Crackdown on charity poker rooms brings backlash
Jul 21, 2015 at 1:25 PM
So perhaps it should come as no surprise that the state's efforts to rein in the charitable gambling industry that has grown more than 20-fold in a decade are sparking backlash — some of it in the form of raw emotion.
Gov. Rick Snyder's deputy lawyer Dave Murley drew rare boos in a crowded Capitol committee room the other day when he told lawmakers: "Charitable poker began as a good cause, evolved into a highly lucrative business and has degenerated into a racket."
At stake is the future of "millionaire parties," casino-style events where nonprofits split cash proceeds with unlicensed poker rooms that provide the space, dealers, poker chips and playing cards along with food and drinks. Many veterans groups, prep sports booster clubs and other nonprofits are no longer hosting Texas Hold 'em and blackjack fundraisers in small church basements and halls, instead contracting with what authorities charge are large "de facto casinos" run through bars and poker rooms.
Revenue from the events reported to the state was $7.9 million in 2002, peaked at $197 million in 2011 and dipped to $184 million in 2012, though officials believe it is more because loopholes have been found in $15,000 chip caps. Charities' profits rose from $3.6 million in 2002 to $19.2 million two years ago before leveling at $15.8 million.
Tension has been building ever since Snyder in June 2012 transferred oversight of the millionaire parties from the Lottery Bureau to the Michigan Gaming Control Board and its regulators familiar with monitoring highly regulated operations at horse tracks and Detroit's casinos. The agency, which already had been working with the lottery to close down sites due to illegal gambling, cracked down on some larger bars that contributed to a 22 percent drop in licenses issued for millionaire parties through the first half of this year.
The friction is boiling over, though, over new regulations proposed by Executive Director Richard Kalm.
Among the most significant proposals are requiring five bona fide members of a charity on hand to help run the games, limiting a single location to hosting one event a day and no more than 120 a year, and restricting the fees that poker room businesses charge charities.
"What started out being the charities' money, the charities' profit, has been whittled away at," said Kalm, who wants to lift a moratorium on new charitable gambling sites once the rules are in place.
He said charities got 81 percent of the proceeds a decade ago but now receive half under profit-sharing agreements never envisioned when the casino-style charity games were authorized in a 1976 update of the Bingo Act.
But charities and establishments running the millionaire parties like the current system and are suspicious that the Snyder administration is working at the behest of casino interests, an accusation denied by regulators. Charities say modest regulations are OK but call the proposed rules an overreach that could significantly hurt legitimate fundraising and put permanent poker sites out of business.
Dane Nickols with the Laingsburg Lions Club said that while charities are taking less of the cut on a percentage basis, they are still raising much more money than previously.
"We want the rooms to make money so they will continue and be there for us to make more money," he said.
Nickols said his club raised just $600 the first time it organized a poker event. Lottery officials who audited the service organization told him it was a lot of labor — 10 volunteers — without much bang for the buck and recommended he try out a card room in a Lansing-area sports bar.
"By going to an established room, we were able to make more money," he said.
The dispute has attracted attention from legislators, who took the unusual step of holding a hearing Thursday before the state has a public hearing on the rules later in November. After the public weighs in, the agency can make revisions — it already has made a couple concessions — before submitting them to the 10-lawmaker Joint Committee on Administrative Rules as early as December.
The panel has 15 session days to object or the regulations take effect when filed with the state. If an objection is lodged, legislators have 15 more session days to pass rules-stopping legislation.
"The emphasis has to be on the charities, not the operators," said Sen. John Pappageorge, R-Troy. "We want them to make their fair living, too. ... But we have to in the rules place the poker houses in proper relationship to the law."
Last month, Republican Rep. Jeff Farrington of Utica introduced a bill to roll back some recent changes put in place by Kalm such as requiring earlier closing times and allowing three events at one location per day. When nonprofits and civic groups sued, an Ingham County judge ruled mostly in the state's favor.
"We've got some violations and we've got some bad actors. But the Gaming Control Board has proposed rules that go far beyond attacking the bad actors or the violators and really threaten to shut down a whole lot of operations that are raising $15 to $20 million a year for charity ... and employing many, many, many people," said Rep. Jeff Irwin, D-Ann Arbor. "If we go too far we're going to ruin a good thing."
Online: Millionaire party updates: http://1.usa.gov/1asE3Ba