Virginia: Timing of market expansion proves judicious
Expert Insight published in G3 Magazine, September 2020 and provided by Martin L Kent, President and COO, The United Company

Most forms of gambling are illegal in Virginia except the state run lottery, charitable gaming and horse race wagering. The state led the way in pari-mutuel horse race betting after it was legalised in 1988. There is one racetrack, Colonial Downs, but off track betting is legalised plus the more recent electronic betting terminals (HHR) introduced in 2018 or via simulcast wagering. Meanwhile, sports betting was legalised in April 2020 and is expected to be launched in the state by the end of the year after it became the second state to legalise sportbooks. It will be available exclusively via mobile and online sportbook apps and will be overseen by the state lottery. Sports wagering could generate up to $55m in gaming tax revenues annually.

There are also provisions in the bills to allow for domestic casinos. A vote will be held in the relevant host cities during November’s General Election. Casinos could generate $969m in total net gaming revenue and around $260m in state gaming taxes annually and create around 5,000 total casino jobs.
The State of Emergency was declared on March 12 by Governor Ralph Northam and a stay-at-home order went into effect on March 30. Rules only allowed residents out to care for family, travel to child care facilities, exercise and travel to work. There were three phases to de-escalation. Phase three began on July 1, which included the loosening of restrictions on restaurants and bars, gyms and pools. Virginia showed a peak at the end of May and further mid-July. By August 3 there were 93,106 cases and 2,218 deaths.

Virginia’s tourism office spent a year making a summer marketing campaign only to halt it four days after its launch in March. Their message is now, quite simply: “We’ll be waiting for you.” State tourism revenues topped $26bn in 2018 and it provides $1.8bn to the state in revenues and supports 232,000 jobs and is the sixth largest employer (seven per cent of employment). The state expects to lose up to $16bn this year in visitor spend (a 60 per cent drop).

Unemployment rate reached 11.2 per cent in April and 9.4 per cent in May – 6.6 per cent higher than May 2019. The state’s racetrack Colonial Downs closed its four Rosie’s Gaming Emporium locations in Richmond, Hampton, New Kent County and Vinton on 15 March and didn’t re-open until July 1. There are now temperature checks on entry and face masks required for guests and staff. The gaming area has been re-arranged to provide social distancing and sanitation equipment is in place.

Aaron Gomes, CEO for Colonial Downs Group said in early July: “We have witnessed unprecedented times. We have spent this time planning and preparing to welcome back guests and team members to our facilities. We have studied best practices across the country, consulted with public health officials and put together a thorough and rigorous system of actions and policies that should give our valued guests and team members peace of mind as they return to Rosie’s.”

During lockdown Rosie’s continued to pay staff in April whilst Rosie Kitchens provided 20,000 free ‘grab and go’ meals for community key workers. Rosie’s opened the four venues during 2019 and currently operates a total of 2,250 Horse Racing Machines (HHRs) and simulcast wagering. Colonial Downs track in New Kent County also operates 600 HHR terminals plus another four simulcast only off-track betting locations. Some 36,000 visitors attended live racing events at the track in New Kent County in 2019.

Another two Rosie’s are expected to open in Danville and Dumfries. HHR total wagers April-Oct 2019 was $729.1m with $674.1 in prizes. Pari-mutuel handle was $24.3m with $17.5m in prizes. The track originally opened in 1997 then closed in 2014 and re-opened in April 2019 under new ownership by Colonial Downs Group (division of Peninsula Pacific Entertainment) after the provision of HHR terminals. Revenues via these games not only provides tax revenue but helps fund purses at the track and revitalise the state’s horse industry.

Colonial Downs racetrack was poised to generate $26.1m in state taxes this year, $17.9m in local taxes and $445m in overall economic activity in Virginia. It provides for over 4,200 jobs. Despite closure the first four months of 2020 saw handle from Virginia horseplayers up to $31.6m in total (23 per cent higher last years figures) thanks to its four online betting partner wagering sites.

Meanwhile the legislation of the Sports Betting Bill came effective on July 1 2020 with a hard deadline for September 15 to declare the regulations and begin accepting applications for sports betting permits. The legislation also allows for casinos to be constructed within Virginia’s borders but limited to the certain municipalities. Meanwhile the Virginia Lottery has been in operation for 25 years and helps fund the state’s public schools with lottery games and scratchcards. There are 5,300 retail partners. The lottery remained running during the lockdown period.

John Hagerty, Public Affairs Specialist at Virginia Lottery said: “We saw a sharp drop in sales from mid March to mid April. Then, beginning in mid April we saw sales rebound rather quickly and since then lottery sales have trended back to about where they were prior to the pandemic.”

POST CV19 OUTLOOK - by Martin L Kent 
Legislation authorising casino gaming became law in the Commonwealth of Virginia on July 1 2020. The law requires a multi-step process for up to five cities in Virginia to qualify as and eligible host city (EHC) for a single casino location in their jurisdiction. Those five cities include Norfolk, Portsmouth, Richmond, Danville and Bristol, Virginia. The first formal step of that process involved each EHC seeking pre-certification from the Virginia Lottery (Lottery), the state entity designated by law to oversee casino and other forms of for-profit gaming in the Commonwealth, of their proposed choice of operator of the casino in their jurisdiction.

On July 9 2020, Lottery pre-certified proposed operators in Norfolk, Portsmouth, Danville and Bristol. Those operators include the Pamunkey Indian Tribe, Rush Street Gaming, Caesars Entertainment and Hard Rock International, respectively. The fifth EHC, Richmond, has additional time under the statute to select an operator and seek pre-certification by Lottery of its preferred operator.

Each EHC that has received pre-certification will now seek placing the local referendum on the November 3 2020 ballot. The question asked will be should the specific pre-certified operator be allowed to conduct casino gaming at the site designated in their pre-certification application. Each EHC where the referendum passes will then be eligible to initiate the process for full licensure.

It is anticipated that process will begin as soon as Lottery completes its regulatory promulgation process in early 2021.

While the effects of COVID-19 and other public safety and health emergencies in the Commonwealth have restricted the normal operation of government since the General Assembly approved the gaming measures, work has continued internally and through alternate digital public forums to adhere to the timelines set out in law for the regulation and licensure of for-profit gaming in Virginia.