A common misconception is that gaming is a 501(c)(3) “charitable” activity.
There is nothing inherently charitable about gaming (e.g., lotteries, raffles, casino-type activities). According to the IRS, it's a recreational activity and a business with possible UBTI implications.
Although a charity may use the proceeds from gaming to pay expenses associated with its charitable programs, gaming itself does not further any charitable purpose. So gaming cannot be a more than an insubstantial purpose of a 501(c)(3) organization.
NOTE: Many states and localities (like Chicago) regulate certain types of gaming activities conducted by nonprofit corporations. Be sure to check these laws in advance of hosting a fundraising event.
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