Committee studies charities owning bars as AG and local officials outline data and rules

The Judiciary Interim Committee met April 1, 2026, to begin the study directed by Senate Bill 2334 into licensed charitable gaming organizations owning alcoholic beverage establishments. Legislative Council attorney Casey Orvedahl opened with a high-level background memorandum outlining constitutional and Century Code authorities, site authorization requirements for cities and counties, definitions of "alcoholic beverage establishment," and administrative rules governing manufacturers and distributors.

Orvedahl told members the study will examine prevalence, ownership structures (nonprofit ownership, LLCs, or separate for-profit entities), and how organizations obtain site authorizations. He flagged key statutory terms — gross proceeds, adjusted gross proceeds and net proceeds — and noted administrative code sets a formula (including a 60% allowance of adjusted gross proceeds per quarter as an allowable expense) that affects what charities can spend on gaming operations. Orvedahl said electronic pull tabs (authorized in 2017) have driven large revenue increases and pointed members to attorney general fiscal reports for detailed breakdowns.

Aaron Hummel, director of the Attorney General's Gaming Division, clarified the committee's revenue figures for fiscal year 2025, saying statewide gross proceeds were about $2.5 billion with roughly 90% paid back in prizes, leaving adjusted gross proceeds in the low hundreds of millions. Hummel said roughly $2.3 billion of gross came from electronic pull tabs and that from adjusted gross proceeds organizations typically had hundreds of millions available after prizes and taxes. He told the committee the gaming division compared lists of gaming and alcohol licenses and identified about 21 gaming organizations associated with roughly 30 alcohol-licensed establishments, noting the list is not exhaustive because there is no statutory duty for bar owners or alcohol license applicants to disclose an affiliation with a licensed gaming organization.

Committee members questioned how much bars themselves keep versus what flows to manufacturers, distributors or charities. Hummel said ownership and operations vary: some organizations own establishments directly as nonprofit corporations, others create for-profit LLCs or separate corporations. He also described statutory and administrative restrictions that prohibit distributors or manufacturers from giving inducements to organizations or site lessors, cap gifts, and forbid distributors from interfering with lessees' relationships with organizations. He identified potential gray areas — including related-party leases where an organization might pay rent to a lessor it controls — and said regulators see occasional questionable arrangements, which the rules and audits should address.

Stephanie Ingebretsen of the North Dakota League of Cities told the committee cities are responsible for site authorizations and may adopt policies (after public hearing) that add local standards: the model policy the League circulated would allow cities to require signed agreements with site owners, limit types or number of games, cap number of e-tab devices at sites, and charge up to $100 per site authorization. Optional model provisions that would require a local nexus (evidence the charity serves the community) sparked the most debate, Ingebretsen said, because cities vary widely and must craft rules appropriate to local stakeholders.

Industry representatives urged caution. Scott Meske of the North Dakota Gaming Alliance provided IRS guidance about asset diversification for 501(c)(3) organizations and cautioned a broad statutory ban on charities buying bars could raise federal tax issues depending on how a bill is written. Gaming stakeholders asked the committee to consider precise drafting if any restrictions are proposed.

The committee asked Legislative Council and the Attorney General's office to pull more detailed vendor/manufacturer lists, a clearer breakdown of the 60% expense allowance, and precise statutory language for the rent limits and allowable expense definitions. Chair directed follow-up research and said members would revisit the issue at later interim meetings as part of the SB 2334 study.

The committee recessed after the day's presentations and scheduled follow-ups to gather more data before drafting any legislative proposals.