Lawsuit Challenging Virginia's Skill-Game Ban Delayed Until Spring 2023

December 7, 2022
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A state court judge has declined to dismiss a lawsuit claiming Virginia’s 2021 ban on so-called skill-game machines violates free speech, and due to a state senator’s involvement in the case, it will not go to trial until April or May.

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A state court judge has declined to dismiss a lawsuit claiming Virginia’s 2021 ban on so-called skill-game machines violates free speech, and due to a state senator’s involvement in the case, it will not go to trial until April or May.

At a hearing on Monday (December 5), Greenville County Circuit Court Judge Louis Lerner also rejected an argument that the General Assembly violated the Virginia Constitution by adding legislation to the most recent state budget that reinforced the illegality of the unregulated gaming machines.

The result of Lerner’s decision is that an injunction against a ban first imposed in 2021 will be extended until the trial, allowing an estimated 14,000 unregulated and untaxed skill machines to continue operating in Virginia until after the state's 2023 legislative session.

The General Assembly and former Democratic Governor Ralph Northam attempted to ban the machines in the 2021 session.

But a legal challenge brought by Republican Senator Bill Stanley and lawyers for skill-game company Queen of Virginia has delayed enforcement of the ban.

The plaintiff in the lawsuit is Hermie Sadler, a former NASCAR driver who owns a truck stop in rural Virginia, near the Tennessee border, that has benefited financially from the machines.

“We anticipate the final court decision will uphold the legality of skill games in the commonwealth,” said Michael Barley, spokesman for Pace-O-Matic, parent company of skill game provider Queen of Virginia.

“However, without further regulation and additional taxation, taxpayers are missing out on nearly $100m in tax revenue that could have gone toward critical projects along with curbing illegal games that are proliferating in Virginia communities.”

Attorneys for the state of Virginia were unavailable for comment on Tuesday (December 6).

In his ruling to allow the free-speech argument to move forward, Lerner referenced a quote from First Amendment scholar and dean of the Vermont law school Rodney Smolla, who said “the Commonwealth does not control the free speech clause. The free speech clause controls the Commonwealth.”

The Virginia Mercury reported that Smolla was hired to argue that skill-games are designed to mimic slot machines and have the same First Amendment protections as other video games. The games are also referred to as “grey machines” because they operate in the grey area of state gaming law.

The case was supposed to be heard in May but was delayed until November to allow the General Assembly to deal with the ban through the state budget. Lerner then delayed a trial in the case on Monday until April or May.

The 2023 legislative session will convene on January 11, 2023. Stanley’s status as a sitting lawmaker comes with the privilege of letting him postpone court dates when the legislature is in session in Richmond.

Skill games generated nearly $140m in tax revenue for the Virginia coronavirus relief fund and local municipalities under a temporary registration program that was in place from July 1, 2020, until July 1, 2021, when the ban took effect. After the law allowing the games expired, Sadler went to court and won an injunction in December 2021 to allow the games to continue to operate pending the outcome of his appeal.

The state's 2022 budget law included new statutory language to tighten prohibitions on skill game machines.

During the injunction, Virginia is not collecting tax revenue on the gaming devices that are found in bars, convenience stores and gas stations across the state.

Barley of Pace-O-Matic stressed that the games can still contribute within the current economic environment.

“If these games were important enough to support small businesses during COVID, they certainly are important now with the economic slowdown and should be allowed to continue operating in a regulated market today and in the future,” Barley said.

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