This story was updated at 10:45 a.m. on April 10 to include comments from Danville’s city manager.
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Gov. Glenn Youngkin’s significant amendments to legislation seeking to establish a regulatory framework and tax structure for so-called skill games in Virginia would ban small business from offering the electronic betting machines in some cities, including Roanoke, Bristol, Danville and Martinsville.
Youngkin also wants to allow cities and counties to ban these games in their localities, charge $9,000 for licenses and transfer regulatory power from the Alcoholic Beverage Control Authority to the Virginia Lottery, which would cause a significant delay in making the games legally available after they were first banned in the commonwealth in 2020.
Sen. Aaron Rouse, D-Virginia Beach, the sponsor of SB 212, slammed Gov. Glenn Youngkin’s last-minute amendments to the proposal as “a slap in the face” of thousands of small businesses across the state that have relied on the revenue from the electronic betting machines.
“It is something to be said for where this governor has shown time and time again that he is more interested in bailing out our billionaires than looking out for the interests of small businesses,” Rouse said in a call with reporters Tuesday. “The governor’s brand has been one that is showing to be unwilling to work in a bipartisan effort with members of the General Assembly, and I think this bill illustrates that.”
Youngkin took action on Rouse’s measure just minutes before the constitutionally mandated deadline at 11:59 p.m. Monday, offering a wide slate of changes that the lawmaker lamented as a “complete rewrite” of his original proposal, which had passed in the Senate by a 32-8 bipartisan vote and in the House by 51-45 during the 2024 legislative session.
Rouse said that as the bill’s chief patron, the first that he heard from the administration relating to his proposal was last weekend.
“I would have preferred the governor had vetoed the bill outright instead of trying this slanted-hand technique to where he tries to appear that he has worked alongside members of the General Assembly,” Rouse said.
Youngkin spokesman Christian Martinez said in a text message Tuesday that the governor appreciates “the extensive work done” by the General Assembly on the skill games legislation during this year’s legislative session.
“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.”
And Virginians Against Neighborhood Slot Machines, a coalition that launched an advertising campaign to voice opposition against the legalization of skill games, applauded Youngkin’s effort.
“The General Assembly sent Governor Youngkin a bill that would have led to an unprecedented expansion of gambling in Virginia. While we are still reviewing the proposed changes, we thank the Governor and his team for the extensive amount of time and effort put in to come up with a more thoughtful approach,” the group said in an email.
But Rich Kelly, president of the Virginia Merchants & Amusement Coalition, called Youngkin’s amendments “devastating,” adding that Rouse’s measure would have offered “a lifeline to small businesses” by allowing them to supplement their income and decrease margins with critical new revenue from highly regulated skill games.
“It is clear the governor is more interested in protecting massive out-of-state gambling corporations than the tens of thousands of small businesses struggling to make ends meet here in his own commonwealth,” Kelly said in a statement.
“For weeks, we have all continuously requested to meet with the governor or his team, and he has ignored our pleas. While we are disappointed with the governor and his broken promise, we are trusting the bipartisan coalition of lawmakers who have had our backs throughout this process in hopes of reaching a resolution that supports small business interests.”
While Youngkin didn’t reject the legislation outright, his amendments would make it more difficult and costly for businesses to offer skill games and for patrons to find places where they can play the games.
For example, Youngkin’s proposal prohibits the operation of these games within a certain distance of casinos, horse racing facilities, schools, day care centers and places of worship like churches, mosques and synagogues.
Skill games would be banned within a 35-mile radius of licensed casinos, which Rouse said “knocks out Virginia Beach, Portsmouth and a majority of the state,” including the Hard Rock Hotel & Casino Bristol and the Danville Casino, and other gambling establishments, such as Rosie’s Gaming Emporium, whose locations include Vinton and Collinsville.
Youngkin further wants to limit the number of permits for businesses to operate skill games to 20,000 statewide. Convenience stores would have to purchase a nonrefundable $9,000 license, plus pay $750 per year per electronic gaming device, capped at three per store. Applicants that meet the definition of a truck stop would have to pay a $21,000 licensing fee, with a cap of seven devices.
Anyone with a stake of at least 10% in a convenience store with a license to offer skill games would be subject to a background investigation, including a criminal history records check and fingerprinting.
Youngkin’s amendments also give localities the ability to ban skill games, and it offers local voters the opportunity to seek a ballot referendum by collecting 5,000 signatures or support from at least 2.5% of their locality’s registered voters.
While proponents of a regulatory framework for these games in Virginia have said that the betting machines would benefit small businesses and generate an estimated $200 million in tax revenue for the commonwealth, Youngkin proposes raising the tax from skill games from a proposed 25% to 35%.
“This Republican governor has increased taxes on small businesses,” Rouse said Tuesday. “I don’t know if these are the effects of the full eclipse or not; that to me in itself was very surprising.”
Under Youngkin’s proposal, 75% of the state’s tax revenue would fund public education, while 5% would benefit the Interstate 81 Corridor Improvement Fund.
