SB 170-GAMING; ELECTRONIC PULL-TABS  1:34:07 PM CHAIR BJORKMAN announced the consideration of SENATE BILL NO. 170 "An Act relating to gaming; relating to bingo; relating to pull-tabs and electronic pull- tab systems; and providing for an effective date." 1:34:23 PM CHAIR BJORKMAN speaking as sponsor provided a brief recap of SB 170 and stated that the bill modernizes charitable gaming laws to maximize benefits for charities and nonprofits through e-tabs and electronic gaming. He said SB 170 engages stakeholders to support gaming businesses and the organizations they fundsuch as youth sports, senior centers, and veterans' groups recognizing their vital community work and reducing the need to seek state funding. 1:35:32 PM CHAIR BJORKMAN announced invited testimony on SB 170. 1:35:43 PM BILL BRESLO, President, Diamond Game Enterprises (Diamond Game), Anchorage, Alaska, testified by invitation on SB 170 and moved to slide 1-4. He stated that several gaming businesses under Diamond Game's umbrella have supplied charitable gaming products in Alaska for decades, including paper pull tabs, vending machines, and electronic pull tabs. He noted that Diamond Game, founded in 1994, specializes in device-based gaming and is part of Pollard Banknote Limited, a family-owned company since 1907. He said their approach emphasizes long-term, sustainable markets by working with local stakeholders, regulators, and lawmakers to introduce the right products responsibly. Drawing on experience in lottery, casino, and tribal gaming, he cautioned against expanding too quickly, which has caused market failures elsewhere. He added that in Alaska, manufacturers should either all be allowed or all be prohibited from owning distributors, emphasizing consistent regulations without grandfathering exceptions. 1:39:38 PM MR. BRESLO moved to slide 5-6 and said that a committee formed after last session examined electronic pull tabs, focusing on whether they should be offered through slot-style cabinets or handheld tablets. The debate centered on ensuring a level playing field and avoiding the appearance of mini-casinos across the state. He said similar discussions in other markets supported the committee's conclusions and noted that choosing between cabinets and tablets is a "false choice," as cabinets typically dominate the market and quickly reach capacity limits. 1:41:07 PM At ease. 1:42:10 PM CHAIR BJORKMAN reconvened the meeting. 1:42:26 PM MR. BRESLO continued with slide 6 and stated that the company produces cabinet-style machines and values their role in the business, but noted that when both cabinets and tablets are allowed, cabinets tend to dominate the market. He added that locations often reach the machine caps quickly, as some manufacturers install the maximum number allowed to block competitors rather than based on actual performance needs. 1:43:34 PM MR. BRESLO moved to slide 7 and said Minnesota's experience shows that tablet-based electronic pull tabs strengthen charitable gaming rather than replace paper pull tabs. Since tablets were introduced in 2013, paper pull tab sales have doubled to over $2 billion, while electronic pull tabs reached $2.7 billion in 2024. 1:44:14 PM MR. BRESLO moved to slides 8-9 and stated that in contrast, cabinet-style machines have reduced paper sales, as seen in Idaho where sales fell 50 percent after cabinets were introduced, and similar trends occurred in North Dakota, Ohio, and Virginia. He explained that tablets are cheaper to produce, ship, and maintain, providing greater savings for charities, while cabinets are more costly and tend to dominate locations. He also said revenue comparisons between the two are misleading because cabinets in other states have higher payout rates, making tablets potentially more profitable when adjusted for differences. He noted that tablets have performed well even in markets with slot machines, such as Minnesota's tribal casinos, showing they can compete effectively. 1:47:40 PM MR. BRESLO moved to slides 10-11 and noted that tablets have performed well even in markets with slot machines, such as Minnesota's tribal casinos, showing they can compete effectively. He said the success of Minnesota's tablet-based model is hard to dispute and believes it would work well in Alaska, adding that while the company could provide cabinets if authorized, tablets offer a more effective approach. 1:48:26 PM JOHN POWERS, Owner, Tudor Bingo Center, Anchorage, Alaska, testified by invitation on SB 170 and stated that he has worked in charitable gaming since 1994 and now owns his business. He expressed concern with Section 31, AS 05.15.186(f) on electronic pull tab costs. He opposed allowing manufacturers and distributors to receive up to 35 percent of proceeds when charities get only 30 percent, arguing they should not earn more than the nonprofits. He noted that Minnesota recently reduced its cap from 30 percent to 25 percent and that all parties there remain profitable, suggesting Alaska should adopt the same 25 percent limit. 