In charity poker vs. regulators, who's holding the cards?

It’s a two-handed game. On one side of the table, Michigan’s casinos, controlled by big-money firms and well-heeled Indian tribes. On the other, thousands of small charitable groups – booster clubs, Lions, Kiwanis, churches – woven into the very fabric of their communities.

Between them, Gov. Rick Snyder and his administration, dealing the cards that will determine the future scope – or even the very future – of charitable poker in Michigan.

In the decade since the state decided Texas hold ’em counted as a charitable game under Michigan’s bingo law, the amount of charitable gambling has exploded, doubling four times between 2004 and 2009 alone. In 2012, about $184 million in revenue flowed through these “millionaire party games.”

This surge, in turn, created its own cottage industry – bars transformed into large-scale poker rooms to handle hour after hour of daily play and organizers to match the licensed charities with time slots at these new gambling meccas.

While giving community charities a new source of fast money – and poker players as much action as they could desire -- the transformation has left Michigan’s casinos frustrated.

“It is completely out of control now,” said Peter Ellsworth, a lawyer in Lansing who lobbies for the MGM Casino in Detroit. “(The oversight) allowed it to develop full-time poker rooms – mini-gambling halls.”

In 2012, Gov. Rick Snyder transferred oversight of the poker games from the Michigan Lottery to the Michigan Gaming Control Board, which also oversees casinos. He also issued (in 2011) a moratorium on new licenses for poker suppliers and locations. game-sponsoring charities.

Hot_Streak_rev3Last December, the Gaming Board shut down one of the largest poker venues in the state, Snookers in Macomb County, after finding “material violations” of state law, such as diverting poker proceeds and filing inaccurate financial documents.

The board’s order stated that Snookers’ owner and an employee even admitted to investigators that they “routinely” altered records to cover the fact they were selling more chips to players than allowed by law.

Charities and poker venues are worried about Lansing’s direction, but the Gaming Board’s director, Richard Kalm, said recently that the agency “(has) been exploring the lifting of the moratorium soon.”

For its part, the Snyder administration is discussing whether the games pay for themselves, at least in terms of the regulatory costs. Sources close to the administration said there was also discussion on whether the games should be taxed, in part because they could be seen as competition to full casinos in the state who either pay taxes or a portion of their proceeds to the state.

Lifting the moratorium will depend on determining if the state’s gaming board has enough resources to adequately regulate the games and how many locations will be needed across the state, Kalm said. He would put no date to when the moratorium may be lifted.

Kalm also said the board is still adding staff to help regulate the games.

David Brown, head of the Michigan Charitable Gaming Association, said industry officials had always been told the moratorium would be temporary, and the longer it goes on, the greater potential for problems for charities and suppliers.

From bingo to big poker

While charities can hold millionaire parties at any facility, most choose to use established poker venues, such as the popular Lansing club Trippers or Northville Downs in that Detroit suburb.

The Traxler-McCauley Act from the early 1970s that allowed bingo also set up the basic rules for millionaire parties and which charities can operate them. Mostly those charities tend to be church-related groups, veterans groups and school groups, but other charities can participate. To look at the state list of licensed game operators is revealing as to the range of different charities operating the games, from local chambers of commerce to school booster clubs to groups like the Lansing Art Gallery.

Millionaire parties originally involved a variety of casino games generally played by members of the charities, but they have evolved into primarily poker, specifically hold ’em.

A charity can get a license to hold a game for four consecutive days a total of four times a year. While the venues provide the room, tables and dealers, only a member of the charitable group is supposed to handle the chips issued to players.

Chip_Capitol1Rick Hert, who runs the one-man West Michigan Film Office, says charity poker provides his group $2,000 to $3,000 a year, which happens to be 100 percent of his operating budget.

"I play poker myself sometimes, and it's a good opportunity to make some money," Hert said. Despite its similar name, the West Michigan Film Office has no relationship with the state-run Michigan Film Office in Lansing. Hert promotes West Michigan as a location for filmmakers in pursuit of state financial incentives.

The West Michigan Film Office raises money at TJ's Charity Card Room in Grand Rapids, and Hert said he's lucky to have a place there.

"It's incredibly difficult to find (an open date)," he said. "Rooms are booked a year or two in advance."

MORE COVERAGE: An ordinary bar on an ordinary night, but poker supplies the drama

Brown, of the Charitable Gaming Association, says that’s typical: “It’s all small, local charities -- children’s groups, veterans, animals, etc.” He added that these are groups that would have a hard time raising the sort of money they can in a poker room, and with very little work.

Donna Gartside, of the DeWitt Lions Club in mid-Michigan, agrees: "It's the most amount of money for least amount of work. It takes two people per shift, six people a day." By way of contrast, for their other big fundraiser -- the ox roast -- the food tent alone takes 20 people every two hours, she said. The $10,000 to $15,000 they raise via poker is more than half of all the money they collect in a year.

A review of listings on upcoming games is a roster of charitable Americana: Kiwanis, Elks, Moose, Eagles, athletic booster clubs, Jaycees, American Legion, VFWs. So if the Snyder administration looks to apply the regulatory brakes, it will face plenty of media-genic opponents.

But regulation – more of it – is needed to deal with the cultural shift, says Ellsworth, the Lansing attorney, who applauds Snyder’s decision to move charity poker oversight from the Lottery to the Gaming Control Board.

“Going back to the Milliken administration (in the 1970s), I was doing liaison work with the Lottery. Charitable gaming was what you did in the basement of a parish on Saturday night. It was not hard-core gambling,” he said.

In the current form, Ellsworth argues, these poker rooms and their charity sponsors have been largely unregulated.

