Virginia lawmakers have passed a bill that legalizes and regulates skill game machines, creating potential competition for the state’s new retail casinos. Next, the bill will head to the governor’s office and, if signed, will legalize the machines four years after Virginia lawmakers voted to ban them.
While voted on in 2020, due to COVID-19, the ban didn’t go into effect until 2021. At that point, it was legally challenged, which allowed skill game terminals to remain in place until Oct. 2023, when the Virginia Supreme Court stepped in and deemed the machines illegal.
Senate Bill 212, which now heads to Gov. Glenn Youngkin’s desk, moved through the General Assembly with limited debate. The Senate passed it with a 31-9 vote, and the House of Delegates voted 49-43 in favor.
Notably, the bill has several sponsors, including Sen. Aaron Rouse (D-Virginia Beach) and Sen. L. Louise Lucas, chair of the Senate Finance Committee. A coalition of small business owners and Pace-O-Matic, a manufacturer of skill games, also backed the effort, one of two bills proposed to legalize and regulate skill games.
Final Bill Includes Changes
Sen. Rouse estimated that skill game machines would bring $200 million in annual tax revenue, based on his original proposal of a 15% tax. However, the number could be higher. Likely to please some critics and proponents of a similar bill proposed by Sen. Jeremy McPike (D-Prince Williams), a few changes, including a higher tax rate, were implemented in the final bill text, including:
- A tax of 25% instead of 15%.
- Alcohol Beverage Control (ABC) will initially regulate machines. The Virginia Lottery Board will later take over.
- Up to four machines instead of five in ABC-licensed locations.
One change that some proponents called for was requiring an ID to receive a player’s card. The final bill left that out but calls for a minimum age of 21.
Also, anyone who allows a minor to gamble will face a misdemeanor charge. The machines must also contain an “accounting system” operated by the state, ensuring fair and accurate tax collection. The majority of proceeds will go to the PreK-12 Priority Fund, and the rest will fund various local and state organizations:
- PreK-12 Priority Fund: 75%
- Local municipalities: 15%
- Administrative costs: 6%
- Problem Gambling Treatment and Support Fund: 2%
- Department of State Police: 1%
- Local municipalities law-enforcement agencies: 1%
If Gov. Youngkin signs the bill, it would end the state’s gray market status quo for skill game machines. However, there is no indication whether the governor will sign or not. His office had previously said it had “serious concerns” with earlier versions of the proposed legislation.
Opponents Call For Level Playing Field
One part of the rejected McPike proposal would have allowed local governments a window to ban the machines. However, Rouse’s bill would prohibit localities from restricting the machines or holding a referendum.
In a speech on the House floor, Del. Barry Knight (R-Virginia Beach) pointed out that municipalities with land-based casinos had the opportunity to hold a referendum to approve the projects first. For example, Richmond voters rejected a casino for a second time last November. Knight added,
What I like to see is a level playing field.
Virginia authorized five casinos in a Nov. 2020 referendum. Since then, only one permanent casino, Rivers Portsmouth, has opened, while two are expected to open permanent locations later this year. The newly established retail casino industry is one of the biggest opposers of skill games. While the competition is the likely cause, the industry says the rapid spread of the machines will harm minors, low-income residents, and those with gambling addictions.
After the legislature passed the bill, Virginians Against Neighborhood Slot Machines (VANSM), a casino-backed group formed to lobby against skill game machines, said in a statement:
This is bad policy that would bring an unprecedented expansion of gambling to every corner of Virginia without even attempting to provide basic guardrails including local referendums, legitimate background checks, security or problem gambling regulatory requirements.
Where Do Other States Stand?
If the bill proceeds to law, Virginia will become only one of a few states to legalize skill game machines, following Nebraska, which legalized the machines in 2020. Wyoming later did the same in 2023.
However, while legal in Nebraska, the state does not tax or regulate the machines. Meanwhile, Wyoming oversees and taxes the games at 20%. The latest report from Jan. 2024 shows the terminals brought in just under $478,000 in tax revenue, nearly three times the tax revenue attributed to Wyoming sportsbooks.
The potential legalization in Virginia could be closely monitored in states like Pennsylvania and Kentucky. The latter banned the machines but now faces a legal challenge from Pace-O-Matic and other plaintiffs.
Meanwhile, in November 2023, the Commonwealth Court of Pennsylvania deemed the machines to be skill games, not gambling devices. However, that decision has not cleared skill games’ status in the state. Lawmakers are divided, with some wanting to regulate them, while others looking to ban them. The state’s Supreme Court could intervene as Pennsylvania Attorney General Michelle Henry petitioned the highest court for a skill games appeal.
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