AmVets Post No. 2 v. Delaware Board of Charitable Gaming

Under regulations adopted by the Delaware Board of Charitable Gaming (the board) (plaintiff), no tickets for a charitable raffle with a prize of over $5,000 could be sold before the organization obtained a raffle permit. The gaming regulations also required the net proceeds of a charitable raffle to be used for the charitable purpose specified in the organization’s permit application and required organizations to comply with record-keeping rules and ticket-issuance standards, among other things. In July 2015, AmVets Post No. 2 (AmVets) (defendant) submitted a raffle-permit application to the Delaware Division of Professional Regulation (DPR). The application indicated a charitable purpose for the raffle proceeds and listed the maximum value of prizes for each raffle drawing. The application did not indicate that the raffle was a progressive jackpot, in which money carried over from one raffle to another. The board approved AmVets’ application and issued permits for AmVets to hold weekly raffles from August 1 through October 31, 2015. On October 10, 2015, DPR became aware that AmVets had been running a progressive raffle for over six months and that the jackpot was roughly $140,000—even though AmVets’ permit application had listed the total value of prizes to be awarded at the October 10 raffle as $600. DPR inspectors also realized that AmVets’ official raffle reports were inaccurate and that the raffle tickets being sold by AmVets did not contain certain required information. AmVets had also failed to keep required records regarding past ticket sales, winners, and charitable contributions. DPR further learned that AmVets’ raffle proceeds were not being donated to charity and were instead being rolled over into the progressive jackpot. The State of Delaware (the state) (plaintiff) filed a board complaint against AmVets based on the raffle activities. A DPR hearing officer found that AmVets had not maliciously deceived DPR with respect to the raffle but that AmVets nevertheless had not been completely truthful about how its raffle would be played. The officer further found that AmVets’ raffle had exceeded the $5,000 prize threshold for permitless raffles by July 2015, yet AmVets had sold raffle tickets after that date without a valid permit. The officer recommended fining AmVets $19,000 for holding raffles without a valid permit, failing to follow proper ticketing procedures, and failing to maintain adequate raffle records and file accurate reports. The board approved the recommended penalties, and AmVets appealed.