Charity Gaming In Michigan: A Model?

Gambling and worthy causes go together. If one is trying to legalize a form of gambling, it is often justified by showing that tax revenue will be generated for the public good.

I make my home in Michigan these days. My state has two basic types of legal gambling; casinos and charity gaming. The largest casinos are the three casinos in the Detroit area (Greektown, MGM Grand, and Motor City) and the Soaring Eagle in Mt. Pleasant. All four of these have poker rooms. Charity gaming card rooms that have poker are located throughout the state. I would like to take a closer look at these card rooms.

Michigan has had charity gaming for a long time. Until the 21st century, the favorite gambling activities for charity fundraising were bingo and “Las Vegas Nights.” The latter featured casino gambling games such as blackjack and roulette. When the poker boom came along in 2004 and subsequent years, poker grew to be the dominant gambling activity for charity gaming. Up to this point, the charities ran their own gaming activities. However, starting in 2008, a new business model emerged with card rooms for charity gaming having multiple charities in the same facility. The profits were split according to state law; 50-50 between the charity and the cardroom. This new model was pleasing to both the charities and the “suppliers,” meaning the charity cardrooms. Far more money was being generated for the charities, and the whole arrangement would have been illegal if the charities were not involved.

From the poker player’s standpoint, we have very much favored this new “marriage” between charities and suppliers. The poker tournaments were now being run with trained dealers and floor people. There would be multiple cash games as well. All this would be within easy driving distance from all the major Michigan cities. Now everyone knows where to go in their town to find a legal poker game and find their poker buddies. The quality of poker has been greatly improved by this environment, as a Michigan poker player has been crowned as WSOP champion twice in the past five years (Joe Cada in 2009 and Ryan Riess in 2013).

Nearly everyone has been happy with the new improvements in charity poker. The charities make good money, the suppliers have a nice business, people are employed in the card rooms, the poker players have a wide choice of games and stakes, and the local governments can spend less money on services when the charities can help out. However, there is one group of people who are not smiling; the big Michigan casinos.

It is normal for those who operate a legal gambling activity to oppose competition. They view gambling dollars as limited, and expect to do better themselves when others do not compete with them for those dollars. The Michigan casinos have been highly dismayed by the charity poker boom. From 2008 to the end of 2011, they fought very hard to place restrictions on charity poker, especially on the charity card rooms themselves. Up to the end of 2010, the casinos were not successful. Then they struck gold.

When the newly elected Michigan governor took office in January of 2011, one of his first acts was to put a moratorium on the issuing of new charity gaming licenses to the suppliers. (Imagine the uproar that would happen if the state’s Liquor Commission or Department of Motor Vehicles put a moratorium on new licensing!) This type of act looks to me like a usurpation by the executive branch of government of power that rightfully belongs to the legislative branch of government. The power to regulate should not include the power to strangle an activity that the legislature legalized to increase the income of Michigan charities.

A Michigan charity gaming license allows you only to operate your business in a fixed location. The license is not transferable. The upward trend in Michigan charity poker was sharply reversed by the moratorium.

In June of 2012, the governor moved the control of charity gaming from the Michigan Lottery Commission to the Michigan Gaming Control Board (MGCB). In the summer of 1013, the MGCB drafted a whole series of new proposals aimed at restricting the income of charity poker operators. They tried to change the closing time from 2 am to midnight, suggested that the poker operators should operate only four days a week instead of seven, that people over 21 should have to wear identification to show that they were of age if alcohol was served, and many other rules designed to strangle charity poker. The governor’s stated reason to confidantes was to increase tax revenue for the state. We gamblers are suspicious that he has other motives as well.

I think the basic idea of linking charities and poker is absolutely sound. The casinos and charity poker are both helpful in increasing state tax revenue and providing a good environment for poker and other gambling activities. There are ways to keep both of these groups operating successfully, rather than being adversaries.

I believe the most important way to define the difference between charity gaming and casino gaming is to ask the question, “Is the game one where the house has an interest in the outcome, or are the participants simply being charged a fee to gamble with each other?” It is a total misnomer to call poker a casino gambling game, even though it is gambling that is often done in a casino. I would like to see “casino gambling game” legally defined as being one where the house has a direct interest in the outcome of the game.

A casino gambling game is not suitable for charity gaming for many reasons. First, the house does not always win. It is entirely possible for the house to lose, sometimes several days in a row. Who pays when a charity runs a gambling game and loses? It is much better to have the charity gambling restricted only to games where the house cannot lose. Also, a casino game where the house is directly gambling against the player can provide an incentive for unethical behavior, whereas a game where the players gamble with each other is one where the house has a strong incentive to be honest. Because charity games are so numerous (there can be hundreds of locations to monitor), it is much harder for the state to conduct adequate supervision.

There are many other issues that would need to be covered by new legislation, but restricting casino gambling games like blackjack and roulette to being played only in a licensed casino is clearly the way to provide a sound underpinning for the relationship between casinos and charity gaming. Agreement on this point is easy, because the charity card rooms make far more money from poker than they do from casino gambling games, whereas poker is only about one percent of casino income.

I recommend charity poker as a fine way to have legal poker in a state. Unfortunately, Michigan is not executing this system properly, because the most important fundamental of accurately defining casino games is wrong. ♠

Bob Ciaffone’s new poker book, No-limit Holdem Poker, is now available. This is Bob’s fifth book on poker strategy. It can be ordered from Bob for $25 by emailing him at [email protected]. Free shipping in the lower 48 states to Card Player readers. All books autographed. Bob Ciaffone is available for poker lessons.