Virginia Lottery Approves Emergency Casino Regulations

The Virginia Lottery Board approved emergency casino regulations at its virtual meeting Wednesday.

The board passed the emergency regulations 6-1, with one member abstaining.

The regulations had to be approved by the board before being submitted to the governor to begin the process to develop permanent regulations for casino operations in Virginia.

Four Virginia localities voted in November to approve casino operations — Bristol, Danville, Norfolk and Portsmouth. A vote for Richmond residents is set for November.

The legislature passed HB 4 in April 2020 to legalize casinos in all five cities.

Individual casino operator license application forms will be available in April. Operators that were given preliminary approval by the Virginia Lottery and certified by the eligible host city will be able to submit documents to be licensed.

Operators have been identified for the casinos: Bristol — Hard Rock International; Danville — Caesars Entertainment; Norfolk — Pamunkey Indian Tribe; Portsmouth — Rush Street Gaming; and Richmond — Pamunkey Indian Tribe.

A presentation of the 300-page document on emergency casino regulations to the Lottery Board was given by deputy general counsel Bob Fontaine, who has 12 years of experience with the Maryland Lottery and helped the state establish its casino regulations.

Fontaine outlined permit and license fees, regulations and revenue charts, and took questions from board members.

Lottery general counsel Amy Dilworth presented the timeline for getting the emergency regulations to the governor’s desk for approval, which then launches what could be up to an 18-month process to approve permanent regulations ahead of casino operations beginning in Virginia.

That timeline includes two public comment periods.

“There is a lengthy rule-making process ahead of us,” Dilworth told the board. “These are emergency rules.”

Timeline in Place

The first step is executive branch approval by April 7 of the emergency regulations. The regulations will be introduced to the public April 26 and open a 30-day public comment period.

Following that, staff will prepare proposed permanent regulations, which Dilworth said have to be completed by Nov. 22.

After the governor approves the permanent regulations proposal, there is a 60-day public comment period. At least 15 days, but no more than 180 days, after that comment period, the Lottery Board will have to adopt the proposal as final and again submit it to the executive branch.

The permanent regulations could be finalized as late as Oct. 7, 2022, Dilworth said, though the hope is that it happens quicker.

The emergency regulations have to be put in place so potential casino operators have a standard of regulations to meet.

Fontaine said most of the emergency regulations are industry standards.

“The goal is to maintain flexibility for operators,” he said, and maintain the integrity of gaming in Virginia.

The Lottery Board will issue three types of licenses: facility operator, supplier and service.

The supplier and service permits are intended to be portable, since it’s likely casinos will use the same few vendors for items such as slot machines, cards, dice, etc.

The facility operator license will be good for 10 years, with a $15 million issuance fee.

The Investigation Process

All licenses are subject to a $50,000 investigation fee. The team is working to build its own in-house investigation staff, but for now, like in vetting sports betting vendors, the work is contracted.

Lottery Board chairman Ferhan Hamid pushed Fontaine on the point of having social media posts be included as part of the investigation process in light of the riot at the U.S. Capitol on Jan. 6.

The purpose of investigations, which include a background check of financial holdings and other key items, is to make sure the operators and suppliers are “above board,” Fontaine said.

Taxes from gaming, and penalties and fees, will go into the Gaming Proceeds Fund.

From there, casino host cities will get a graduated percentage. Casinos operated by Indian tribes will get 1% of the adjusted gross revenue toward the Virginia Indigenious People’s Trust Fund. Problem Gambling Treatment and Support Fund will get 0.08%, and the Family and Children’s Trust Fund 0.02%. Civil penalties will be applied to the General Fund, according to Fontaine’s presentation to the board.

Behind-The-Scenes Work

There’s a lot that happens behind-the-scenes before going live, Fontaine said.

“The first casino to open will train (the staff), and the second will poach them,” Fontaine said. He said while it will frustrate the initial operator, every casino to open will want staff trained in Virginia’s regulations when it opens.

Casinos will be open to those 21 years and older, and there will be no cash wagers or credit.

It is likely statewide casino monitoring will be contracted, Fontaine said, as there only a few companies equipped to handle it.

“The number of wires under the floor of a casino is unbelievable,” Fontaine said.

The next Lottery Board meeting is April 21.