COVID-19 has had a massive impact on the gaming industry. Safety protocol and a nationwide coin-shortage are affecting every single casino. One trend that has emerged in the industry is the elimination of change in the redemption kiosk. By giving the patron the option to donate their change or receive a TITO ticket for the change amount. Most importantly the donation option has so many benefits for all involved but also has many unforeseen risks. Avoiding risks and the extra costs with this type of donation module is possible. Why would a casino gamble with charity?
Gaming Compliance + IRS 501c3 Compliance
You have two highly regulated industries conducting business under the same roof, there will be risks. Naturally, Some of these risks may seem obvious, but some are not. All it would take is someone to expose a vulnerability, and now you have a significant risk on your hands. Gaming regulators usually recognizing these risks and vulnerabilities but might have a learning curve, with a new set of regulations to consider. As we know, if there is a risk involved, they will expose it. Casinos need to be aware of increased compliance and the problems that may cause.
Who’s money is it?
In my quest to bring a change to charity program into the casino industry, I remember a conversation I had with a midwest gaming regulator. I was looking for some feedback on my charity idea. One of the statements he made took me by surprise. I was sure this issue was essential to him. He had no problem with the charity concept. Most of his questions revolved around vetting and proper reporting. He asked,” was the casino going to be the only one deciding where the patron’s money was going”? These donations were not the casino’s money. He seen many risks involved in the casino finding the charities, handling the donations, and adequately distributing the funds. Corporate contributions are one thing but managing a patrons contribution is something else.
Keeping with the” who’s money is it,” theme let me ponder a question. If a kiosk manufacturer is charging a casino a fee for the donation software, who is paying that fee? Is this fee transparent? Are these fees reasonable? Can someone or some company profit from non-profit activities? Is the casino patron allowed to write this donation off on his taxes? Does all of this activity that appears to be for charity have the same transparency, record keeping, reporting, and follow up that a 501c3 would be required to have? If this is all big business, can it even be called a donation? How is the casino reporting these costs? Is this charity or big business?
Is the donation module even lawful?
IRS code states this.(IRC Sections 511-515, generally; Reg. Sec. 1.501(c)(3)-1(e)(2).) And private interests may benefit from the charity’s activities if that benefit is an unavoidable incident of the charity’s otherwise proper activities. However, the operational test requires a charity to “establish that it is not organized or operated for the benefit of private interests such as designated individuals, the creator or his family, shareholders of the organization, or persons controlled, directly or indirectly, by such private interests.” (Reg. Sec. 1.501(c)(3)-1(d)(1)(ii).) How did all this start? Is there someone behind the scenes making this casino donation to charity legitimate?
Is a casino patron making a donation to charity on the kiosk fully aware of the process? Do they understand in some cases, they might just be giving the money to the casino with the hopes that the casino passes on these funds? In many cases, this might not be a donation at all. Is there any follow-through from the casino to make sure the contributions were properly utilized? Are there transparent reports created for gaming regulators? How does the casino distribute these funds? What are they doing with the interest they make on holding these funds?
Is the kiosk manufacture profiting from charity?
Understandably there are considerable costs involved in adequately implementing such an excellent idea. Having something like this developed, tested, and implemented comes with costs. First, are these costs transparent? Secondly, Is the fee more considerable than the donations collected? Does the patron understand this? If the fees are higher, why would the casino pay these fees instead of just giving the charity that money?
Why take the risk and responsibility?
I know there are many questions I asked in this piece. Luckily we have been working on answers and solutions for over 12 years. My question to all casino operators is this? Why would you take on these risks and use your resources to do this? We have a plug and play system that can deliver results without the costs or risks. Contact me today for more information at [email protected]