Luck likely running out for games of skill

February 25, 2020

Legislation prohibiting the use of “games of skill” is headed towards passage by both the House and Senate. HB 881 (Bulova) / SB 971 (Howell) specifically define games of skill and add them to the category of illegal gambling prohibited in code. The progress of these bills reflects the will of the General Assembly to enforce a ban on the games instead of pursing other revenue generating options involving legalization. This is mainly driven by concerns that the games are not well-regulated and having an adverse impact on Lottery revenues, which in turn reduces flexible funding provided to localities for K-12 public education.

Games of skill, also known as regulated electronic gaming devices or “grey machines” are currently found throughout the Commonwealth, often in bars, convenience stores, gas stations, and restaurants. The term grey machines refer to the notion that these machines operate in a grey area of the law; it is currently unclear whether they are legal. These games typically operate in a manner like an electric slot machine and typically rely on a player’s memory to influence the outcome of a wager. Advocates of the games contend that the ability of players to alter the outcome of a particular “spin” differentiates grey machines from gambling based on chance, which is currently illegal in Virginia. There is currently no licensing requirement, regulation, or taxation of grey machine gaming revenue.

According to a November 2019 report from JLARC on Gaming in the Commonwealth, JLAC staff estimate that more than 9,000 grey machines are in operation currently and could generate annual statewide revenue estimated between $83 million and $468 million. This revenue not only goes untaxed, but also is likely depressing revenues from authorized gaming such as the Lottery. This is important to localities as Lottery revenues are distributed on a per-pupil basis to local school divisions to supplement the costs of K-12 education. In FY 2018, this amounted to $606 million.

At the start of the 2020 General Assembly session, several bills were introduced to either regulate and tax grey machines, or to ban them outright. HB 1589 (Bagby) and SB 909 (Norment) among others, would have provided a regulatory and taxing framework, had they not been left in the House General Laws Committee and incorporate into SB 971 respectively. However, the General Assembly may wish to revisit this issue in future sessions and if/when a ban on grey machines has time to take effect.

HB 881 was reported from the Senate Finance and Appropriations Committee with an amendment 12-3. SB 971 passed the House 69-29-1.

VACo Contact: Jeremy R. Bennett

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