Use of Proceeds etc. Part 1/2

The draft charitable poker regs as posted, mimic the existing regulations regarding charitable bingo; 10% of gross revenue generated must be set aside by the qualified organization to be used for its stated charitable, religious, community or educational purposes.  This Use of Proceeds formula is outdated and has been addressed by many for over two decades.  The recently adopted regulations for Social Quarters addressed Use of Proceeds and the final draft uses a new, long sought after formula of Gross revenue MINUS prizes which is now defined as Adjusted Gross Receipts.  The Electronic Pull tabs used in Social Quarters requires that 20% of the Adjusted Gross Receipts must be set aside as Use of Proceeds.  Simple mathematical “reverse engineering,” reveals that the 20% Use of Proceeds, based on Adjusted Gross Receipts for Electronic Pull Tabs equals 1.4% of the Electronic Pull Tab Gross Revenue.  Since VDACS’ statutory authority for poker requires the “Gross Revenue” formula as in bingo, it is simple enough to set the Use of Proceeds for poker at 1.4%  as is the de facto Use of Proceeds currently used for the social quarters and their electronic pull tab devices.  Prize payouts for bingo, including the paper pull tabs used at bingo, is 75%, far less than the payout in poker and in electronic pull tabs.  In addition, the expenses incurred at a bingo game are far less than expenses at a poker event or electronic pull tab operations.  The combination of higher payouts in poker and much greater expenses(primarily to pay professional dealers and supervisors) makes 1.4% Use of Proceeds for poker, in line with the very similar operations of electronic pull tabs.    A poker operator is to a charity what a manufacturer is to a social quarters operating electronic pull tab devices.  Neither poker operations, or electronic pull tab operations,  resemble bingo operations in anyway.  Utilizing the bingo model for poker, will smother the charities and the poker operator, allowing for neither to profit.  In fact, the regulations should mandate a reasonable and proper use of proceeds, 1.4% of Gross Revenue, and then audit to ensure compliance.  The regulatory body should have no place in determining reasonable and proper business expenses. Doing so is obtrusive, complicated and found no place else in code.  Charities are afforded the privilege to game in exchange for providing needed charitable donations/activities/events for their communities.   The idea that the regulations should dictate how charitable events should be run is unreasonable.  No staff member at VDACS has ever managed a bingo game or a social quarters or a charitable poker event.  The expertise in charitable gaming exists amongst the thousands of volunteers and game managers across the state, not with VDACS.  This idea is eloquently stated in a letter attached here from the first Director of Charitable Gaming, Clyde Christman.  In this letter, dated March 23, 2005, Director Christman thanks the charities for training his staff so that they may understand better how to regulate.  How far we have devolved in our joint efforts to generate charitable dollars from our gaming activities.    Using a 1.4% Use of Proceeds for poker, as in Electronic Pull Tabs, will yield the Qualified Charity approximately $1100 per day dedicated to its Use of Proceeds.  This is a tiny fraction of what for profit poker yields, but it is close in overall profit to bingo and offers the charities much needed variety.

Instead of asking the General Assembly to create more restrictions for the charities, the Agency should be asking the General Assembly for an appropriate amount of money to manage this 1.25 billion dollar industry.  VDACS employs approximately 12 people to regulate charitable gaming, all at one Richmond location and most are not dedicated full time to charitable gaming.  By comparison, The Virginia lottery which generated 3.75 billion dollars in 2022, and has over 300 employees in 6 locations around the state.   We do not need oppressive regulations for charitable gaming, we need a regulatory body to fight for a proper staff and allocation of funds to oversee our industry.    Stop blaming the charities and their dedicated Virginia volunteers for perceived industry shortcomings.    Reduce the onerous regulations, and let this charitable business thrive.  Charitable Gaming is for the first time competing with massive For Profit gambling enterprises all of whom have a massive variety of opportunities.  Only charitable gaming is being reduced, squeezed and manipulated out of business.  The very fee that the charities send to the State for oversight is hijacked into the General Fund and is not available to the Agency that is tasked with regulating.  This mess is aided and abetted by the Legislature and the Executive branches and the charities are the entities that suffer.   This upcoming General Assembly session should redefine Use of Proceeds for all forms of charitable gaming using the new Adjusted Gross Receipts formula but until such time, the suggestion here and from others whom have posted on this site will satisfy both statutory requirements and the needs of our charities.  The poker use of proceeds formula left as it is in draft form will violate other statute that prohibits underlying regulation from effectively nullifying the very activity that the underlying statute permits.  

Submitted by Chuck Lessin