Unveiling the Charitable Mirage: North Dakota’s Gaming Organizations Under Scrutiny

MINOT — Gambling is not permitted in North Dakota. It is forbidden by the state Constitution.

Article XI, Section 25 states,

“The legislative assembly shall not approve any game of chance, lottery, or gift enterprises, under any pretense, or for any purpose whatsoever.”

Yet, it clearly isn’t illegal, as gambling has surged into a multi-billion-dollar enterprise in recent years due to the Legislature approving the spread of electronic pull-tab machines. Or essentially, slot machines, in terms of pure function.

Of course, our tribal neighbors establish their own regulations regarding this matter, but concerning state law, this surge of gambling is enabled by a loophole in the aforementioned ban that is so vast you could drive a truck through it.

After the statement I just quoted, the constitution continues: “[T]he legislative assembly shall permit the state of North Dakota to participate in a multi-state lottery for the state’s benefit, and, the legislative assembly may authorize by law bona fide nonprofit veterans’, charitable, educational, religious, or fraternal organizations, civic and service clubs, or any other public-spirited organizations it may acknowledge, to conduct games of chance when the total net proceeds of such games of chance are designated for educational, charitable, patriotic, fraternal, religious, or other public-spirited purposes.”

This is the wording that legitimizes what is known as “charitable gaming” in North Dakota.

It is that “other public-spirited purposes” phrase where we begin to stretch the meaning. When most of us envision charity, we think of entities like food banks and support organizations for individuals with disabilities. However, the largest segment of charitable gaming in North Dakota, by a significant margin, has nothing to do with those causes.

Thanks to the e-tab machines, what used to be a trickle of gaming license applications to state officials has transformed into a veritable flood. “Our office used to obtain only one or two applications each year,” Deb McDaniel, the gaming director at Attorney General Drew Wrigley’s office, informed me. “Now with e-tabs, we see a continuous influx of applicants.”

One factor contributing to this is that what qualifies as “other public-spirited uses” is not clearly delineated in the legislation, allowing organizations that you and I might not deem particularly charitable to obtain gaming licenses.

West Fargo Events stands as one example.

The municipality of West Fargo ostensibly established that nonprofit to organize concerts and other community activities. In truth,

it was founded by Todd Berning, the CEO of Epic Companies, along with his team,

 and its main purpose appeared to be to facilitate charitable gaming at venues owned by Epic to fund events at locations owned by Epic Companies or near Epic Companies sites.

Does this genuinely represent what you or I might consider a charitable purpose? It is noteworthy that, just before

the decline of Epic Companies,

the organization had sought and been denied

 a gaming license.

I requested and obtained from McDaniel a list of 27 pending applications for charitable gaming licenses. Among them? A fireworks association in Minot, a skydiving business in Fargo, a ski resort in Pembina, and a foundation linked with a Bismarck baseball team

partially owned by Republican state Rep. Glenn Bosch.

Where is the boundary between a charitable organization and a straightforward business providing services in a community?

You could argue that these entities fit the broad interpretation of “public-spirited” in that they aim to provide services and activities to the general public, but if that is the criterion, is there any business in the state that isn’t public-spirited? What restaurant, bar, trampoline park, or bookstore isn’t “public-spirited” in the broadest sense of the term?

To demonstrate how significant that loophole is, I obtained from McDaniel a listing of all 337 organizations presently licensed for charitable gaming under the various classifications outlined in the state Constitution (see the complete list below). The “public-spirited” classification is, overwhelmingly, the most prevalent, and it is not even close.

The count of “public-spirited” licenses is approximately 71% greater than the combined total of the second (veterans groups) and third (public safety) place categories.

This did not occur by chance. Clearly, legislators must formulate a better definition for what constitutes a “public-spirited” organization in the context of charitable gaming, but a recent legislative hearing regarding a bill aimed at achieving just that highlighted what a political battleground that might become.

The bill at hand is Senate Bill 2035, proposed by Republican Sen. Janne Myrdal. It seeks to refine the definition of “public-spirited” organization so that it more accurately reflects what you or I might define as a charitable purpose.

Opponents emerged in force

at the Judiciary Committee hearing.

They

contended against

certain aspects of the bill that would exclude adult recreational organizations (consider softball or hockey teams), tourism, and economic development objectives from the legal definition of charitable gaming.

Gambling generates substantial revenue. Because this loophole has persisted for many years, numerous organizations throughout the state are now (and I genuinely believe this is the correct term) reliant on that revenue.

Reverting this situation isn’t going to be simple, but what is the alternative? State gaming regulators are mandated to issue gaming licenses that comply with the definitions established in state law. Currently, those definitions are so broad and ambiguous that virtually anyone offering a service to the public can organize as a nonprofit and fund themselves through gaming.

Looming behind all this? The societal consequences of this gambling surge. Once again, we are discussing

billions of dollars in revenue.

From where is that money originating? And can the individuals who gamble that money afford to lose it?