Is raffling the points/funds off even allowed by the PSN and Xbox Live Terms of Service? If not, report them.

I think as long as you bought them, you can do whatever you want with them. You just can't offer points cards in exchange for game favors, such as getting higher multiplayer levels or whatnot.

I got word from PSN Support that it is OK to raffle off a gift card, tho I was linked to Xbox TOS and I could not find any reference to doing stuff to game points, which was more vague as an answer as opposed to PSN Support, who gave a clear answer to my question.