Virginia Legislature Passes Casino Gaming and Sports Betting Bills
Insight provided by CJ Fisher, Partner and Robert Baldassarre, Associate, with Fox Rothschild

As the saying goes, “Virginia is for Lovers”, but as of late April 2020, Virginia is also for casino gaming and sports betting. On April 22, 2020, Virginia’s Legislature voted in favor of a bill that would bring casino gaming to the Commonwealth, particularly to five eligible cities. In addition to the new casino gaming legislation, the Virginia Legislature also approved a bill legalizing online/mobile sports betting.

Casino Gaming
The casino gaming legislation provides the Virginia Lottery Board with control over all casino gaming in Virginia, which is limited to five (5) eligible host cities that meet certain criteria. The cities that meet the requirements are Bristol, Danville, Portsmouth, Richmond and Norfolk. The citizens of each city must approve having a casino by public referendum, which is expected to occur during the presidential election on November 3, 2020.

The board is permitted to issue a single operator’s license for each eligible host city. Prior to scheduling the required referendum, each eligible host city must submit its preferred casino gaming operator for review. Upon a successful preliminary review, the Virginia Lottery will certify approval for the eligible host city to proceed with the required referendum.

If the required referendum passes in an eligible host city, the preferred casino gaming operator must file an application for an operator’s license with the Virginia Lottery. If that gaming operator meets the standards for licensure, it will be issued an operator’s license by the board.

To obtain an operator’s license, an applicant must make a capital investment of at least $300 million in a casino gaming establishment, inclusive of the value of real estate and all improvements, as well as possess an equity interest of at least 20% in the casino gaming establishment. Upon issuance of a license, the operator is required to pay a $15 million license fee.

Licensed operators are permitted to offer on-premises mobile casino gaming to individuals physically located on the premises of the casino gaming establishment. Operator licensees are subject to a variable tax rate on adjusted gross receipts ranging from 18% to 30%.

The legislation also provides for supplier’s permits, which allow a permit holder to sell or lease casino gaming equipment and supplies or provide management services to licensed operators. Additionally, a service permit is required for individuals participating in any gaming operation as a casino gaming employee or concessionaire.

Sports Betting
The new sports betting legislation requires the Virginia Lottery to operate a sports betting program through which applicants can apply for permits to engage in sports betting operations, with the board providing regulatory oversight.

A sports betting permit allows a permit holder to operate an online or mobile sports betting platform. The Executive Director of the Virginia Lottery is required to issue no fewer than four (4), but no more than 12 sports betting permits.

Prior to July 1, 2025, substantial and preferred consideration for a sports betting permit will be given to certain major league sports franchises and operators of major league sports facilities; however, any permits issued to such applicants will not count toward the minimum or maximum sports betting permit requirement noted above. Accordingly, the total number of sports betting permits could exceed 12.

Further, substantial and preferred consideration will be given to sports betting permit applicants who have had their names submitted as a preferred casino gaming operator to the Virginia Lottery by an eligible host city and have been certified by the Virginia Lottery to proceed to the required local referendum. Any permits issued to such applicants will not count toward the minimumsports betting permit requirement. In other words, even if all five casino gaming operators receive a sports betting permit, the Virginia Lottery is still mandated to issue at least four more.

Accordingly, the sports betting legislation envisions the issuance of a minimum of nine sports betting permits (assuming all five casino gaming operators receive a permit) and the issuance of a maximum of 12 sports betting permits, with an allowance to exceed 12 in regard to major league sports franchises and operators of major league sports facilities.

Pursuant to the casino gaming legislation, the Virginia Lottery will issue a sports betting permit to any licensed casino gaming operator, regardless of whether such licensee otherwise meets the requirements for obtaining a sports betting permit.

Prior to the issuance of a sports betting permit, applicants must pay a nonrefundable $250,000 fee. Permit holders are subject to a fixed 15% tax on adjusted gross revenue.

A permit holder may operate its sports betting platform under a brand other than its own, but is prohibited from using more than one brand.

If requested by a sports governing body, permit holders must use official league data to settle tier 2 bets (i.e., live or in-game bets). Wagering on youth sports and Virginia college sports is prohibited, as well as proposition bets on college sports.

Provisions related to the licensing or permitting of sports betting suppliers are notably absent from the legislation and presumably will be addressed by the board in its regulations.

A unique aspect of both the casino gaming and sports betting legislation is a required nonrefundable application fee of $50,000 for each principal of a casino gaming operator license applicant and sports betting permit applicant, respectively, to cover the cost of a required background investigation. The board will conduct a background investigation of each license or permit applicant, as well as their principals and certain associated individuals and entities.

The board is required to implement regulations for casino gaming to be effective within 280 days of enactment of the casino gaming legislation, while regulations for sports betting are required by September 15, 2020.