Legislation to legalize, tax skill games in Virginia heads to governor

RICHMOND, Va. — Virginia lawmakers on Friday passed legislation that would legalize games of skill, the slot machines that were prevalent in businesses across the state before an on-again, off-again ban went into effect.

If signed by GOP Gov. Glenn Youngkin, the bill would tax and regulate the devices, known as gray machines because of the murky area of ​​law in which they previously operated.

The legislation was supported by a well-organized coalition that included skill game developer Pace-O-Matic and business owners who organized the games and shared in their profits. Even critics said they were moved by the testimonies of the business owners, many of them first-generation Americans, who said the machines had been a lifeline for their establishments, especially during the pandemic.

“For years, thousands of small businesses across the Commonwealth have come to rely on the additional, sustainable revenue from skill games. This win will solidify their presence in Virginia and give thousands of small business owners peace of mind knowing they can keep their doors open, create jobs and support their local communities,” said Rich Kelly, a restaurateur and president of the Virginia Merchants and Entertainment. Coalition, which was formed to advocate for legalization of the machines.

The arcade-style games, which other states are also struggling with, are similar to slot machines but involve an element of skill, according to their manufacturers.

Opponents of legalizing it said it would mean a massive expansion of gambling in Virginia, which they say could harm children, low-income people and those struggling with gambling addiction.

Legalization has also been opposed by other players in the gambling industry, including casinos, which have donated generously to Virginia lawmakers in recent years, as has Pace-O-Matic.

“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, safety or problem gambling regulation requirements,” Virginians Against Neighborhood Slot Machines, a group formed to lobby against the legislation, a statement said.

The legislation, introduced after a similar effort failed last year, would limit the number of games allowed in each ABC-licensed store to four; Ten machines would be allowed at truck stops. That’s closer to the five- and 10-machine limits in the original industry-backed bill than some stricter versions of the legislation as it went through the process.

Receipts from the machines would be taxed at a rate of 25%, higher than the 15% on the original invoice.

Under the legislation, localities would not have the power to ban the machines or hold a referendum on whether to allow them, a local control option that opponents had sought.

During a speech in the House of Representatives, Del. Barry Knight, a Republican from Virginia Beach, insisted that places where the General Assembly has allowed casinos would first have to hold a referendum to approve the projects.

“What I like to see is a level playing field,” he said.

The bill requires players to be 21 or older, although it does not require a verification method like a player card that some proponents called for. Someone who allows an underage player to gamble can be charged with a crime.

The state’s ABC Authority would initially regulate the machines, then the Lottery would take over.

The legislation requires skill gaming machines to include an “accounting system” operated by the state to ensure regulatory oversight of accurate revenue and tax collection.

The legislation the General Assembly passed Friday was the product of a conference committee, a small group of lawmakers who met privately to hammer out a deal after the two chambers passed competing versions.

“It’s a real compromise,” said Republican Del. Terry Kilgore, one of the lawmakers who helped draft it.

The bill, sponsored by Democratic Sen. Aaron Rouse of Virginia Beach, passed with relatively limited debate. The Senate voted 31-9, and the House of Representatives voted 49-43.

Youngkin’s press office, which previously told the Virginia Mercury that it had “serious concerns” about previous versions of the bill, did not immediately respond to a request for comment Friday.

The debate over games of skill is a rare issue that isn’t divided along partisan lines, and lawmakers have been working on it for years.

A 2019 state report said Virginia, like other states, was struggling with the “rapid spread” of the machines, which at the time were not “specifically permitted or prohibited” and were not taxed or regulated.

The General Assembly voted to ban them in 2020 because they paved the way for casinos for the first time.

But skill game operators were given a one-year reprieve after then-Gov. Ralph Northam, a Democrat, asked lawmakers to delay the ban’s enactment and instead tax the machines and use the revenue for COVID-19 relief. The ban came into effect in July 2021.

A legal appeal was filed, and in December 2021, a Virginia judge issued an injunction blocking enforcement.

Last fall, the Virginia Supreme Court lifted the order, meaning the machines had to be turned off again.