The e-tab machines dotting the North Dakota landscape generate revenues for charities throughout the state, but they could also be a source of money laundering, fears the head of the state’s Gaming Division.
E-Tab Boom
The e-tabs that have become so prevalent in South Dakota since the state legislature legalized them in 2018 have grown in popularity but are also becoming the source of some concern. The slot-style machines can be found in gas stations, convenience stores, truck stops and barrooms.
In the fiscal year that ended June 30, 2023, the e-tab machines generated almost $2 billion in gross proceeds before payouts and the revenue derived from those proceeds was approximately $205 million that went to designated charities throughout the state.
Republican state Senator Janne Myrdal, said, “I think we’ve seen certain things go astray a little bit, where the cattle have gotten out of the corral, and it’s beyond what the intent of our laws are.”
At least one of the issues Myrdal is referring to concerns money laundering. There are roughly 4900 e-tab machines at 830 sites in South Dakota and one recent report highlights how the money laundering scheme works.
The North Dakota Gaming Division had asked for an activity report from an e-tab manufacturer and found an instance in a Fargo area barroom in which a customer put money into a machine, never played, and subsequently cashed out. The patron then took the voucher to the owner of the bar who wrote them a check for approximately $8000.
Cause for Pause
Those kinds of schemes don’t typically work in casinos and sportsbooks, as they have trained staff, surveillance equipment, and a litany of procedures in place to guard against money laundering. However, the environments in which e-tabs are present (convenience stores, taverns, truck stops) have no such preventative measures in place.
North Dakota’s Gaming Division Director, Deb McDaniel, said, “That’s one report, on one device, we have 4,900 devices.”
“We know it’s happening, but can’t quantify how frequently it occurs, or in what amounts,” she added.
More Criticism
But other issues have also manifested like underage usage of the machines, counterfeit pull tabs and false vouchers. There is also a concern from South Dakota gaming tribes as to how the proliferation of e-tab machines is affecting their casino business. Why drive all the way to a casino and deal with parking when one could simply drive down the street and gamble?
But the industry is thriving and performing well for the charities it serves, which is why Scott Meske, a lobbyist for the North Dakota Gaming Alliance, cautioned about taking an extreme approach, ala throwing the baby out with the bath water.
“Let’s make sure that the bad actors and some of the bad things that are happening are taken care of, but we don’t throw a blanket over the entire industry and say it’s bad,” Meske told lawmakers.
There are several issues that need to be dealt with including enforcement of the gaming regulations and which businesses are eligible to house the e-tab machines. Legislation is expected to be drafted in the near future to address those needs.