1:50:49 PM JON WEAVER, Owner, Pilot Games, Minnetonka, Minnesota, testified by invitation on SB 170 and stated that Pilot Games is the largest charitable gaming company focused solely on electronic pull tabs and is independently owned. Founded in Minnesota in 2014, it is the state's oldest electronic pull tab operator and has experienced steady growth over 11 years. He thanked the committee for considering electronic pull tabs in Alaska, describing them as easy to regulate, track, and account for. He said the company provides real-time reporting tools for charities and the state, allowing effective oversight even in large or remote areas, ensuring strong accountability and regulation. 1:53:10 PM MR. WEAVER continued with his testimony of SB 170 and stated that he supports electronic pull tabs, noting his company began in Minnesota in 2014 when the product was struggling because distributors feared it would hurt paper pull tab sales. He designed games to complement, not compete with, paper pull tabs, emphasizing that electronic versions should expand participation and increase funds for charities. Over 11 years, his company has helped raise hundreds of millions of dollars for local nonprofits, while tax revenue from electronic pull tabs helped Minnesota pay off bonds for the Vikings' U.S. Bank Stadium 20 years early. He added that tablets also support local bars and veterans' clubs, especially after COVID-19, by providing social, community-based gaming rather than casino-style play. He said tablets better suit the atmosphere of local venues and offered to share his company's experience in charitable gaming, noting it has twice been named U.S. Gaming Company of the Year. 1:57:28 PM CHAIR BJORKMAN asked if a 30 percent manufacturer cap on ideal net, excluding taxes, work for Pilot Games in Alaska. 1:57:41 PM MR. WEAVER replied that a 30 percent cap would be workable for Pilot Games, but 25 percent is not sustainable even in Minnesota. Developing new games costs about $350,000 and requires major investment in technology, security, and reliability, supported by a staff of over 100 and offices in multiple states. He noted that Minnesota's 25 percent rate was reduced at the request of tribes, not charities or the state, and his company's rate had been 31 percent. He added that operating at 25 percent caused losses in early 2025, and without 1,800 sites and strong ties to Minnesota charities, continuing business there would be difficult. 2:00:08 PM MARC DOWNING, Chief Counsel, Grover Gaming, Greenville, North Carolina, testified by invitation on SB 170 and read the following: [Original punctuation provided.] My name is Marc Downing, and I am Chief Counsel of Grover Gaming, Inc. Grover Gaming is a software development company headquartered in North Carolina. Grover Gaming is the nation's leader in electronic charitable gaming. Our products have netted our charitable partners over $860 million nationwidein New Hampshire, North Dakota, Kentucky, Ohio, and Virginia. 2:00:38 PM MR. DOWNING continued with his testimony of SB 170: We believe electronic pull tabs would be a boon to Alaska charities and the local communities they serve. In every state that has modernized its charitable gaming to allow electronic pull tabs, charities have seen a tremendous increase in their fundraising. With this new revenue, charities have been able to reinvest in themselves by renovating and updating their posts and lodges, offer new services to their members and, most importantly, invest more in their charitable causes in their local communities. Additionally, participating charities have seen their membership increase, tapping into younger demographics. The modernization of charitable gaming has brought about positive, palpable change to charities and local communities in other states, and the same would happen in Alaska. The only change we encourage you to make is authorizing consoles in addition to tablets in order to provide flexibility to the charities. We are cognizant of not having the appearance of mini casinos as that is not the intent of charitable gaming. Therefore, one solution is to authorize consoles in members-only locations, but then only tablets in establishments open to the public. Nevertheless, I encourage you to support SB 170. 2:03:08 PM JULIE OTTO, Manager, Easy Street Pull Tabs, Kenai, Alaska, testified by invitation on SB 170, providing the following testimony: [Original punctuation provided.] 2:03:39 PM MS. OTTO continued with her testimony of SB 170: Where does the money go, how does it affect us, what  would we do without it?  