unregulated machines

Unregulated gaming machines are shown in Roanoke.

RICHMOND — Thousands of electronic “skill” games would disappear from restaurants, truck stops and retail stores across Virginia on July 1 under legislation the House of Delegates and a Senate committee adopted by wide margins Wednesday.

The House voted 80-15 to approve HB 881, proposed by General Laws Committee Chairman David Bulova, D-Fairfax.

The Senate Finance and Appropriations Committee voted 14-2 to pass SB 881, proposed by Finance Chairwoman Janet Howell, D-Fairfax, and Senate Minority Leader Tommy Norment, R-James City.

The votes represent a potentially devastating setback for companies that have installed, by one count, more than 9,000 machines that the industry contends are legal under current state law because they operate by skill, not chance.

The Virginia Lottery contends that it stands to lose $140 million in sales and $40 million in profits in this fiscal year because of direct competition from skill games in almost 2,000 lottery outlets.

Queen of Virginia Skill & Entertainment alone has installed 7,500 of the video gaming machines in about 2,500 retail outlets across the state.

“We’re terribly disappointed with the vote,” Queen of Virginia lobbyist Tom Lisk said after the Senate committee action.

“It’s going to hurt thousands of small businesses — restaurants and convenience stores — that have been benefiting financially from using these games in their establishments.”

Lisk said the company could take legal action if the assembly approves a ban and Gov. Ralph Northam signs the legislation.

“We’re certainly going to look at our options,” he said.

He called the proposed ban ironic because the General Assembly is preparing to potentially legalize casino gaming in five Virginia cities, allow regulated betting on professional and at least some college sporting events, and allow the lottery to sell its game tickets over the internet.

Norment cited the sudden “convergence” of new gaming proposals as further reason to prohibit electronic gaming devices that might be incompatible with other gaming options, such as casinos.

“They have been detrimental to the lottery,” he concluded.

The finance committee later approved legislation to legalize betting on professional and collegiate sports, despite concerns about lack of protections for professional athletes from pressure to alter their performance for gaming interests.

It also approved legislation to allow the lottery to sell tickets online. The House later advanced a similar measure that Bulova had proposed.

The proposed ban on electronic skill games represents a sharp turn of fortune for Queen of Virginia and other game vendors.

The General Assembly appeared poised to regulate and tax the machines when it convened last month, and Northam endorsed one proposal that would have regulated and taxed the gaming revenues at a 35% rate.

However, that bill died in a House of Delegates committee after slot machine companies pushed to allow full competition for retail video gaming.

Northam spokeswoman Alena Yarmosky said the governor “is carefully monitoring the legislation moving through the General Assembly.”

“While the General Assembly continues to debate this issue, any legislative action must address school funding,” Yarmosky said. “The governor has made it clear that taking money away from schools is unacceptable.”

Queen of Virginia, based in Henrico County and owned by Georgia-based Pace-O-Matic, estimates the games could generate up to $300 million a year under a regulatory and tax structure the company has advocated for its industry.

“While we understand and share the legislature’s concern with the proliferation and operation of illegal slot machines, we believe the better solution would be to regulate and tax the skill game industry,” Pace-O-Matic said in a statement on Wednesday.

“Regulation and taxation of the skill game industry will protect Virginia jobs, eliminate the proliferation of illegal slot machines and provide hundreds of millions of dollars to the commonwealth in additional tax revenue.”

The company also faulted the assembly for preparing to “legalize casino gaming backed by big out-of-state corporations. Legislators are currently putting the interests of Las Vegas casino owners over Virginia small business owners.”

Casino lobbyists said they had been more concerned about another proposal, which a Senate committee killed on Wednesday, that would have allowed video gaming terminals — slot machines — to compete in retail establishments.

A coalition of slot-machine companies, led by Las Vegas-based Golden Entertainment, pushed for broader competition, but also supported the ban to “level set” the playing field for gaming rivals, said their lobbyist, Steve Baril.

Sen. Frank Ruff, R-Mecklenburg, and Sen. Jill Vogel, R-Fauquier, voted against the ban, which Ruff hopes to amend on the Senate floor to exempt truck stops.

Queen of Virginia vowed to continue the fight for regulating the machines instead of banning them.

“It’s certainly a dark hour for us,” Lisk said, “but we don’t think the battle is over yet.”

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