition would not have a significant state or local impact on governmental revenues.

In addition, the state could require regulation of these raffles. These costs, which would not be significant, could be paid for by regulatory fees.

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