Confusion surrounds changes to small games of chance law
NORTHERN CAMBRIA — It took a little more than two hours for Sgt. James Jones to outline the rules and regulations — old and new — surrounding small games of chance fundraisers like raffles and 50/50 drawings.
And some of the 171 men and women attending the seminar Thursday at Hope Fire Co. still weren’t sure they understood.
“There’s a lot of confusion,” Jim Douglas, vice president of the Clymer Volunteer Fire Co., said Friday morning.
“You’re confused more than you were when you got there.”
The Pennsylvania Legislature passed two acts last year changing the 1988 law that established certain small games of chance as legal forms of gambling.
The laws — Act 2 and Act 184 of 2012 — made some changes designed to help the nonprofit organizations and clubs who use the games to raise funds. They raised the limit on what an organization can pay out in prizes in a given day or week. They allowed clubs to keep a portion of the proceeds, where previously every penny had to be designated to charitable works. And they added 50/50 drawings as a legal game (despite being a popular fundraiser everywhere, 50/50 drawings technically were illegal until last year).
But they also required organizations to file reports of the prizes they paid out, the proceeds they earned and how the money was spent. While those records have always been required, organizations have not had to report them regularly. (The first reports must be filed in 2014.)
Many organizations have been unaware of or have failed to follow the rules that have been on the books for 25 years. Now that they have to file the reports, they’ll have to learn and understand the many regulations.
“Most of the sections or provisions of the acts that organizations are having issues with didn’t change. They’ve been in effect for 25 years, they just weren’t aware of them,” Jones said by phone the week before the meeting in Northern Cambria.
“(Most organizations) are interested in nothing but following the law and that’s great and that’s why we’re trying to let them know what the law is.”
Jones is a member of the Bureau of Liquor Control Enforcement with the state police barracks in Punxsutawney and has been holding seminars throughout the area.
“We’re really doing what we can because we understand that people don’t have a good grasp on it. And it’s difficult and we understand they’re volunteers, they work for organizations that help communities, so we’re doing our part to help out,” he said.
Douglas, who attended two different seminars to try to grasp the regulations, said one of the confusing issues is that there are some different regulations depending whether an organization is classified as a club — carrying a liquor license as well as the small games of chance license — or a non-club. Unraveling what applies to the fire company has been complicated, he said.
He thinks he has it straight now. But he still is frustrated that the record-keeping rules will make fundraising even more difficult than it was.
“It’s gonna hurt us because we’ve got to keep our records for two years. We are all volunteers,” he said.
The Clymer company uses bingo games as fundraisers. But now aware that he has to make anyone who receives $100 or more sign their name when they take their prize, he’s concerned that some players will stop playing.
“But there are some (people) that are on disability or welfare, and they’re afraid (to sign),” he said, because their disability or welfare payments could be jeopardized by the prize money. Meanwhile, donations are slim, he said.
Kami Anderson, executive director of the Armstrong-Clarion-Indiana Drug and Alcohol Commission, said more than 100 people have attended each of the four seminars they’ve held with Jones.
“We’ve been shocked at the response,” she said.
A lot of the concerns being raised are about the old rules, not the changes.
“People just weren’t aware,” she said. “I think people really want to make sure they’re following the law and that they’re educated in what they’re doing.”
So what are the rules? And how have they changed?
Here’s what hasn’t changed. Any form of gambling not explicitly spelled out by state law is illegal. (Gambling is defined as “consideration,” or payment, plus the element of chance, plus a reward. So that office March Madness pool? It’s gambling.)
The Small Games of Chance Act allows certain games to be operated as fundraisers. They are: punchboards, pull-tabs, raffles, daily and weekly drawings, and now 50/50 drawings.
A big change is the limit to what an organization may pay out in prizes. Now you can offer a prize up to $1,000 for a single chance, up from $500. You can award a total of $25,000 in a given week, up five times from $5,000. If an organization can offer a bigger prize, it can attract more participants and make more money.
The proceeds from the games must be kept in a separate bank account and be used “in the public interest.” That’s simple for an organization entirely devoted to public interest causes. They can all use 100 percent of the proceeds to support their organization.
It’s a bit different for an organization holding a club license. A club is an organization that is licensed to sell liquor under the part of the liquor code that covers restaurants, hotels, etc., and also has a 501(c)(3) designation. They may only keep 30 percent of the proceeds from the games for approved expenses. The remaining 70 percent must be used for public interest purposes. That 30 percent can’t be spent on alcohol or wages or fines.
To operate a game an organization must pursue either a regular license — which allows the organization to hold games at specific locations all year — or a limited occasion license for specific events. That isn’t new. What is new is that any group that makes more than $2,500 in a year must include a criminal history check for its executive officer and secretary along with the application.
Also new: Any club applying for a license must also include the most recent report of their records. Don’t keep the required records? You can’t get a new license.
There are many regulations surrounding the operation of the games. Some are old but mostly unknown and unfollowed. For example, children under 18 may not participate in games in any way, including selling raffle tickets.
Here’s one that is new: The person operating a game in any way can’t play the game. “It’s pretty much common sense, a lot of these clubs have had these safeguards for years,” Jones told those gathered in Northern Cambria Thursday.
For those conducting daily drawings: Those may now be run at the same time as weekly drawings, and more than one drawing may occur in a day. This is a new change.
Here’s another change: Only one license is allowed per location. So the VFW can’t allow the neighboring fire company to use its banquet room for an event that includes small games of chance if they both hold a license. The only exception is for groups that have a license for a particular event but don’t have a particular location. So the VFW can allow the boosters club to conduct games in their banquet hall if the boosters have a license just for that event. However, while the boosters are playing their games, the VFW has to shut down all of its games.
Here’s another exception. Even though every small games of chance license has a location listed and only applies to that location, raffle tickets and 50/50 tickets may be sold elsewhere; the games may be played at another location for annual events (like an annual picnic); or — and this is new — if the location is unusable.
Records must be kept for two years — or five years for clubs. Jones said the five-year requirement is the only change in record keeping. The records must include the number of W-2G forms issued (an IRS requirement), winnings reported, revenue collected, expenses, prizes paid and amount spent in the public interest. (There are also specific records to be kept for each game, such as the value of merchandise in a raffle.)
Those general records must then be reported annually, or biannually for organizations with a club license.
Jones stressed that his officers are willing to work with organizations.
“If you make a mistake, an honest error, it’s not going to result in the suspension of your license,” he said. “We issue considerably more warnings (than citations). If you were to get arrested, you’d have to work at it.”
Here are the highlights of the changes in Acts 2 and 184 of 2012:
- 50/50 drawings are now legal.
- A prize can be up to $1,000 for a single chance, up from $500. Weekly prizes can total $25,000, up from $5,000.
- Clubs may keep 30 percent of the proceeds for approved expenses.
- Applications for a license to operate the games must include a criminal history check for certain officers (for groups making more than $2,500), and the most recent report.
- Only one license per location is allowed.
- Clubs must keep records for five years.
- Records must be reported annually, or twice a year for clubs.