The latest episode of the AZ Big Podcast with Michael & Amy has officially dropped. Episode 66’s guest is Jim Stipe, shareholder of Burch & Cracchiolo. He talks to Michael and Amy about changes in Arizona’s red hot gaming industry and the legal issues that come with gambling, sweepstakes, raffles and more as well as how to avoid legal problems in gambling.
LISTEN TO THE PODCAST: https://open.spotify.com/episode/4SXSgdnA1rdSEMBwvifq5i?si=_b9cexNpToewZ02KIf0lfA
Listen to more of the AZ Big Podcast here.
Podcast Transcript:
Michael Gossie
Welcome to the AZ Big Podcast sponsored by Burch and Cracchiolo. I'm Michael Gosse and I'm joined by my co-host, our publisher, Amy Lindsey. Today, we're super excited to have in the studio, Jim Stipe, shareholder at Burch and Cracchiolo, who's going to have some really fun things to talk about today. Jim, thank you for being here.
Jim Stipe
Great to be here, thank you.
Amy Lindsey
Thank you for joining us. Jim, start off. Tell us a little bit about your background and your legal practice.
Jim Stipe
So, my background is that I've been with Burch and Cracchiolo since 1992, so my entire legal career, actually, I graduated from law school and started straight there. I actually worked there when I was still in law school and then in about... In the late 90s, around 1997, I started representing the Arizona Department of Gaming and some litigation, and I've pretty much represented them almost continuously since then. I also represent The Arizona Lottery now, and then you know, I have a lot of other related, you know, contest marketing, charitable fundraising kind of clients.
Amy Lindsey
I can't imagine you realized how much that would change and progress over time.
Jim Stipe
Well, I've been doing it so long that it seems a little slow to me actually but I think, you know, everything's changing exponentially in the world and that the world of gambling is going to be the same way.
Michael Gossie
Yeah, it seems like especially in the last few years, there's been a couple of things that have dramatically changed the world of gambling that's legalized sports gambling in Arizona and COVID. So, let's start with COVID, how has COVID changed the world of gambling?
Jim Stipe
So, you know, obviously pre COVID there was an expansion online, all kinds of activities whether it's retail or work or you know marketing and what happened during COVID was what was an expansion into new markets became a necessity. You had to work online, you had to shop online, and people became used to it. They had to become used to it and now they expect it and so gambling has to react to that. So, gaming operators have to get online if they want to be fully successful and so pre COVID, you saw Australia go online, they were kind of out in front.
You saw some things in the United States like legalized poker in New Jersey and Nevada. Now it's gonna... you know, the genies out of the bottle, and they're going to have to go online, and you're going to see nationally, internationally, more gambling online.
Michael Gossie
Is online gambling legal in Arizona? I've heard conflicting things.
Jim Stipe
Well, sports betting is obviously there's some online gambling that was permitted as part of that bill that includes fantasy sports. That includes some little lottery activities, generally not, now...
Michael Gossie
Do people realize that, do you think?
Jim Stipe
I think generally, so I don't think we see a lot of problems there as a regulator.
Michael Gossie
Okay.
Jim Stipe
But you know, problems more, say, with how you run poker games and stuff like that, but you know that's going to... that's going to change. I do think that, you know, there's some other legal online gambling activities, like charitable fundraisers. That can happen, but generally it's pretty limited.
Amy Lindsey
So, how has the legalization of sports betting in Arizona had any impact on the state?
Jim Stipe
Well, it's kind of been the first big thing that went online, so pre COVID, I'm not sure. Had the Arizona legislature passed the sports betting bill, but I'm not sure it would have been... would have allowed online wagering. There was a lot of fear within the Arizona Legislature that I heard expressed, which was that we don't want to make gambling available 24/7 to people anytime, anywhere. And after... you know, post COVID you if you're going to be successful, you don't have any choice. So, to have those operators be successful, they were allowed to do it and you know I don't know what the future holds in Arizona, but I can say that nationally, internationally. You're just gonna see that expansion.
