Future of skill games in Virginia still unclear as Senate rejects Youngkin’s proposal

The fate of slots-like skill games in Virginia convenience stores and truck stops remained in limbo Wednesday as the state Senate voted to reject Gov. Glenn Youngkin’s sweeping changes to a proposal to legalize and tax the gambling machines.

The Senate voted 34-6 to reject the governor’s tougher amendments to the bill, sending the legislation back to Youngkin in its original form.

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The bipartisan move raises the risk Youngkin could veto the legislation, an outcome that would leave skill games prohibited throughout Virginia by a ban enacted under former Gov. Ralph Northam. But lawmakers also announced Wednesday that they’re planning a special session later this spring to reach a deal on the state budget, creating an opening to reconsider the skill game issue over the next few weeks.

“I recognize that this bill faces an uncertain future if it goes back to the governor’s desk,” said Sen. Aaron Rouse, D-Virginia Beach, the bill’s lead sponsor in the Senate. “But… I stand with small businesses in every corner of our commonwealth urging the governor to do right by small businesses and sign this bill.”

Virginia’s skill game ban — which was passed in 2020 but didn’t take effect until 2021 after lawmakers gave the industry a one-year grace period due to COVID-19 — was suspended for nearly two years as the skill game industry fought it in court. The Supreme Court of Virginia reinstated it late last year, rendering the machines illegal and prompting the industry to launch a new lobbying push to change the law.

Things appeared to be going well for skill game supporters until the bill got to Youngkin, who had signaled in February that he had “serious concerns” with the proposal. Last week, the governor unveiled amendments that would impose a higher tax rate on the machines, more regulatory safeguards and strict geographic limits that would effectively ban the machines in most of the state’s metro areas. 

The governor wanted a 35% tax rate on the machines, while the General Assembly approved a 25% tax rate. Skill game supporters claim Youngkin’s amendments would create a tax rate of up to 45%, but the administration has said that’s a misread of the bill and the suggested rate is indeed 35%.

In a statement Wednesday evening, Youngkin’s office reiterated its qualms about the legislation while indicating the governor is open to revisiting the geographic limits skill game backers took issue with.

“The governor’s concerns with the bill remain and his amendments addressed those concerns,” said Youngkin spokesman Christian Martinez. “He is open to continuing discussion to alleviate issues with both perimeter provisions.”

Proponents of legalizing skill games have portrayed it as a matter of fairness, arguing that since Virginia has legalized numerous other types of gambling there’s no reason the machines that generate revenue for small business owners should be treated more harshly. Opponents of the bill say the state shouldn’t allow a gambling free-for-all or reward businesses that exploited a legal loophole to profit from gambling machines that have been unregulated and untaxed for most of their existence in Virginia.

The Senate appeared to consider a second vote on the skill game bill to preemptively override a potential veto. But the body didn’t follow through on that effort, which would have required two-thirds votes in both legislative chambers. The House of Delegates, which had approved the skill game bill by a narrow 51-45 margin, didn’t take up the skill game bill Wednesday. Because the bill originated in the Senate, the Senate’s decision to reject Youngkin’s amendments sent the bill straight back to the governor.

The policy specifics of what the governor recommended drew little discussion in the Senate, which completed its action on the skill game bill Wednesday in about five minutes.

Rouse, the only senator who spoke on the bill, said the “most egregious” elements in Youngkin’s proposal were the geographic limitations that would outlaw the machines in the state’s most populous regions. Youngkin’s version of the bill would have prohibited skill games within 35 miles of licensed casinos and Rosie’s facilities affiliated with the Colonial Downs horse racing track. The governor also suggested banning skill games within 2,500 feet of schools, day cares and places of worship.

In a seemingly less controversial amendment, Youngkin proposed giving cities and counties the ability to ban skill games locally. The bill sent to him had no provisions for local control, legalizing the machines statewide with no ability for communities to opt out.

The governor had also suggested tougher regulations requiring the industry to verify the identity of players before they put money into the machines, a system that could help prevent minors and people seeking help for gambling addiction from playing skill games. The bill the legislature passed also bars people under 21 from playing and has provisions for gambling addiction, but was less clear on how those rules would be enforced since skill games aren’t as closely supervised as slot machines on a casino floor.

Del. Paul Krizek, D-Fairfax, a skill game critic who has pushed for tougher regulations on the industry, said the legislature could have avoided a veto by rejecting the 35-mile rule while leaving the rest of Youngkin’s suggestions.

“I’m a big believer that half a loaf is better than no loaf,” Krizek said. “I’m sure there’s things that the governor could meet them halfway on.”

A large group of convenience store owners gathered at the Capitol Wednesday morning to applaud lawmakers seen as skill game allies and criticize Youngkin for amendments they felt were overly harsh and not in tune with reality.

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Munir Rassiwala, who owns several convenience stores around Virginia, said he voted for Youngkin but was disappointed the governor seemed to think protecting the investments casinos have made is more important than helping smaller entrepreneurs like him.

“There should be a compromise,” he said. “There are lives at stake.”

Sen. Bill Stanley, R-Franklin, a skill game supporter, encouraged the crowd to keep up the fight.

“Hopefully cooler heads prevail both in the governor’s office and here in the legislature,’ said Stanley, a lawyer who has done work for Pace-O-Matic, a major skill game company lobbying for the legalization bill. “I think ultimately a solution for the budget and for skill games is in the works.”

Virginians Against Neighborhood Slot Machines, an anti-skill game advocacy group funded by casinos, urged Youngkin to veto the bill.

“That is the only course of action to ensure public safety, protect vulnerable communities and to prevent every neighborhood in Virginia from becoming a mini-Las Vegas,” the group said in a statement. “It should tell Virginians everything they need to know that ‘skill games’ proponents threw a tantrum at the mere prospect of modest regulatory protections.”