Cash given in online competitions

[2Curious]

What is the name of your state (only U.S. law)? AZ

Is there any particular guidelines to giving cash in online competitions? I see that ESPN is doing the Streak for Cash competition and is giving out monthly and annual cash prizes. We are planning on having a monthly competition with the cash being the prize. We are then also letting different community/nonprofit organizations direct individuals to the competition who are then able to make a donation/special entry that will increase their odds of winning. From that donation/special entry a percentage will go to the organization (fundraising). User gets the chance to win the competition while they also get to support a organization of their choosing. Would like to know if from an initial glance/listen if there are any potential legal lines we may be crossing.

 

[FlyingRon]

If a person has to pay anything for a chance to win you have to be VERY VERY careful that you are not violating the gambling laws of whatever state both you and the player are in. If the players have to pay or give anything to participate you are almost certainly running an illegal gambling operation (even if *ALL* the money wen to charity, the fact that you retain even some of it makes it worse). While some states permit charities some leeway in conducting fundraisers that look like gambling, opening it up nationwide via the internet is certainly not going to fly.

Arizona law only allows charities to conduct raffles, and except for certain hospitals, they do not allow that to be contracted out to other people.

Even if it is free to play,
You'll have to issue 1099's for the money paid out and if more that $600, you'll have to W2-G and withhold taxes.