House committee adopts 'do not pass' recommendation on bill narrowing charitable gaming definition

Bismarck — The House Education Committee voted to recommend 'do not pass' on Senate Bill 2035 on a 13-0 roll call after several hours of testimony and questioning about proposed changes to which nonprofits may hold state charitable gaming licenses.

Deb McDaniel, director of the Charitable Gaming Division in the Office of the Attorney General, told the committee the amendment aims to narrow the statute's definition of “public spirited” organizations and to clarify related terms already defined elsewhere in state law. “My name is Deb McDaniel, I'm the director for the charitable gaming division under the office of Attorney General and I would be happy to answer some questions,” she said at the start of her remarks.

The amendment would move “educational activities” and “educational public service organizations” from the catch-all public-spirited category into the separate statutory definition for educational organizations. It also would remove adult amateur athletic competitions (which McDaniel said the office interprets to mean pool leagues and similar adult leagues) from the public-spirited category. The amendment clarifies that only domestic (North Dakota–domiciled) nonprofits that have “regularly and actively” fulfilled their primary purpose for two years would qualify for a state gaming license.

Why it matters: Committee members repeatedly raised rural and practical concerns: who in small communities would be authorized to declare a group “public spirited” for local permits if those communities lack a convention and visitors bureau (CVB), and whether longstanding local events that draw out-of-state participants would be harmed. Representative Hager asked how a town without a CVB, such as Rolla, could obtain access to charitable-gaming mechanisms; McDaniel replied the office reviews articles of incorporation and two years of meeting minutes to place an applicant in the correct statutory category.

Key clarifications given at the hearing included the distribution of gaming proceeds under current law: organizations running licensed gaming may keep net proceeds for operations (she said organizations use up to 60% for expenses) and must dedicate 40% of net revenues to eligible charitable purposes. McDaniel emphasized that the entire 40% must benefit the community rather than be reserved only for a club's members.

Representatives also discussed examples that prompted the proposed change. McDaniel and others cited applications from recently formed nonprofits, including an entity described as Epic Charities and other event-type nonprofits, and said the office sees a surge of applications: “we have 50 organizations sitting on my desk asking for a state gaming license right now,” she told the committee. The office said it approves most applications that meet statutory requirements; McDaniel estimated a roughly 98% approval rate among recent applicants who met minimum requirements.

Supporters of the amendment said narrowing the definition would prevent organizations created mainly to benefit owners or affiliated businesses from obtaining state gaming licenses. Critics warned that the change could unintentionally block community fundraisers, local tournaments that bring visitors, and rural groups that rely on charitable gaming to support community projects. Representative Hager and others urged the committee to consider the effect on small towns and to ensure local permitting routes remain available.

Formal actions: Representative Heilman moved a "do not pass" recommendation on SB 2035; Representative Hager seconded. The committee recorded a roll-call vote of 13 yes, 0 no to recommend 'do not pass.' A later motion to place the bill on the committee's consent calendar (moved by Representative Schreiberbeck and seconded by Representative Longmire) failed on a roll-call vote of 4 yes, 9 no.

The committee record shows members pressed the Attorney General's office for a clearer rule about when local governing bodies (cities or counties) may recognize a nonprofit as "public spirited" for local raffle permits, and whether a state-level license is necessary for events that have large prizes or ticket sales. McDaniel noted that if an event exceeds local permit prize limits, organizers would need a state license to sell higher-value pull tabs or electronic gaming products.

The committee left the bill as recommended 'do not pass' and asked for a committee carrier to carry that recommendation forward.

Ending: The committee moved on to other agenda items after taking the vote. Lawmakers said they expect continued discussion in the interim about classification, local permitting, and whether to craft different statutory changes that protect community fundraisers while preventing abuse.