Michael Gossie
You know, you mentioned a little bit earlier about charities and fundraisers and gambling. What do people need to know about that or what are the mistakes that people seem to make all the time that ...that they need to know about when they're setting up a fundraiser or a charitable gambling event?
Jim Stipe
Right. So, what I really encourage people to do is recognize that -- that only certain charities are allowed to do raffles, whether online or in person, or any kind and they have a special dispensation to do that kind of gambling. It is still gambling though, just because the charity is doing it doesn't mean it's not. So, you got to follow the law, the Arizona state statutes, you got to have good terms and conditions, so people know that they're safe and there's nothing shady going on and then you've got to follow IRS regulations and so, what I tell people is please, you know, at least initially, get a good lawyer, make sure you know, you avoid the pitfalls. Make sure you're a charity that qualifies, that you're using the money right, that the right people are operating your raffle and that and then get a good accountant so you can meet the IRS rakes.
Michael Gossie
You know. I didn't realize that a raffle was actually included in gambling.
Jim Stipe
It's absolutely gambling, yeah.
Michael Gossie
So, how would you define raffle from a legal standpoint?
Jim Stipe
Well, raffle would be a ticketed drawing and now those tickets don't necessarily have to be paper. They could be electronic, but they're a ticketed drawing where you, you know, you know that the hand in the bucket of raffle tickets, right? I mean, that's generally how we look at it. It's really just the form of lottery but it has that, you know, I don't think it's defined in the statutes actually it's just referred to... It's kind of, you know, term of art that we all use for that kind of drawing.
Michael Gossie
So, how do you know if you're a qualifying nonprofit?
Jim Stipe
You got to look at the statutes. So, to give you an example of some of the qualifiers is you got to be a 501(c)(3). You got to use your money right. You've gotta... They just changed the law. You've got to have been in existence for a year, it used to be five years, they shortened that. That was part of the last package of legislation in this area, so those are the kinds of things you got to be aware of. You've got to be aware of where you can operate, where you can sell tickets. It's got to be Arizona, can't take ticket purchases from Utah, so there's pitfalls there, and you need to be careful of them.
Michael Gossie
That's so interesting. So, when I go to a Diamondbacks game night, I'm in the 50/50 raffle. That's actually considered gambling?
Jim Stipe
That's gambling. So, generally in Arizona there is a... all gambling is prohibited, and then you just except out certain things and social gambling, amusement gambling, and one of those certain things is regulated gambling, and that's where charities and their raffles fit.
Amy Lindsey
Okay.
Michael Gossie
Jim, this is fascinating. We have a million questions for you, but before we get to them, I have to say the attorneys like Jim at Burch and Cracchiolo have been proving for more than 50 years that a successful business or legal case of any kind starts when you hire the right lawyer. Let them prove it to you. Learn more bcattorneys.com. That's bcattorneys.com. Okay so, you mentioned that you can't sell them online, you can't sell them to other states,
Jim Stipe
You can sell them online.
Michael Gossie
But, it has to be in Arizona.
Jim Stipe
It has to be in Arizona.
Michael Gossie
So, what do nonprofits need to know about fundraising events, and marketing those fundraising events?
Jim Stipe
Well again, if it involves raffles or any kind of that contest marketing, you know you need to follow the statutes and so get that lawyer. If you're, if... that's for your charitable fundraiser. If you're a non charity, there's still things you can do. You can still do contest marketing, and there's all kinds. The most obvious kind is the no- consideration- requireddrawing, which we kind of generally refer to as sweepstakes. Right and there's companies out there like Omaze that run these sweepstakes nationally and they have celebrity sponsored, you know, sweepstakes that benefit charities and you know, those are things you can do. Again, the same rules apply, which is you've got to be very careful there are a lot of pitfalls with national sweepstakes, there's issues of federal law, there's IRS reg’s and you know, you got to be really careful with your agreements. So again, get your lawyer. Get your good accountant.
Amy Lindsey
I'm hearing one thing. Please consult an attorney before...
Jim Stipe
Please, please do it. Please do it there. There's just... there are some real pitfalls and people fall into them all the time.