“The definition of qualified organizations is really loose. Any group of 15 senior citizens can form a qualified organization; lots of outfits that aren’t really charities,” he said, adding that his perspective is personal and does not necessarily reflect the views of MGM.

Big bucks and big bucks

Even as fast as the poker world has grown and as eagerly as small charities have flocked to it, charitable poker is still small potatoes in both the world of nonprofits and of gambling.

For all of 2012, the net profit for charity groups – the more than 2,500 licensed that year -- using poker fundraisers was about $16 million (from revenue of about $184 million). The vendors running the games took in a similar amount, with the rest of the money going to the players themselves.

By comparison, the three Detroit casinos reported $1.4 billion in revenue in 2012. Michigan Lottery generates a net income of about $700 million.

And a report for the Michigan Nonprofit Association says the nonprofit sector in Michigan had more than $200 billion in annual revenue, though the report only covered the small share of nonprofit groups that had at least $25,000 in receipts.

“The MNA has never taken a position on charitable gaming and we remain neutral on the subject,” said spokesman Ted Jones last week.

While casinos have doubled their lobbying at the State Capitol since 2009, there’s little evidence of a legislative push to restrict the poker rooms – and Ellsworth says legislation isn’t needed, if the Snyder team acts.

“What they need to do is cut way, way back on number of charities allowed at a venue and number of nights that venue can run charitable gaming … really it’s just a scheduling change. You don’t need a change in the rules or statute to do that. … The Gaming Control Board executive director has authority to approve venue and schedules. From that authority you can limit number of orgs per night at each venue,” he explained.

“By enforcing rules that are there now, you can get a higher percentage of money to charitable organizations.”

Editor's note: This story was produced in a collaboration between Bridge Magazine and the Gongwer News Service.

John Lindstrom is publisher of Gongwer News Service Michigan, a subscription service that covers daily activities at the Capitol and in state government. Lindstrom is a graduate of Michigan State University and has worked in Michigan journalism for more than three decades.

Bridge Senior Editor Derek Melot and Staff Writer Nancy Derringer contributed to this report.

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Comments

JR
Thu, 06/06/2013 - 9:57am
I was involved in working at charity poker games for several years. Our sponsoring non-profit is well established in our community and has worked to provide high-quality educational services to low income children for decades. The people who worked at the poker hall were volunteers and all proceeds went directly into programming for the children. Interestingly, the folks who came to play were mostly aware of our work and although they were primarily there to have a good time, they often left with brochures about our efforts and we even received a few extra donations as a result - again, money that directly went into programming and services for the kids. We had to stop sponsoring charity poker games and forgo that source of needed funding when a for-profit casino opened in our region because we lost most of our gamblers to the glitzier venue. That hurt us, but is understandable. My point is that for-profit casinos are already competing successfully with charities and control the lions' share of this market in Michigan. For the state to further "crack down" on legitimate charities by making it more difficult to raise money in this way in areas where it is still possible seems particularly unfair, particularly in a sector that has already suffered from new state tax laws that have disincentivized charitable giving by removing most tax credits for donations. I see this move for further regulation of charity poker simply as a political gift to big money casino interests, and one which ultimately harms voluntary and charitable efforts in Michigan. Where are our real values in this state?
Jay
Sun, 06/09/2013 - 2:03am
“What they need to do is cut way, way back on number of charities allowed at a venue and number of nights that venue can run charitable gaming … really it’s just a scheduling change. You don’t need a change in the rules or statute to do that. … The Gaming Control Board executive director has authority to approve venue and schedules. From that authority you can limit number of orgs per night at each venue,” he explained. “By enforcing rules that are there now, you can get a higher percentage of money to charitable organizations.” Ellsworth is only explaining facts that interest the lobbyists in Lansing. Charities are maxed at $15,000 in tournament buy-ins and chips sales per night. Once they sell out, they are done selling. Limiting the charities does NOT affect the amount of money that can be raised, it AFFECTS the number of PLAYERS that can play (thus hoping they decide to play at the casinos) From the lack of certainty that players will have from not being able to receive full service at their favorite charity room, they will then begin to plan to play else where (which is usually another Charity Room, NOT the casino) This then CUTS BACK on the charity profits, because more and more players fear a sellout when they are playing, and can't buy back in. As you see from the report above, smaller entities (22 casinos vs 80+ Charity Rooms) Casinos and Lottery still comprise of the main bulk of the gaming industry. I do not disagree that improvements can be made on oversight, and assistance in operation policies, and providing resources to those that need or request it to be able to run smoothly, safely, and legally are needed. But efforts that directly relate to RESTRICTING the number of charities that can benefit from this fundraiser, the days/times/or hours of operation, the maximum that charities may sell in buy-ins and chip sales, or excessive policies that indirectly hinders the ability to operate and maintain the cost of insurances, labor, equipment, advertising/marketting from a business aspect all work to hurt the non-profit organizations profits, more importantly those that rely on charity poker to remain OPEN. Restricting Charity Poker RESTRICTS the charities in YOUR communities
Bob Ciaffone
Fri, 06/14/2013 - 5:20pm
Snyder is already violating the law with his "moritorium" on licensing. Regulatory agencies are there to regulate a lawful activity, not stifle it. Imagine if the Liquor Commission declared a moritorium on licensing new liquor licenses. What we have is the executive branch of our government grabbing power from the leguislative branch in an unlawful manner. This must stop.
neil hutsko
Wed, 07/31/2013 - 11:44am
if i understand a group of 15 people can apply for a non-profit lic. and run a room for other non profit groups - if possible us seniors can keep busy- also what new rules are to take place on sept. 1rst 2013 about how long a charity lic. is good for and the tips-- for working personnel at the rooms ?