Court of Appeals upholds original rules regulating charitable gaming

By: Sarah Wojcik | C&G Newspapers | Published June 15, 2015

METRO DETROIT — The Michigan Gaming Control Board and 15 plaintiffs, including the Michigan Charitable Gaming Association, have been in a legal battle since the MGCB filed new rules on May 14, 2014, that would significantly limit the amount and type of business conducted in charity poker lounges.

On May 29, 2015, the Michigan Court of Appeals reversed a Michigan Court of Claims order to place an injunction on the administrative rules that the MGCB promulgated to govern “millionaire parties,” a form of casino-style charitable gambling. The plaintiffs argued that the MGCB’s rule-making process was illegal.

The Court of Appeals upheld the legality of the MGCB’s rule-making process but has not yet issued a date on which the rules will take effect. The Court of Appeals relinquished jurisdiction of the case and remanded it back to the Court of Claims for further proceedings.

“The court must inform us of the effective date of the ruling,” said Mary Kay Bean, communications specialist with the MGCB.

Gov. Rick Snyder signed over the regulation of millionaire parties to MGCB Executive Director Rick Kalm from the Michigan Bureau of State Lottery’s Charitable Gaming Division in June 2012 to enforce the Bingo Act and cut down on illegal activity at charity poker lounges.

Bean said the Bingo Act was published in the early 1970s to regulate “Vegas night” events at local halls, for example, and that legislators did not anticipate charitable gaming evolving into poker lounges dealing in large sums of money.

Because the Joint Committee on Administrative Rules, a bipartisan state legislative committee responsible for the oversight of rules proposed by state agencies, did not vote to approve or deny the new rules initially proposed by the MGCB, the rules went into effect on May 14, 2014.

“After the JCAR hearing and public hearings, we made changes to the rules requested by legislators and the charities,” Bean wrote in an email.

On May 30, 2014, the Court of Claims granted the MCGA’s request to place an injunction on the rules. On July 2, 2014, the MGCB issued a set of “emergency” rules that included some of the major provisions of the original rules. The rules effectively eliminated venues that operated solely as charitable poker lounges.

“The emphasis is now placed more on charities, because that was what was envisioned originally — that charities were to run these games,” Bean said. “Suppliers can be hired to assist them, but we wanted to take the emphasis away from locations.”

Since the emergency rules took effect, Bean said the MGCB has issued more than 2,170 licenses to charities, which equates to 7,600 event days and more than $113 million in potential chip sales at events.

She said the MGCB approved 67 locations, such as bars and restaurants, to host millionaire parties that would be supported by suppliers, and nearly 50 suppliers to assist with managing the games.

Charities, she said, also could host millionaire parties at their own sites.

In a statement, Kalm said the MGCB has seen reduced illegal activities.

The Michigan Charitable Gaming Association was disappointed in the Court of Appeals ruling.

“We are disappointed with the majority’s opinion. We believe the dissenting opinion is more accurate,” MCGA Executive Director Kate Hude said. The Court of Appeals decision was 2-1. “We haven’t quite decided yet how we’re going to approach it, but we’re staying focused on (proposed legislation to change the new rules).”

Senate bill 178, introduced by Sen. Rick Jones, unanimously passed through the Regulatory Reform Committee on May 12, and House bill 4293, introduced by Rep. Tom Barrett, was referred to the Regulatory Reform Committee on March 10.

Both pieces of legislation are the exact same bill, Hude said, and would essentially clean up some of the definitional language in the Bingo Act and make some changes regarding millionaire parties.

“(The Bingo Act) has been in existence since 1972 and has only been amended slightly in 1999,” Hude said. “They’re singling out locations that host millionaire parties when commercial bingo halls have been in existence since the ’70s.”

The dissenting Court of Appeals opinion reads, “Legislature did not intend to allow for a rule to be submitted to the Joint Committee on Administrative Rules, withdrawn, altered, and then resubmitted without its having gone through the rule-making process.”

Hude said the emergency rules have had a significant impact on charities, but they are learning to adjust to the new rules. Of the nearly 50 licensed suppliers, she said that the number of active suppliers is around 25-30.

“Some members and charities don’t have the ability to use licenses because of a decrease in the amount of suppliers. (Previously), there were well over 100 (suppliers),” Hude said. “The reason so many charities are in support of having suppliers is because they don’t have the manpower or financial resources to host events themselves.”