People often ask, where does the money from charitable gambling go? Well, the money from our pull tab store, EZ Street Pull Tabs in Kenai, AK goes to support the operating costs of the Ninilchik Senior Center. The center has been around since 1983 and has come upon hard times more than once. We rely of grant dollars from the Borough and the State as well fundraising money we raise ourselves. Having the pull tab store has made a world of difference for us and the needs of the center. If we didn't have charitable gaming to support our operations, we would rely a lot more on grants, which we all know are not guaranteed. Paper costs, along with everything else keep going up, If our e-tabs follow the MN model and we could double our net, why wouldn't we?? Without them our profits could start going the other way as costs continue to rise Next generation of pull tab players likes electronics  We have had the pull tab store for 5 years now. We have a pretty loyal clientele however they are aging out. The next generation is more familiar with technology as compared to paper in whatever they do. Pull tabs are no different. We need to stay with the times and offer that next generation a new form of entertainment so hopefully we can maintain the money coming in through charitable gambling. E-tabs will do that. Available space  Smaller store. Tablets will do well as far as our space. Our pull tab store doesn't have a lot of extra room to add a bunch of cabinets or the counter space to add an electronic gaming area. Having tablets only allows the smaller pull tab store only (no bar or big gaming area) to compete effectively against other venues. Limits on payouts:  SP 170 kept the cap on payouts for pull tabs at $2M. I would like to see that raised more than 10 percent (since it hasn't been raised since 2015) as all this money helps out the non-profits and they can always use more money. In light of not increasing that one, the payout of $4M on e-tabs seems like a great opportunity to increase a non-profits bottom line. 2:06:33 PM MATT FISCHER, Owner Alaska Wholesale LLC, Kasilof, Alaska, testified by invitation on SB 170 and moved to slide 2, Who we Are. He said he has operated his distribution business for four years, continuing the company his father started in the 1990s. As Alaska's only remaining full-time resident distributor, he said the charitable gaming industry cannot survive on paper pull tabs alone due to rising costs and supply shortages, making modernization essential for its future. 2:07:39 PM MR. FISCHER moved to slide 3, Alaska Gaming Its About the Nonprofits. He said Alaska's gaming industry is unique because, unlike other states, it includes operators and pull-tab stores, which makes adopting new systems more complex. While stakeholders compare roles, he supports the Minnesota model, noting its $75 million increase in net revenue and emphasizing that net gains, not gross figures, reflect true growth since most gross revenue is paid out in prizes. 2:08:36 PM MR. FISCHER moved to slide 4, How Permits Can be Run, and explained that Alaska has several gaming models: self-directed sites like senior centers that run their own pull-tab stores, multi-beneficiary setups with several permittees, and for-profit operators who raise money for nonprofits. He clarified that the 30 percent nonprofit share is a minimum, not a fixed amount operators can give more. Similarly, vendors can keep up to 30 percent but may choose less, as these percentages serve as flexible guardrails rather than rigid limits.  2:10:14 PM MR. FISCHER moved to slide 5, Paper Pull-Tabs, and explained how revenue from an 82 percent payout pull-tab game is divided. Of each dollar, $0.18 remains after player winnings. From that, about 30 percent goes to manufacturers and distributors, and 36 percent to operators when used. Bingo halls typically have lower payout rates, while pull-tab stores prefer higher ones but have had to reduce payouts due to rising paper costs. 2:11:22 PM MR. FISCHER moved to slide 6, Issues Facing Nonprofits and Charitable Gaming, and said Alaska nonprofits face growing challenges, including illegal online pull-tab games on Facebook and unlicensed gaming stores that cut legitimate proceeds in half. SB 170 aims to give authorities power to act against these operations. Meanwhile, nonprofits struggle with rising costs for rent and supplies while ticket prices remain fixed. 2:12:33 PM MR. FISCHER moved to slide 7, Key Points From Alaska Industry Talks, and said he spoke with a few Alaskans that are concerned about a potential manufacturer monopoly, rising e-tab costs, and money leaving the state. Bars worry tips could decline with electronic play, and some fear the games move too fast, though he noted they are actually slower than paper. He added that Alaska's permit limits, based on prizes, encourage low payout games that drive players away. 2:14:03 PM MR. FISCHER moved to slide 8, Key Points From Alaska Industry Talks, and said many prefer having the rules in statute rather than regulation, noting that most of SB 170 is modeled after Minnesota law, which has already been tested. He added that some reporting requirements go unused and should be removed to save time. 2:14:41 PM MR. FISCHER moved to slide 9, 100 Percent of Nothing, is Nothing, and said reducing bar shares isn't practical, noting that without incentives, bars won't offer pull tabs. Paper pull tabs already hurt service and reviews, and with electronic games, bars risk losing tips. He encouraged profit-sharing to keep them engaged, emphasizing that "100 percent of nothing is nothing." 