North Dakota Charitable Gaming Approaching $1B Market, But Not Everyone is Happy

Posted on: September 25, 2019, 02:22h. 

Last updated on: September 25, 2019, 02:35h.

Charitable gaming is becoming big business in North Dakota, as state regulators overseeing the games of chance say wagers are expected to top $1 billion over the next two years.

charitable gaming North Dakota casino
North Dakotans are enjoying their new charitable gaming offerings. (Image: Jeffery Thompson/MPR)

North Dakota State Gaming Director Deb McDaniel told a legislative committee this week that her agency is understaffed and will not be able to properly govern the games in the years ahead. The state legalized electronic pull tabs in 2017. As a result, nonprofits are reporting a surge in gaming activity.

It is a true struggle to regulate this rapidly expanding gaming industry,” McDaniel said Tuesday. “I need to at least double the amount of staff I have now to do this properly.”

McDaniel’s agency presently has 11 full-time officials who are tasked with now overseeing 2,000 electronic pull-tab machines located at 524 sites.

The gaming division regulates, enforces, and administers charitable gaming in the state.

Tax Increases

Critics have lambasted the legalization of electronic pull-tabs on claims that they essentially function as slot machines. However, manufacturers say they operate just as traditional paper pull-tabs, and are not linked to one another.

Along with McDaniel’s concerns on regulating the growing charitable gaming market, others say the growing revenue is leading to higher taxes levied on the nonprofits.

A one percent gaming tax is imposed on charitable gaming revenues on wins up to $1.5 million. Once a charity passes that threshold, they’re on the hook to share 2.25 percent with the state, and pay a $15,000 add-on toll.

“While that may be providing a small windfall to the state, it is robbing charitable organizations of revenue that would be put to better use in our local communities supporting these organizations and their missions,” North Dakota Charitable Gaming Association President Janelle Mitzel told the committee.

Charitable betting handle soared from $569 million in 2015-17 to $841 million in 2017-19. The nonprofits won $42 million in the latest two-year period, and shared $6.5 million with the state’s general fund.

Mitzel estimates charities will increase their gaming proceeds in 2019-21 to $69 million.

Senate Finance and Taxation Committee Chairman Dwight Cook (R-Mandan) told McDaniel to put together a reasonable budget with the necessary personnel to oversee charitable gaming. “Whatever the tax is, it ought to cover your expenses for regulating and enforcement,” he said.

Tribal Damage

Charitable gaming, according to McDaniel, is also thought to be poaching gaming dollars from the state’s five tribal casinos. She’s also received reports that the charitable machines are being used for money laundering.

Along with regulating charitable gaming, McDaniel’s office enforces the state’s tribal gaming compacts.

South Dakota’s tribes haven’t commented on the specific impact electronic gaming pull-tabs have had – if any – on their operations. The Native American Indians scored a major win in 2017 when legislation to allow the state’s parimutuel racetracks to feature historical racing machines – which also closely mimic slot machines – was defeated in the legislature.