The 2024 legislative session in Virginia has seen not one but two bills introduced with the aim of legalizing and regulating skill game machines, each with the potential to shape the state’s gambling future. The machines in question resemble slots but include a nominal element of skill to avoid being legally classified as gambling devices. They have proven to be controversial in Virginia as they have in other states.
Virginia originally banned the games in 2020, but postponed the implementation of the law until 2021 due to the COVID-19 pandemic. After that, a legal challenge delayed the matter even further. The result was that the machines were still operating last year. The situation remained unresolved until October 2023, when the Virginia Supreme Court intervened in a surprise move and affirmed the illegality of the machines.
Now, some lawmakers are looking to re-legalize the machines, facing pressure from the device manufacturers and from small business owners who object to the loss of revenue. Unsurprisingly, the bills also have their critics, particularly the state’s nascent retail casinos.
Two Bills, Two Ideas on How To Regulate Skill Games
One of the proposals, SB 212, is sponsored by Sen. Aaron Rouse (D-Virginia Beach). It has the support of a large coalition that includes Sen. L. Louise Lucas, chair of the Senate Finance Committee, and small business owners. It’s also backed by Pace-O-Matic, a major manufacturer of skill games that last year won a legal battle in Pennsylvania regarding the legal status of the machines there.
Details of SB 212 include:
- Establishment of a regulatory structure overseen by Virginia’s Alcohol Beverage Control (ABC) agency
- A 15% tax rate
- Limit of five terminals in restaurants and similar locations
- Limit of 10 terminals at truck stops
- No limit on the total number of machines in the state
Rouse estimates his proposal will create about $200 million in annual tax revenue. He and supporters of the bill are focusing on the narrative that skill games significantly benefit small businesses.
Meanwhile, Sen. Jeremy McPike (D-Prince Willam) is the sponsor of the second bill, SB 307. His bill would authorize video lottery terminals (VLTs) as well as skill games. Naturally, the inclusion of VLTs means McPike received the backing of major VLT manufacturers, J&J Ventures and AccelEntertainment. Details of the bill include:
- Virginia Lottery Board oversees and regulates skill games and VLTs.
- A 34% tax rate on gross profit
- No limit on the number of machines per location or statewide
- Allows for regional bans by local governments, but only if done by Jan. 1, 2025
- Requirement for players to provide an ID to receive a player’s card
Rouse’s bill seems to be progressing more quickly. It has earned the nod from the Commerce and Labor Committee and now sits in the State Finance Committee. The fact that Sen. Lucas chairs that committee should help its chances there. Conversely, McPike’s bill has yet to receive a full hearing.
The Casino Industry Opposes Skill Games
The Virginia casino industry is among the biggest opponents of skill game legalization. The operators, most of whom are still in the process of building their permanent facilities in the state, have employed various arguments against the machines. These include reports of crime associated with skill gaming establishments and the potential exposure of minors to gambling. They have also voiced worries about the scale of potential skill game expansion.
Under Rouse’s bill, if each ABC-licensed location installs the maximum number of games, that would mean 91,000 terminals terminals in the state. By comparison, there were about one-tenth that number operating during the ban’s pandemic grace period.
Such widespread competition is a concern for the casinos, especially given that they haven’t yet established themselves fully. The state authorized the construction of up to five retail casinos in a November 2020 referendum.
Since then, only one—Rivers Portsmouth—has opened its permanent casino. Two more have begun offering games at temporary facilities until the finished casinos open later this year. A fourth will only begin construction later this year, while the state is still seeking a location for the fifth.
Originally, the plan was for the fifth casino to go in the state capital. However, in a special election last November, Richmond voters rejected the proposal for a second time. The state Senate then shelved a bill that would have given Fairfax County residents their turn to vote on the question in this year’s general election. Technically, Fairfax is still in the running, but other areas like Petersburg could have a better chance.
The uncertainty over the fifth casino location comes as the industry grows slower than some might have hoped. In December 2023, Rivers Portsmouth and the two temporary casinos generated $58 million in revenue. New Jersey, which has a similar population to Virginia but an established casino industry, saw its Atlantic City casinos take in over $232 million in retail revenue.
Skill Machines & VLTs Lead to iGaming Resistance
Virginia will be shaping its future gambling landscape by choosing whether or not to legalize skill games and potentially VLTs. Whether or not retail casinos suffer from the additional competition, regulated skill games could significantly reduce the chances of online casinos coming to Virginia in the future. The establishment of retail casinos was a positive in that regard, in that the US approach to iGaming typically builds off of large retail operations. Yet when small businesses get into the game with VLTs and similar devices, it typically has a chilling effect.
That’s because some of the fiercest opposition to iGaming comes from owners of such small businesses and the trade organizations representing them. Gaming terminals at restaurants, gas stations, and corner stores provide value for gamblers in the form of convenience. Unfortunately for them, that also happens to be one of the main benefits of online casinos. And unlike the casino companies, those small businesses don’t usually have an opportunity to launch their own iGaming sites.
While iGaming can be disruptive to retail casinos, it also represents an opportunity. However, small business owners involved with gambling oppose any iGaming plans because they see it as a threat to their income with no upside. Similarly, convenience store and gas station owners typically oppose the creation of an online lottery, fearing the loss of retail ticket sales.
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