Virginia one step closer to creating single gaming agency

The gaming industry in Virginia is currently overseen by multiple state agencies, and splitting those duties has created oversight and enforcement gaps. (Ned Oliver/Virginia Mercury)

Legal gaming has surged to new heights in Virginia, transforming into a multibillion-dollar annual market as the state’s expanding casinos, sports betting, and online gaming sectors fuel economic growth and reshape the entertainment landscape.

But the industry is currently overseen by multiple state agencies, and splitting those duties has created oversight and enforcement gaps in the rapidly expanding industry. After a 2022 report by the Joint Legislative Audit & Review Commission (JLARC) recommended that Virginia give a single state agency the power to regulate most gambling, efforts began to consolidate regulatory powers by a centralized body.

On Wednesday, the newly created Joint Subcommittee to Study the Feasibility of Establishing the Virginia Gaming Commission for the first time reviewed a proposal that would put the numerous agencies under one roof.

Under the two-year plan before the committee, an independent state agency — dubbed the Virginia Gaming Commission — would consolidate the regulatory powers over online gambling, charity gaming, bingo, live horse racing, fantasy contests, the state’s five licensed casinos, and 10 licenses for Rosie’s Gaming Emporium.

The sole exception under the proposal is the Virginia Lottery, a state agency created in 1987 after a statewide voter referendum, that would remain a separate entity and continue to oversee and regulate the sale of lottery tickets in the commonwealth.

“As we have gone through the cost-benefit analysis, our team has studied different options, continued stakeholder outreach and working sessions with the agencies, and our team views this option as the best path forward,” Collin Hood, a director at the Virginia-based consulting firm Guidehouse, advised the committee at its meeting in Richmond Wednesday.

The target operating model for the Virginia Gaming Commission, Hood added, is an “efficient, cost-effective and strong regulator.”

If realized under the proposed plan, the new state agency would be able to respond to new regulatory and oversight needs from emerging gaming types, maintain the state’s commitment to horse racing and charitable gaming industries, increase transparency through centralized annual reporting to the public and the state government, and increase accountability for gaming regulation and oversight.

It would also facilitate a consistent statewide problem gambling strategy across all gaming types and clarify the points of contact for key stakeholders, including Virginia State Police, local law enforcement, state legislators and the industry itself.

“Change is difficult, but it is the right thing that we need to do to get a handle on it, otherwise everybody is working in different silos,” Sen. Bryce Reeves, R-Spotsylvania and the committee chair, said in an interview after Wednesday’s meeting.

“There is internet gaming or electronic gaming that happens in the cloud, and we have three different agencies trying to manage that, so there’s some areas where we can save the state a lot of money.”

Heading toward $21 billion in wagers

The plan recommended by Guidehouse, which is drafting various options, “is probably where we’re headed,” Reeves said. “Consolidation is going to help us with enforcement and compliance. If you talk to prosecutors today, they don’t even know what they are looking at.”

Before Virginia’s anti-gambling stance softened in 2018, about $3.4 billion was wagered on state lottery games, charitable gaming and traditional horse racing — a number that grew steadily as the state approved more ways to gamble. By 2025, when four casinos are expected to be open, total wagering could grow to $21 billion.

The JLARC report recommended that the Virginia Lottery should become the primary gambling regulator, noting the agency has already been beefing up its staff to handle sports betting and the four casinos being built around the state.

But the Virginia Racing Commission that is in charge of live horse racing and the horse racing-adjacent Rosie’s slots enterprise, doesn’t have the staff to carry out its regulatory mission, the report found. It further concluded the Virginia Department of Agriculture and Consumer Services — which regulates forms of charitable gaming like bingo, poker and slots-like machines called electronic pull tabs — also doesn’t have the resources to do its job.

The creation of the Virginia Gaming Commission as a head organization would bring together the existing agencies in an effort to provide the state’s response to a rapidly changing industry, Reeves said.

“I’ve never voted for gambling, and now I find myself the chairman of the committee, only from the simple fact that this all started from charitable gaming and then finding fraud in it,” he said, referring to findings by a General Assembly subcommittee in 2021 that showed corruption in the state’s charitable gaming industry was rampant due to inadequate oversight and conflicts of interest.

“We cleaned that up, and everybody learned some hard lessons,” Reeves said. “What we are trying to do here as legislators is that we don’t have the time or bandwidth to monitor all these different gambling institutions, that shouldn’t be our job. In the end we made a policy decision, it’s not a political decision, we are taking politics out of it.”

‘A good way to govern’

Del. Paul Krizek, D-Fairfax, committee member and an unapologetic critic of legal gaming, applauded the proposed consolidation plan.

“We’re moving judiciously and prudently, and this is a big issue because right now we have a number of different agencies regulating the industry, and they all do it a little bit differently,” Krizek said. “It really needs to be consolidated under one umbrella, that brings expertise and people that know the whole industry.”

Under the current system, legislators like himself don’t have an easy point of contact to go to  with concerns, Krizek said.

“It ends up being the loudest voices that catch our ear, and really what we need is an expert agency that can vet all of this and make sure that it especially protects the public. And that’s the kind of input that would come from a Virginia Gaming Commission.”

As the next step, the Guidehouse consultants are tasked with delivering a final report for the committee to vote on at its next meeting in November while lawmakers begin to develop the legislation framework to change the code for the consolidation. The General Assembly would weigh the measure during the 2025 session.

The proposed two-year roadmap toward the creation of the new state agency would formally begin on July 1. After a successful launch of the Virginia Gaming Commission, lawmakers would reconsider consolidating Virginia Lottery operations under the same roof.

“This is the first time in 13 years that I have seen us take a proactive approach to government rather than making a cheese sandwich and saying you’ve got to eat it,” Reeves said. “It’s going to allow more people the opportunity to enter the process and to those setting it up a realistic timeline so it’s not so stressful. This is what I would call a good way to govern.”

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