Wednesday, July 17, 2024

In Rewrite of Skill Game Bill, Youngkin Proposes Tougher Rules on Industry

A row of deactivated Queen of Virginia skill games at a Richmond convenience store no directs patrons to contact state lawmakers to support the legalization effort. (Graham Moomaw/Virginia Mercury)

RICHMOND — Gov. Glenn Youngkin isn’t saying no to the legalization of slots-like skill games in Virginia, but he’s proposing significantly tougher regulations than what the General Assembly approved earlier this year.

An amended bill the governor sent down Monday night would give local citizens the power to ban the machines in their communities, cap the number of machines allowed statewide at 20,000 and prohibit the operation of skill games within a certain distance of casinos, horse racing facilities, schools, daycares and places of worship like churches, mosques and synagogues.

Youngkin spokesman Christian Martinez said the governor “appreciates the extensive work done by the General Assembly on this issue this session.”

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

Youngkin’s proposal drew swift condemnation from Sen. Aaron Rouse, D-Virginia Beach, a skill game supporter who called the governor’s actions “a slap in the face to thousands of Virginia small businesses.”

“My co-sponsors, our bipartisan coalition, and I will work together to make sure the harmful provisions put into place by Governor Youngkin do not advance, and we will do everything possible to make the interests of small businesses – not casinos or massive out-of-state corporations – a priority,” Rouse said in a news release.

A sizable group of convenience store owners, many of them South Asian immigrants, has advocated for the skill game legalization bill, telling lawmakers the extra money they made from hosting the machines was essential to their survival during the COVID-19 pandemic. Though the machines have an aesthetic resemblance to slots, Virginia policymakers have struggled with the question of how to classify them.

Because they require players to interact with the machine more than traditional slots, skill game backers have argued they technically shouldn’t be considered a form of gambling. Virginia experts on gambling addiction have disputed that claim, saying call data to the state’s problem gambling hotline shows people can get hooked on the machines just like traditional slots.

Pace-O-Matic, a Georgia-based skill game company that has made well over $1 million in campaign donations to Virginia politicians since 2018, has also lobbied for the legalization bill in Virginia.

The General Assembly will take up Youngkin’s amended bill on April 17, when lawmakers return to Richmond to act on the governor’s vetoes and recommendations for bills passed in the legislative session that concluded March 9. If the General Assembly votes down some or all of the skill game amendments, Youngkin could then sign or veto the bill returned to him. If no bill passes, skill games would be outlawed in Virginia under a ban lawmakers first passed in 2020.

Youngkin’s version also slows down the regulatory process for allowing the machines to be turned back on, after a Supreme Court of Virginia decision forced them to be deactivated late last year. Instead of having the Virginia Alcoholic Beverage Control Authority oversee the machines on a temporary basis starting July 1, Youngkin’s amendments give regulatory power to the Virginia Lottery.

The Lottery would begin accepting applications on Jan. 1 of 2025, but skill game licenses wouldn’t take effect until the Lottery has put in place a “real time central accounting system” giving state officials more direct insight into how the machines work and how much money they’re making. The Lottery would also be tasked with setting up mechanisms for verifying “age and identity” before a player can use the machines, a system that would presumably block anyone under 21 from playing and exclude people with gambling problems who want to ban themselves from spending money on skill games.

Youngkin also suggested bumping the tax rate on the machines to 35%, up from 25% in the bill approved by the legislature. In the governor’s plan, truck stops could have no more than seven machines instead of the 10 envisioned by the legislature. Convenience stores and gas stations would be limited to three, down from four in the bill sent to the governor.

Youngkin’s proposal states that host locations for skill games must be licensed to sell lottery tickets, a departure from the original bill that authorized restaurants and sports bars to host machines if they had a retail ABC license.

In perhaps the most significant change, Youngkin’s amendments give city and county governments the ability to ban skill games in their jurisdictions. If a city council or county board chooses not to act, local voters would have the ability to initiate a ballot referendum by collecting 5,000 petition signatures or support from at least 2.5% of their locality’s registered voters.

It’s unclear how many Virginia localities might adopt anti-skill game positions. The bill approved by the General Assembly would have authorized the machines statewide, with no ability for local decision-making.

The location-based restrictions could also be a headache for the skill game industry, which has repeatedly accused the casino industry of trying to stymie competition from skill games “to protect casino profits. Representatives for Virginia casinos and the Rosie’s horse racing franchise operated by Churchill Downs opposed the skill game bill, arguing their bigger gambling facilities came with more capital investment and job creation that could be threatened if every neighborhood convenience store is allowed to have slot machine lookalikes. A casino-funded group called Virginians Against Neighborhood Slot Machines has run an intensive advocacy campaign against the skill game bill.

Youngkin’s amended bill would prohibit skill games within 35 miles of a licensed casino or Rosie’s horse racing facility, which mostly feature electronic machines that also resemble slots but are powered by an archive of past horse races.

After Virginia legalized casinos in certain areas in 2020, casinos are now up and running in Bristol, Danville and Portsmouth with two more being planned in Norfolk and Petersburg.

In addition to the Colonial Downs horse track in New Kent County, there are Rosie’s locations in the cities of Richmond, Hampton and Emporia as well as the town of Vinton in Roanoke County and the town of Dumfries in Prince William County.

The 35-mile radius around all those facilities would put a significant portion of Virginia’s map off limits for skill games, notwithstanding any other local efforts to ban the machines.

The Virginia Merchants and Amusements Coalition, a group of business owners advocating for the skill game bill alongside Pace-O-Matic, called the governor’s amendments “devastating.”

“In another effort to protect out-of-state gambling interests, he effectively banned skill games by banning skill games within a 35-mile radius of all gaming establishments,” said the group’s President Rich Kelly, the owner of Hard Times Cafe.

Youngkin’s amendments require skill games to have a payout percentage of at least 80% in cumulative “monthly pays,” a rule meant to give players a minimally fair shake at winning money. Traditional casino slot machines in Virginia are supposed to have a payout percentage above 84%. Though the skill game industry insists talented players can win every time they play because the machines involve skills like spotting patterns and memorizing sequences, a 2022 state study concluded skill games have a lower payout percentage (77%) than other types of electronic gambling based on chance.

The amended bill from Youngkin also instructs the Lottery to come up with rules meant to promote security and deter crime at businesses that host skill games.

Del. Paul Krizek, D-Fairfax, who tried to add stricter regulations to the skill game bill on its way through the General Assembly with mixed results, said he’s still reviewing Youngkin’s amendments but sees them as “favorable.”

“This is a major policy change for the commonwealth and it implements it in a reasonable way under the right regulatory body, while still allowing for these small businesses to generate revenue from up to three games in their establishments,” Krizek said.

Virginia Mercury is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Virginia Mercury maintains editorial independence. Contact Editor Samantha Willis for questions: info@virginiamercury.com. Follow Virginia Mercury on Facebook and Twitter.

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