Virginia Governor Proposes Stricter Regulations On Skill-Game Industry

April 10, 2024
Republican Governor Glenn Youngkin has amended a bill that regulates and taxes skill games in Virginia, adding stricter regulations than the measure the General Assembly approved prior to adjourning last month.

Republican Governor Glenn Youngkin has amended a bill that regulates and taxes skill games in Virginia, adding stricter regulations than the measure the General Assembly approved prior to adjourning last month.

Youngkin sent the 76-page amended bill to the legislature on Monday (April 8) with proposed amendments that would cap the number of machines allowed in Virginia at 20,000, raise the tax rate to 35 percent, allow cities to ban the machines, and require that host locations sell lottery tickets.

“The governor appreciates the extensive work done by the General Assembly on this issue this session,” Christian Martinez, Governor Youngkin’s press secretary, said in a statement Tuesday.

The General Assembly will now consider the changes proposed to Senate Bill 212 when lawmakers return to Richmond on April 17 to act on the governor’s vetoes and recommendations for bills passed in the legislative session that ended March 9.

If the General Assembly votes against some or all of the amendments, Youngkin’s options are to sign or veto the bill. Youngkin had until Monday at 11:59pm to decide whether to sign a bill, issue a veto or return it to the legislature with amendments. 

“During the bill review period, the governor and his team have met with dozens of members and outside stakeholders on the bill,” Martinez said.

“His proposed amendments represent necessary changes and the added protections to the legislation address his serious concerns with the regulatory structure, tax rates, the number of machines, impact on the Virginia Lottery and broader public safety implications of the proposal.”

If no bill passes, skill games would remain illegal in the state after the Virginia Supreme Court reinstated a ban in October that lawmakers first approved in 2020.

Youngkin’s significant rewrite of SB 212 eliminates the legislature's approved language to give the Virginia Alcoholic Beverage Control Authority (ABC) temporary oversight of skill games beginning on July 1. His amendments will instead give regulatory oversight to the Virginia Lottery and set a limit of 20,000 terminals in total to protect the lottery’s retail operations.

Currently, there are an estimated 9,000 to 14,000 unregulated gaming machines in convenience stores and other retail locations that have been unplugged after the Virginia Supreme Court in October reinstated a ban on the terminals.

Senator Aaron Rouse, a Democrat who introduced Senate Bill 212, described Youngkin’s amendments as “a slap in the face to thousands of Virginia small businesses in every corner of our commonwealth.”

“Governor Youngkin’s action on the bill demonstrates why he has failed to produce a single bipartisan deal this session,” Rouse said in a statement posted on X, formerly Twitter. 

“I am disappointed that after having this bill on his desk for nearly a month, Governor Youngkin waited until this past Saturday to meaningfully engage with us, refusing to bring stakeholders, small business owners and those impacted by this legislation to the table for a discussion,” Rouse added.

Youngkin’s proposal also requires that skill-game locations must be licensed to sell lottery tickets, which is different from the original bill that required convenience stores and restaurants to have a retail ABC license.

The governor also restored the ability of cities and counties to ban skill games in their jurisdictions. If a city council or county does not act, local voters would have the ability to initiate a ballot referendum by collecting 5,000 signatures from at least 2.5 percent of local registered voters.

The bill approved by the General Assembly would have authorized skill games throughout the state, with no ability for local governments to ban the machines.

Youngkin also proposes to restrict locations within 35 miles of any licensed casino, racetrack, or Rosie’s historic horseracing (HHR) facility. Churchill Downs owns Colonial Downs Racetrack and Rosie’s locations in Virginia.

“We think the proposed amendments are viewed as mitigating potential problem gaming issues from skill-based games, as raising more taxes than the prior version,” said Barry Jonas, an analyst with Truist Securities.

“From a Churchill Downs perspective, we believe clear cap limits and location restrictions should limit new skill-games supply risks, and therefore help Churchill Downs Rosie’s HHR facilities,” Jonas wrote in a research note Tuesday.

The governor’s proposal also increases the tax rate from 25 to 35 percent, while reducing the number of skill games from four to three at licensed locations and from ten to seven at truck stops.

In addition to the skill-games bill, Youngkin amended Senate Bill 628 to make Petersburg the fifth city in Virginia eligible to host a casino.

The governor specifically removed the re-enactment clause added by the House that would require the bill to be required to pass the General Assembly a second time before it would take effect.

Both the House of Delegates and Senate already approved SB 628 during the 2024 session.

Among the bills signed by Youngkin were House Bill 525, which amends the state’s 2020 casino law to prohibit any eligible city where a referendum fails to hold another referendum for three years from the date of the last failed vote.

Youngkin also signed Senate Bill 541, which is identical to House Bill 1131, that simply removes Richmond as an eligible city to host a casino, but without designating Petersburg in its place. 

The measure was introduced after Richmond voters defeated a casino referendum in November for a second time. Voters previously rejected a casino in 2021.

Senate Bill 628 would add Petersburg to the list of eligible cities and give the city the ability to hold a ballot referendum asking local voters to approve a casino.

In 2020, Virginia lawmakers approved legislation allowing five casinos to be built in the state if the projects first secured voter approval. Casinos in Bristol, Portsmouth and Danville have already opened, with a fourth in Norfolk still in development and construction set to begin this year.

Another bill signed by Youngkin was Senate Bill 397, which requires licensed lottery retailers and casinos to display a sign with the state tip line and website for illegal gaming. The tip line will be administered by the Office of the Gaming Enforcement Coordinator with the state police. 

Meanwhile, Youngkin also signed Senate Bill 540, which is identical to House Bill 991, a one-page bill that allows data centers located in Virginia to host lottery games that are authorized in other states. 

All bills go into effect on July 1.

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