The General Assembly in 2020 passed legislation banning skill games effective July 1 of that year after some lawmakers expressed concern that the electronic betting machines could pose a threat to the profitability of several planned casinos in the commonwealth.
The devices in question function like slot machines that pay out winnings to players with skill. Unlike games of chance, such as the slot machines at the larger casinos which are considered gambling, skill games have an interactive component. It’s not rare for well-versed players to sometimes win hundreds, if not thousands of dollars.
But after the coronavirus pandemic shuttered thousands of businesses, lawmakers agreed to a one-year reprieve for operations of the electronic skill games. After the expiration of the regulatory oversight by the ABC ended on June 30, 2002, businesses across Virginia have operated skill games in murky legal territory.
That changed in December, when the Supreme Court of Virginia reinstated the state’s ban on slots-like skill machines, overruling a decision by a lower court that had issued a temporary injunction blocking the enforcement of the ban.
In his amended legislation, Youngkin rejected a provision tasking the ABC with regulating skill games on a temporary basis starting July 1. Instead, it hands regulatory power to the Virginia Lottery, which would begin accepting applications on Jan. 1, 2025 — and would have to begin building a regulatory framework from scratch.
Rouse considers any delay a setback for small businesses reliant on revenue from skill game operations.
“Lottery has told us they would need 18 months for the regulatory setup to take over skill games, and one of the compromises that we had worked out in a bipartisan effort was that ABC says they are familiar with skill games — that they would regulate skill games from the start and give Lottery enough time to set up and hand it over,” Rouse said. “It would have allowed our small businesses that are already struggling to have the games turned back on.”
Among the community of small business owners who would be impacted by Youngkin’s amendments, his effort lead to widespread consternation.
Mont Morrow, owner of Community Inn in Roanoke, said his business ran four skill game machines when they were legal and said that they helped with cash flow — especially after the business suffered a fire in 2019 and the pandemic shutdowns followed in 2020.
Morrow said the governor’s proposed 35-mile ban “doesn’t make any sense to me.”
“What they’re doing with these machines, they’re no different than what they’re doing at Rosie’s or down in Danville,” Morrow said. Caesars Virginia has opened a temporary casino in Danville, and the full location is anticipated to be open by the end of this year.
It’s unclear how much potential revenue would be unrealized by localities that would not be allowed to host skill games.
Ryan LaFountain, Roanoke’s commissioner of the revenue, said that when skill game machines were legal, they generated an average of $5,000 to $6,000 annually for the city in tangible property taxes — “In the scheme of the city’s budget, it’s not a substantial amount,” he said.
But, he said, city officials do not have a way to determine how much revenue could be attributed specifically to skill game operations.
Asked whether the city of Roanoke had a position on Youngkin’s proposal, city spokesperson Tracy Lauder said staff had not yet had time to review and discuss it with city council.
Carroll Bell, owner of The Coffee Pot restaurant in Roanoke, said his business ran up to seven skill game machines before the state banned them.
Bell said the machines’ revenue helped pay the bills for The Coffee Pot, which before COVID-19 was open seven days a week for lunch and dinner but has been unable to resume lunch hours since the pandemic.
“I had hoped that Governor Youngkin, who ran on a pro-small business platform, would come through for us, especially after COVID wrecked our businesses,” Bell said.
Bell said he is “extremely disappointed and dismayed” by Youngkin’s proposal limiting where skill games could be operated and said it “seems he has caved in to big business demands.”
“I just really don’t understand the concept of giving Rosie’s and the casinos a noncompete area of a 35-mile radius,” he said.
But Randy Eads, the city manager and city attorney for Bristol, where the state’s first casino, a temporary operation, opened in July 2022, has maintained that skill games are illegal under Virginia code and said he was in the process of sending out letters to the operators asking them to cease operations when a judge extended the injunction on the state’s ban on the machines, which allowed them to continue operating for months.
“I fully support the governor’s amendment to the skill game legislation,” Eads said Tuesday.
And in Danville, City Manager Ken Larking said that the city has tried to limit as much as possible the proliferation of skill games since they started popping up. Because businesses needed a special use permit to offer the betting machines, there weren’t many to begin with, and many of those that existed weren’t fully permitted, which is why the impact of Youngkin’s amendment will be felt less in Danville than in other places, Larking said.
The city tried to limit skill games because they’re very similar to casino games, but without the framework for gambling addiction help, among other things, which led to concerns about the wellbeing of patrons and public safety concerns, Larking said.
One of the reasons the city chose Caesars is because the casino had a framework to address all these concerns. “Certainly, I think our preference would be that they just not be allowed anymore, period. But certainly having the amendment make it so that each locality has to approve whether or not to allow it in a community, I believe was a good provision,” Larking said.
Proponents of a regulated skill games industry in Virginia now have just a little over one week to weigh Youngkin’s amendments, which the General Assembly is set to take up when it reconvenes on April 17. Lawmakers may approve or reject some or all of the governor’s proposed amendments and send the legislation back to his desk.
Staff writers Matt Busse, Susan Cameron and Grace Mamon contributed information to this report.