Michael Gossie
Do people not realize the legal ramifications of not following the letter of the law?
Jim Stipe
I think what happens a lot of times is there's so much of this going on that they skate for a while and then ...and then they get. You know, and they don't realize, you know, they think they're kind of doing what everybody else is doing and maybe to some degree they are, but they don't realize they're breaking the law.
Amy Lindsey
So, what are some ramifications if you don't consult an attorney, you don't follow the correct rules to do it, what can happen?
Jim Stipe
Well, you can get criminally prosecuted, of course, but what I would say certainly for retailers, and you know 501(c)(3)s is the biggest issue and this is true for all gambling companies. Actually, for gambling companies too, which is that once you lose your reputation in this arena, once you damage it, once people have doubt about whether your program is legitimate, whether they are safe putting their money there, it's very hard to restore your reputation. So, you... once you destroy it, you're kind of done. So, regulators and regulations are really important.
Michael Gossie
So, what advice would you have to a company that's trying to market themselves, trying to get some attention.... they're thinking about, hey, maybe we'll do some, we'll do a contest, or we'll do a raffle or do something like that. What advice would you give to that company?
Jim Stipe
Well, of course, get a good lawyer and a good accountant. I keep saying that, but really important. But what I would say is, you know, look around at what other people are doing and something I've been seeing. It used to kind of be that charities... You can work together in Groups. So, it used to be that we would see charities go out to retail and have them, say, provide a prize for a raffle and there was some synergy there, the retail could say “hey see you know we provided this” and get a get a little marketing that's being flipped now. I'm seeing more and more of it being flipped, which is retail runs the drawing in the sweepstakes, and they advertise that they're, you know, passing on this money to the charity and it's great for the charities because they get all this outreach to, you know, this massive retail base. So, it's there's really some synergy there and there's, you know, it's a kind of a win win but you have to be real careful. You got to have all the agreements in place. You have to have the licensing done. You got to think about intellectual property issues and you know it's important to have the lawyer.
Michael Gossie
Oh, my gosh, you know you don't think about it when you're just trying to set up a raffle. I started a nonprofit back in New York, and I think that we probably broke the law multiple times.
Amy Lindsey
Is there a statute of limitations on that, Michael?
Michael Gossie
Because we did all we...
Amy Lindsey
Did you consult an attorney?
Michael Gossie
I didn’t because you know, you're just... you're just so worried about raising money for your charity and doing the right thing, you don't really think about that and does that happen with a lot of nonprofits.
Jim Stipe
It does so, so I'll get calls with. Hey, we've got a letter.
Amy Lindsey
Let me guess, they didn’t consult an attorney first.
Jim Stipe
They did not consult an attorney. They didn't think about issues you know and they started taking, you know, wagers from some other state and the state regulator that there said, hey, you got to stop and then you know. You know, fortunately, I think regulators generally want people to do well and, you know, they don't want to hammer you, but they're going to require that you follow the law and if you keep skirting it, especially you know with sweepstakes, you can get into a lot of trouble. You know there, there used to be a lot of pretty high profile sweepstakes that got shut down and there's no coming back from that.
Amy Lindsey
Well, I guess the legal part is bad enough, but you don't want to damage the reputation of the charity, really keep in mind while you were raising money for that charity, that's what gets hurt.
Jim Stipe
That's right. Exactly.
Michael Gossie
So, where do you see the majority of your caseload come from? Is it from nonprofits? Is it from businesses?
Jim Stipe
It's probably around 50/50
Amy Lindsey
Okay.
Jim Stipe
Actually, yea and there's more contest marketing than just, you know, sweepstakes kind but, you know, I do see a lot of that. I got a lot of calls, and it was amazing. During COVID it was, you know, every single day because people were having to transition online.
Amy Lindsey
Yeah, there were so many charity things that were shut down, they were major fundraisers.
Michael Gossie
So, what was happening during COVID that your caseload kind of jumped like that?
