Susan DeVere, 57, launched the contest after repeated attempts to sell the stunning home which she has lived in for the last 16 years failed.
The property, near Auchencairn, Kirkcudbrightshire, has been valued at £1.5 to £2.5 million and contains 17 bedrooms, three self-sufficient flats, a 20-seat cinema, drawing room, music room, games room, and an art studio.
Built in the 1880s, it also comes with five acres of land and stunning views across the Solway Firth to England.
Tickets for the raffle were priced at just £5 and the winner was promised the castle with no strings attached including no mortgage, no stamp duty and no legal fees.
However, the 'Win A Castle' competition failed to generate enough ticket sales and the prize was changed to cash giveaways of £65,000, £7,000 and £5,000 which were handed out in June last year.
One person complained to the Advertising Standards Authority(ASA) and claimed the promotion, which was launched on Facebook and a dedicated website, had been administered unfairly.
Following an investigation, the ASA has now banned the promotion and said the winning entrant should have been awarded the castle or a cash sum matching its value.
Mrs DeVere blasted the watchdog for targeting 'house competitions' and has vowed to challenge the ruling.
She said: "It should have taken the ASA a heartbeat to look at our site and see that from the beginning everything was spelled out, including that a cash prize to the value of tickets would happen if enough entries were not received.
"There was nothing wrong with my promotion, I especially made it clear that if the target was not met that the money that came in from the entries would be used for prizes and charitable donations
"I don’t agree with their verdict or the way they investigated."
In their ruling, which was issued to Mrs DeVere last week, the ASA said: "The promotion must not appear again in its current form. We told Win A Castle that they must ensure that they awarded prizes as described in their ads or reasonable equivalents; for example cash to the same value."
Mrs DeVere, a mum-of-one and an author from London, hoped to sell 550,000 tickets and donate any extra cash to charity. She is looking for a smaller home nearer to her family in the south of England.
In total, the raffle raised £107,000, with £77,000 handed out as prizes and the remainder used for administration costs and donations to good causes.
The writer purchased the 24,000 sq ft house for £450,000 in 2003 and set about renovating it.
She added: "I had already stated that I would not run it the same way but would be building a business here first so that the winner did not have to worry about maintaining it and then making sure a sponsor would guarantee that the prize could be given."