2:15:26 PM MR. FISCHER moved to slide 10, The Minnesota Model, and explained that the Minnesota model, recently adjusted from an 88 percent to an 85 percent payout, includes strong regulations requiring manufacturers to sell to all distributors, prohibits gifts, and bars manufacturers from also acting as distributors to maintain fair competition. 2:16:06 PM MR. FISCHER moved to slide 11, Minnesota Compared to Alaska Games, and said he favors the Minnesota model because, while Minnesota pull-tab revenue rose 267 percent over the same period, Alaska's increased only 12.1 percent, even as inflation climbed 33 percent, showing Alaska's gaming industry is falling behind. 2:16:33 PM MR. FISCHER moved to slide 13, Opposition to This Bill, and said opposition fears about job losses are valid, but adopting the Minnesota model could generate $75 million from e-tabs, supporting roughly 800 jobs. Without SB 170, additional revenue is lost, causing pull-tab stores and nonprofits to struggle or close, as paper pull tabs alone are no longer sufficient to sustain them. 2:17:35 PM MR. FISCHER moved to slide 14, Pull Tabs as Entertainment, Payout Percentage Matters and referenced a bar chart. He explained that higher payout percentages increase the number of plays per $100 spent, for example, 85 percent payout equals 650 clicks, while 90 percent approaches 900990 clicks, allowing players to "replay" winnings. He emphasized that electronic pull tabs are meant to provide entertainment, and higher payouts extend playtime, keeping participants satisfied. 2:18:19 PM MR. FISCHER moved to slide 16 and showed a picture of the typical bar setup in Minnesota and stated that a tablet stand can hold 10 tablets. 2:18:43 PM MR. FISCHER moved to slide 18, Pull-tab Store Death Spiral, and stated that pull-tab stores are stuck in a cycle of lowering payouts to boost profits, which drives away customers and eventually forces them out of business. 2:19:06 PM MR. FISCHER moved to slide 19 and stated that raising the $4 million prize cap increases player winnings, and keeps the players coming back to play. 2:19:32 PM MR. FISCHER moved to slide 21, a comparison of paper and electronic tabs showing that after a 3 percent tax deduction, distributors and manufacturers earn 27 percent. The only scenario where they make more than permittees is when working with an operator. 2:20:22 PM MR. FISCHER moved to slide 24, Why an Electronic Gaming Bill in 2025, and stated that SB 170 establishes guardrails, while specific details like vendor payment schedules will be handled through regulations. He said it makes most sense to adapt to the Minnesota model, with monthly deposits being more practical than weekly ones. 2:20:56 PM MR. FISCHER moved to slide 25, Why so Many Changes in Statute, and stated that lessons from Minnesota and North Dakota show the importance of strong regulations, noting North Dakota's unregulated payouts led to problems. Removing key elements from the model could undermine the system, which is why Alaska favors Minnesota's proven approach. 2:21:46 PM MR. FISCHER moved to slide 29 and stated that one of the biggest concerns is the limited number of manufacturers, noting his company is one of only three distributors remaining. 2:21:55 PM MR. FISCHER moved to slide 30 and argued manufacturers should not be distributors, citing a past case where dual licensing enabled cheating. He said keeping manufacturers, distributors, and permittees separate ensures accountability and consistent reporting to the state. 2:22:35 PM MR. FISCHER moved to slide 32 and referenced a chart. He emphasized keeping provisions to prevent kickbacks, noting that some companies lure permittees with upfront payments that ultimately reduce profits. Many permit holders lack time to analyze long-term impacts, so he urged keeping anti-kickback provisions in SB 170, following Minnesota's regulatory model. 2:23:45 PM MR. FISCHER moved to slide 37 and referenced a chart. He described Alaska's current gaming distribution as dominated by one company, Arrow, which owns both major point-of-sale systems and several manufacturers. He said this consolidation limits competition, allows access to competitors' sales data, and threatens smaller distributors. He urged maintaining separation between manufacturers and distributors, similar to Minnesota's model, and said he supports fair competition that benefits nonprofits.  2:25:49 PM CHAIR BJORKMAN held SB 170 in committee.