Jim Stipe
Well, so for charities, you know, they had their annual fundraiser. Yeah, right. The silent auction, sell raffle tickets at the door, and all of a sudden that's gone.
Michael Gossie
Right?
Jim Stipe
So, they're like, you know, they have to look online and what do we do? What can we do? And you saw, I don't know if you noticed, you go to Diamondbacks games, you do the 50/50 raffle. There was a point and this was pre COVID, but they moved those online too. So, you can be watching Diamondbacks game, you know, on TV and you get an advertisement for the 50/50 raffle and you can participate right then.
Michael Gossie
Wow, that's just dramatically changed.
Amy Lindsey
It's not as good because you don't get to eat a hot dog and a beer.
Michael Gossie
Right, right, exactly.
Jim Stipe
It's not justified. Even when you're home and there's a salad available, right?
Michael Gossie
How has social media played a role in this? Because if you're a nonprofit and you have a fundraiser and you know you want to get some attention, oftentimes you're going to you're going to go to social media to kind of, you know, pump up the interest in that. Have you had a social media component of that, that you've had to deal with?
Jim Stipe
Oh, sure. A lot of these people, well, a lot of the contest marketers, not necessarily the charities, but they're on Facebook, and they're doing these things on Facebook and they'll ask, how do I do it? You know, and I got to explain how no consideration works. You know, that's a real pitfall. People don't necessarily understand that you can't just give one free ticket and say it's no consideration. That's not how it works.
Michael Gossie
So, with social media you've got a global audience, and if you're only allowed to sell tickets to somebody in Arizona, how, how do you regulate that?
Jim Stipe
So, with ...when it's non gambling, you can go nationally.
Michael Gossie
Okay.
Jim Stipe
So sweepstakes can be national, but the pitfall there is that different states have different requirements for these programs. So, just because you're not doing gambling doesn't mean you can go to another state and do fundraising like that. You may have to get licensed. There may be some kind of regulation. Sometimes you have to post a bond.
Amy Lindsey
So, it sounds like not only get legal counsel, but get it early on cause you're saying that there's really so many different things to consider.
Jim Stipe
Yeah, what you do is in the beginning, go ahead and spend the money, expend the resources to get it right, and then you can run it after that right, you can just touch base with your lawyer. Hey, check our rules for the new program or whatever. You know, make sure your terms and conditions are right and that somebody has looked at how you're doing it and given you the thumbs up.
Amy Lindsey
No, that's great advice.
Michael Gossie
Okay, so if you're a nonprofit, you're thinking about doing a raffle. Your thing about doing any kind of contest, you're looking, if you're a business owner thinking about contest marketing, make sure you go to bcattorneys.com and contact Jim but Jim, I have one question I have to ask you. My March Madness pool that I love every single year.
Amy Lindsey
I knew this was coming.
Jim Stipe
Right?
Michael Gossie
I warned Amy about this one.
Amy Lindsey
OK, fantasy football too.
Michael Gossie
My fantasy, my fantasy football, my March madness pool. Is that legal in Arizona?
Jim Stipe
That's fine. It's social gambling, absolutely.
Michael Gossie
Okay, and how do you define social gambling?
Jim Stipe
Social gambling is where there's an exchange of revenues just between the players.
Michael Gossie
Okay.
Jim Stipe
Okay, so your neighborhood poker game is fine. If it's just friends. It's basically exchanging money as soon as it becomes a business, though, and this can be a very minor thing. As soon as somebody starts making money on that, even just from selling sodas, it becomes gambling.
Amy Lindsey
Oh, wow. Okay.
Michael Gossie
Wow, that's good to know. Okay, thank you so much for listening to the AZ Big Podcast with Michael and Amy. Once again, thank you to our sponsors, Burch and Cracchiolo. Jim Stipe, thank you so much for being here today. We learned so much, and if you want to get all the greatest and latest business and real estate news, go to azbigmedia.com. That's azbigmedia.com. Jim, Thanks again.
Amy Lindsey
Jim, thank you, that was some great advice. We appreciate your time.
Jim Stipe
Thank you.