Nonprofits Are Winning Big With Gambling

BY NEIL MEHTA

The Matpac Wrestling Club, a nonprofit youth program in North Dakota, has increased its revenue 30-fold since 2017. Not through candy-bar sales or bake-offs, but from a multimillion- dollar gambling operation.

It is hardly an outlier. Across the Great Plains state, sports leagues, tourism bureaus and other charities have transformed themselves through gambling.

North Dakota sits at the center of an unlikely experiment: Tax-exempt groups can install Las Vegas-style machines in restaurants, bars and other establishments and watch the money roll in. An increasing number of states now allow them.

While states legalized the machines to give struggling nonprofits supplemental revenue, groups have instead rewritten their fundraising playbooks: They find venues to place “electronic pull-tab machines”— e-tabs, for short—and often make money faster than they can spend it. Some tax-exempt organizations have bought pubs, branded as casinos. A charity for the disabled runs four bars.

“I don’t know if the public understands the scale at which charitable gaming is occurring in the state,” said Sean Cleary, a Republican state senator in North Dakota. “It has gone well beyond the scope of what a lot of folks were intending.”

Players in North Dakota spend more than $2 billion on e-tabs annually, directing profits to charities. The machines are now fixtures from bowling alleys to Applebee’s. There is one for roughly every 100 adults in the state.

Proponents say charitable gambling keeps nonprofits solvent and lets them expand their missions. Newly rich from e-tab cash, the Matpac Wrestling Club purchased an 18,000square-foot facility and, in 2024, distributed nearly $1 million in grants to other organizations, according to Internal Revenue Service nonprofit filings.

Wild West

“Gaming funds help us market Bismarck,” the head of another nonprofit, focused on tourism, testified at a state Senate hearing. Without that money, she said, the organization wouldn’t be able to help fund July Fourth fireworks or “Rodeo Days.”

Some lawmakers and researchers, however, argue that lax regulation has fostered a nonprofit Wild West.

In central North Dakota, the Beulah Convention and Visitors Bureau is housed in a modest suburban office complex and promotes the area. The nonprofit’s revenue surged past $750,000 by 2024 after it began sponsoring e-tab machines around 2021—up from less than six figures five years earlier, according to filings.

But in early March, the North Dakota Attorney General sought to revoke the group’s charitable gaming license and fine them, alleging that an investigation had found “multiple violations of state gaming laws and regulations.”

In one case, according to the AG’s preliminary findings, the nonprofit claimed to have donated over $270,000 to the Pfennig Wildlife Museum, a tourist attraction, but instead opened a bank account under the museum’s name, sent itself the money and used a portion of the funds to pay its own employees’ salaries and pay back a loan, among other expenses.

A representative of the Beulah Convention nonprofit declined to comment. Its chairwoman said at a city council meeting in March that her staff had been “unfairly vilified.”

E-tabs grew out of decadesold “charitable gaming” laws that permitted smaller games like bingo and blackjack. But a wave of legislation in states such as Kentucky, Minnesota and New Hampshire has added e-tabs to the mix.

In some states, they are less conspicuous. Minnesota’s, for example, are played on electronic tables. Indiana became the latest to legalize them in December. They are blockbusters wherever they arrive.

For more than 3,000 nonprofits nationwide, charitable gaming now constitutes more than half of their funding, according to a Wall Street Journal analysis of IRS filings.

E-tabs descend from traditional paper pull-tabs, a game of chance where strips hide symbols. Reveal the right ones and win a cash prize. North Dakota legislators, who legalized e-tabs in 2017, say they didn’t anticipate the games’ wild success or how closely manufacturers would model them after slot machines.

The trend is so lucrative that charities are entering the bar business. Ace’s Lounge & Casino, in Minot, is operated by a subsidiary called Ice Time LLC. Ice Time itself is owned by the town’s nonprofit youth ice-hockey program, according to IRS filings.

Millions in income

In Grand Forks, a charity for disabled adults bought Southgate Casino Bar & Grill through a subsidiary. The group, the North Dakota Association for the Disabled, operates four bars and made over $4 million in net gaming income in 2024, its filings show. Southgate’s offerings include three blackjack tables, bar bingo and 10 e-tab machines.

The nonprofit’s chief executive, Don Santer, said the group spends roughly $3 million on direct services for people with disabilities and that the term “casino” is a marketing label.

The sheer scale of charitable gaming forces lawmakers to weigh competing interests. A 2023 North Dakota legislative report found that e-tabs are the source of most gambling- addiction cases in the state. But many nonprofits now need gaming to survive.

“It can feed people’s addiction for gambling, but also it’s an economic benefit to people who are served by these organizations,” said Democratic state Rep. Gretchen Dobervich, a public-health practitioner.