Playing to win: How gambling and youth sports became bonded in Minnesota

Every table inside Jimmy's Food and Drink is taken by 7 p.m. on a Thursday in late spring. This is bingo night, always a full house. The crowd is so large patrons sit in an overflow section near the door.

The bingo game is being broadcast over the speakers, with large TVs flashing numbers as they are announced. At table after table, customers at the Vadnais Heights establishment alternate between ripping open cardboard pull-tabs and dotting numbers on their bingo cards.

"O-74" comes over the speaker, a woman shouts "Bingo!" and an echo of groans follows.

The big winner, though, is someone else: youth sports in Minnesota. In this case, kids who participate in the White Bear Lake Hockey Association.

The money generated by pull-tabs and bingo at Jimmy's on this night and every night is crucial to hockey in that northern suburb. Similar arrangements are playing out all across Minnesota, as youth sports organizations in the state combined to generate nearly $100 million in net receipts on lawful gambling in 2020, a figure more than double the 2010 total.

Play pull-tabs at your favorite bar? There is a decent chance that game is being operated by a community sports entity and that you're contributing to what now serves as an essential fundraising source for many youth sports organizations in the state.

Charitable gambling is booming business in Minnesota, to the tune of $2.1 billion in total sales in the 2020 fiscal year. The pandemic shutdown disrupted steady annual growth in sales, but gambling operators are reporting a bounce-back in wagering since the state lifted restrictions.

In 2020, 183 youth sports associations held a gambling license, according to the state's Gambling Control Board, and they make up the largest percentage of total sales of any subsection of Minnesota nonprofits, 30%.

This money has long been a fundraising source for youth activities, but a surge in revenue during the past decade has bonded lawful gambling and youth sports in many Minnesota cities.

That increase can be attributed to several factors, including the arrival of electronic pull-tabs, and comes despite ever-present risks of theft and addiction problems.

Organizations have matched increased popularity with their own raised aggressiveness and sophistication. They don't get to pocket all of their gambling revenue, of course; taxes, expenses and administrative costs strip away a sizable chunk. What is left over enables associations to lighten the cost-of-play burden on families and fund enhancements or new opportunities.

Gambling proceeds in many organizations dwarf traditional fundraising methods such as 50-50 raffles at football games and selling candy bars or frozen pizzas door-to-door.

Christine Olson, gambling manager for the White Bear Lake Hockey Association, put it simply: "It's a big business."

A lot of the money coming in goes out just as quickly.

Organizations pay for extra training, cover costs of fees and equipment, fund capital improvement projects, award scholarships and donate money to high school programs and other charities in their communities. Some hockey associations use gambling proceeds to pay ice rental bills, which can run as high as $700,000 per year.

"It goes straight back to the kids," said Chad Marquardt, president of the White Bear Lake Hockey Association.

The Apple Valley Hockey Association used gambling revenue to outfit a dryland training facility with high-end equipment available to its 200 youth players. The facility includes a skating treadmill and a RapidShot system that alone cost $100,000.

On a spring evening, middle schoolers Leila Korkowski and Makayla Gore went through workouts on the skating treadmill, which measures stride, power and skating form. A certified trainer ran the controls and monitored their data at a computer.

A few feet away, sixth-grader Padraig Spencer jumped into the RapidShot booth. The system tracks players' shooting accuracy, speed and reaction time in firing a shot off their stick.

White Bear Lake's hockey association, which has 800 kids, is in the process of opening a new facility that will feature two skating treadmills, two RapidShot machines, a weight room and a plyometrics area. The project was financed 100% by gambling proceeds.

The association already helped save its city-owned rink by committing $2.5 million in gambling revenue to pay for a new refrigeration system when the old one had to be replaced.

Blaine Youth Hockey Association uses gambling funds to help subsidize costs. Anything to lower the "sticker shock" of playing hockey, association president Jeff Meister said. They also donate money to Blaine's girls' and boys' varsity programs as well as homeless shelters, other youth sports programs and local organizations.

Youth sports officials say they shudder to think what would happen if they didn't have gambling revenue to cover the costs of big projects or offset participation.

"That would crush a lot of sports," said Coon Rapids wrestling coach Bob Adams, who oversees charitable gambling for a club program.

This sense of reliance didn't exist in the early days of the relationship between charitable gambling and youth sports. Minnesota legalized pull-tabs in 1981, and sports associations already were involved when Gary Danger joined the Gambling Control Board in the late 1980s.

Paper pull-tabs — nicknamed "cardboard crack" — have historically been the primary attraction for bar gamblers, and the arrival of electronic pull-tabs in the last decade helped trigger double-digit annual growth.

"There's an appetite out there," Danger said.

Danger, a compliance officer, uses a dollar bill to illustrate how the gambling pie gets divided. On average, 85 cents of a wager returns to the player in winnings. Of the remaining 15 cents, roughly half goes toward expenses (payroll, rent, accounting, etc.). The other half gets split between taxes and the association's take.

About 3 cents per dollar multiplied many, many times over can pay for a dryland training center, ice time and reduced costs for families.

By law, every nonprofit with a gambling license must employ a gambling manager. Olson has held that job for White Bear Lake Hockey for 10 years, though she has worked in the pull-tabs industry for 23 years.

Her association runs gambling operations in seven establishments and registered total sales of $24.1 million last year, with pre-tax net receipts of $3.5 million. That put the association No. 2 in total sales among all 1,144 licensed organizations in Minnesota, according to state data. Five of the top 10 organizations in total sales were youth hockey associations.

