Revolutionary New Casino and Sports Betting Laws Create Prime Opportunities for Virginia Gaming Industry
The gaming industry may be focused elsewhere due to the pandemic closing, but in the midst of the recovery, the newest entrant to legalized sports betting deserves a closer look. Virginia’s casino and sports betting laws create fertile ground for casinos and sports betting operators alike, providing licenses for up to five casino operators and permits for at least four and as many as 12 non-casino online sports betting operators.
On April 22, 2020, the Virginia General Assembly enacted into law two revolutionary bills that legalize the operation of casinos (the “Casino Gaming Law”) and sports betting (the “Sports Betting Law”) in the commonwealth for the first time. The Casino Gaming and Sports Betting Laws establish the Virginia Lottery Board (the “Board”), which will consist of seven appointed members to serve five-year terms.
Under the laws, the Virginia Lottery must draft and enact regulations to govern gambling in Virginia, and the Board must approve the final regulations under the Casino Gaming Law by April 6, 2021. Regulations under the Sports Betting Law must be approved by September 15, 2020.
The Casino Gaming Law permits casinos in five cities in Virginia: Norfolk, Bristol, Richmond, Danville, and Portsmouth. These cities are required to hold a referendum at the November 2020 election on whether to allow casino gaming in their city. If the referendum is successful, the Casino Gaming Law permits all typical casino games, including but not limited to blackjack, poker, craps, roulette, and slot machines.
While many of the specific regulations are still to come, the Casino Gaming Law provides the following details regarding the issuance of a casino gaming operation license:
- The license will be valid for 10 years;
- The Board will issue one license per city;
- Upon issuance (or transfer) of the license, the operator will pay a $15 million fee;
- The license applicant must make a capital investment of at least $300 million in a casino gaming establishment (includes the value of real property upon which the establishment is located) and possess at least a 20 percent equity interest in the casino gaming establishment;
- Criteria for granting a license include the applicant’s capital investment and financial health, experience, security plans for the casino, economic development value and potential for community reinvestment and redevelopment, and status as a minority-owned business;
- Background investigation fees for each of the licensees’ principals will be $50,000, plus “reasonable costs” of the investigation that exceed $50,000; and
- License renewal fees have yet to be determined and will be addressed by the regulations to come from the Board.
Casino revenues will be taxed as follows:
- 18 percent on the first $200 million of its adjusted gross receipts;
- 23 percent on its adjusted gross receipts exceeding $200 million but not exceeding $400 million; and
- 30 percent on its adjusted gross receipts exceeding $400 million.
The following are noteworthy dates for entities with an interest in applying for a casino gaming operator license:
- June 1, 2020. The Virginia Lottery began accepting documentation from entities interested in becoming casino operators, with many casinos already securing bids with the eligible host cities. Danville has selected Caesars Entertainment as its proposed operator; Portsmouth has selected Rush Street Gaming; and Norfolk has selected the Pamunkey Indian Tribe.
- July 15, 2020. The Board will have a meeting to determine whether these entities are preliminarily approved.
- August 14, 2020. Deadline for an eligible host city to order a referendum on the question of whether it will permit casino gaming in its city.
- November 3, 2020 (Election Day). If a referendum was ordered, residents will vote to approve or deny the referendum. If the referendum passes, the eligible host city has 30 days to certify its preferred casino gaming operator with the Virginia Lottery. The Virginia Lottery will develop guidelines establishing procedures and criteria for conducting this preliminary review.
Only applicants that were given preliminary approval by the Virginia Lottery and certified by the eligible host city can submit documentation for licensure. The Board will decide regarding the operator’s license within 12 months of receipt of a completed application.
In conjunction with the Casino Gaming Law, Virginia’s Sports Betting Law legalizes online sports betting in Virginia. Sports Betting Operator Permits will allow operators to facilitate wagers via Internet or mobile platforms.
A Sports Betting Operator Permit will:
- Be valid for three years;
- Cost $250,000 to apply, with an additional $250,000 fee if the application is approved;
- Cost $50,000 for the background investigation for each principal, plus any “reasonable costs” of the investigation that exceed $50,000;
- Have a license renewal fee of $200,000; and
- The Virginia Lottery Director will decide on applications for a Sports Betting Operator Permit within 90 days of receipt. Criteria will include past experience, financial viability, compliance with applicable laws, success with sports betting operations in other states, and the presence of minority investors.
The Virginia Lottery will impose a monthly 15 percent tax on adjusted gross revenue but permits license holders to carry over and deduct net losses for up to 12 months.
Sports betting includes single-game bets, teaser bets, parlays, over-under, moneyline, pools, exchange wagering, in-game wagering, in-play bets, proposition bets, and straight bets. The law does specifically prohibit bets on youth sports, proposition bets on college sports and bets on Virginia college sports.
The Sports Betting Law mandates the Virginia Lottery award permits to no less than four and up to 12 sports betting operators. The Virginia Lottery Director, however, will give “substantial and preferred consideration” to permit applications from major league sports franchises as well as certain casinos, which is likely to leave less than 10 permits for the purely online sports betting operators.
Due to the need for the Virginia Lottery to draft and issue relevant regulations prior to accepting permit applications from sports betting operators, the Virginia Lottery advises that sports betting will not be available before mid to late December 2020, but, due to COVID-19 related delays, that date may be pushed to 2021. In any case, the Virginia Lottery is operating under the following proposed schedule:
- July 15, 2020. The Board will hold a public meeting to promulgate draft sports betting regulations. The regulations will undergo a public comment period of at least 30 days.
- September 15, 2020. Deadline for final approval of the regulations by the Board.
- Late September 2020. The Virginia Lottery will begin accepting applications for sports betting permits. The Virginia Lottery will determinations on permits within 90 days of receipt of a completed application.
The Virginia Lottery has not disclosed interested sports bettering operators, but Virginia’s low tax rate and application fee is likely to attract a multitude of national players like FanDuel, William Hill, and DraftKings as well as smaller operators that have a great opportunity to grow in a limited market.
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