WBL Hockey's net profit last year was $479,035, trailing Blaine YHA ($697,473), which was No. 2 among all organizations. Seven hockey associations ranked in the top 10 in profit.

Youth sports associations that operate a pull-tabs booth in a bar are responsible for staffing it with their own workers. They also pay the establishment rent — a maximum of $1,750 per month — and buy the inventory (pull-tab tickets and other gaming material).

"It's a lot of work and regulation so you better be ready to manage that well," Blaine's Meister said.

Olson manages 65 employees who primarily cover shifts at pull-tabs booths in those seven establishments. She uses an accounting firm to handle bookkeeping, and her operation gets audited at least once every year and some years experiences multiple audits by different agencies.

Her association paid nearly $100,000 in taxes per month last year. The state received $27.5 million in tax revenue from all youth sports associations combined.

"If you say that the gambler is a willing participant and not a victim in any way," said Daniel Harrison, president of the Cottage Grove Athletic Association, "then the state wins, the association wins and the bar wins."

Gambling manager typically is a paid position, and experience in doing the work is critical. Former Apple Valley Hockey Association president Chris Link described the thought of a newcomer starting up a gambling operation from scratch as "almost impossibly daunting."

That reality has stopped the Chanhassen Athletic Association from proceeding beyond periodic conversations. The association, which oversees baseball, softball, basketball and soccer, relies on other forms of revenue: participation fees, tournament hosting proceeds, sponsorships and more.

CAA president Jaxon Lang, a parent volunteer, said the "burden of compliance complexity" in charitable gambling is too much of a hurdle to overcome for his association.

"We don't have a moral compass that says we shouldn't do it," Lang said. "We have a sense that it takes work and there is a complexity in it that we just haven't had the motivation to create the position or recruit the position. Nor have we had someone step up and say, 'I want this.' We talk about it and then we just kind of back away when nobody says, 'I want to own it.' "

That is where an experienced gambling manager proves invaluable. Olson started working in a bingo hall at age 18 and later sold pull-tabs at White Bear Bar before taking over as her association's gambling manager.

Olson created custom pull-tabs tickets for each bar, along with a White Bear Lake Hockey ticket. Her association also runs night bingo, morning bingo, raffles and Tri-Wheels. Olson takes out advertising in suburban newspapers to promote their games.

"Since the beginning, I said we're going to do everything we can and let's see how much we can earn," she said. "Let's help the bar owners."

The state requires meticulous oversight in this cash-only business. Multiple gambling managers and association presidents referred to charitable gambling as "the most regulated" entity in the state.

Diligent management is two-fold: Handling cash transactions appropriately, and then making sure gambling revenue is being spent legally on its intended purpose.

One gambling manager likened the arrangement between sports associations and charitable gambling to two families living in one house. There is a gambling side and an association side.

The state mandates that gambling funds be held separately from an association's general account, and any expenditure using gambling revenue requires approval from the association's board. Gambling managers must present monthly reports to their association to show detailed bookkeeping.

"You need transparency, especially when you're dealing with cash," Danger said.

Embezzlement happens, but those involved believe strict regulation of the industry provides a safety net and some peace of mind.

"If you steal from gambling of any substantive amount, you will get caught," Harrison said. "It's just a matter of when."

Most associations use independent accounting firms to keep gambling finances in order. The Gambling Control Board conducts regular compliance reviews, and occasionally the Department of Revenue audits associations as well.

"We stress that it can't be a one-person show," Danger said. "With that kind of volume, somebody could get in there and if they're doing something [illegal] and no one is watching, it could get away from people pretty fast."

That happened in Little Falls when the treasurer of the youth hockey association was charged with embezzling $92,000 over a 3½-year span. Association president Carmen Johnson said the theft did not come from its gambling account but rather from the organization's general operating account. The association had been setting aside money for improvements to its arena.

The treasurer altered bank balances and the association's board did not double-check statements.

"None of us ever thought that would happen," said Johnson, who discovered the theft.

Insurance and donations helped the association replenish a portion of what was stolen, but the ordeal served as a cautionary tale.

"You need to have checks and balances," she said.

Danger said the governing body has expanded its oversight and educational messaging as gambling has grown. A case of theft can not only send a person into the criminal justice system but it also could cost the organization its gambling license, thus eliminating a critical fundraising source.

"It's heavily regulated," Danger said, "but that also provides for integrity."

Theft is not the only potential problem. Susan Sheridan Tucker, executive director of the Northstar Problem Gambling Alliance, is concerned about addiction as a byproduct of gambling's ever-increasing popularity. Her organization advocates for "hard-core guardrails" in gambling controls beyond hotline numbers posted at pull-tabs booths.

"I'm not against gambling, but I am against creating situations where the player is not going to be protected," Sheridan Tucker said, while noting 220,000 Minnesotans fall somewhere on the problem gambling spectrum.

Sheridan Tucker said she understands the benefits that charitable gambling provides youth sports but finds it "very unfortunate that we have set up a system that kids are dependent on a gambling game to be able to play sports."

The impact of that revenue source — however each individual views it — is hard to overstate. It is evident in new sheets of ice at hockey arenas, in new dugouts at baseball fields, in lower participation fees, in extra training, in scholarships and in more kids able to play sports.

"Associations have a lot of kids and a lot of people involved," Cottage Grove's Harrison said. "The charitable gambling gets to the grassroots."