Imperfect Virginia Sports Betting Bill Gaining Momentum

Imperfect Virginia Sports Betting Bill Gaining Momentum

A flawed online sports betting bill in Virginia is starting to emerge from a pack of competing proposals after a key House subcommittee vote. The bill, which would impose one of the nation's highest tax rates, limit types of wagers and all but compel operators to compensate sports leagues for data rights, advanced in the House just a few days after its Senate companion did the same. It gives the legislation a solid path forward despite what are sure to be concerns from the gambling industry.

The 5-1 vote Tuesday by the House Committee on General Laws gaming subcommittee underscores political support for new legislation, even over the sweeping, though loosely defined, gaming bill passed last year. The 2019 measure required lawmakers to pass the same bill again in 2020, and elected officials have introduced a handful of competing proposals to better define that legislation. However, Tuesday's decision to not just prioritize but advance a more narrowly tailored 2020 bill helps show a new trajectory for Virginia gambling, one that could include self-inflicted handicaps.

Bill Details

The bill puts sports betting under the purview of the lottery, Virginia's only notable gaming entity, though it would allow multiple third-party vendors to operate.

  • Positives: The lottery could permit up to 10 online licenses, or "skins." The House bill doesn't articulate how many skins the lottery would be required to license, but it opens the door for a competitive, digital marketplace. That has been essential to successful sports betting offerings in other states with top sportsbooks, like New Jersey and Pennsylvania.
  • Negatives: The bill incorporates a 20 percent tax on gross gaming, which is about twice the median average and a possible deterrent to would-be operators considering Virginia. It also bans any wagers on in-state college teams, as well as all in-play betting on college sports and essentially mandates operators to reach undefined "commercially reasonable terms" with professional sports leagues for in-play wagering on their competitions. Industry stakeholders have argued against the prohibitions on college betting, arguing it will push players back to the unregulated black market. The fees for league data are also largely opposed by operators.
  • Worth Noting: HB 896 would also permit Virginia Lottery sales over the internet. The lottery grosses more than $2 billion annually and online sales will likely have a far greater economic impact than any future sports betting market.

Developments

Tuesday's vote builds momentum for the aforementioned sports betting structure and hinders the chances among the remaining alternatives.

  • Bill Advances: The bill was recommended for the influential House Committee on Appropriations, which has jurisdiction over state budget matters. With a favorable recommendation from Appropriations, the bill will almost assuredly advance out of the full House of Delegates.
  • Companion: This comes a few days after the Senate Committee on General Laws and Technology viewed HB 896's companion measure favorably while pitching a reduced tax rate. SB 384 will be discussed further by Senators, and like its House companion could still see significant changes, but combined with the recommendations in the House Tuesday, it appears this legislation has the best chance of the remaining sports betting bills to pass into law.
  • Competitor Fails: Among those proposals was HB 911, which would have taxed gross gaming revenue at 10%. The House gaming subcommittee recommended "incorporating" that legislation into HB 896, essentially ending its future as a stand-alone bill.
  • Key Point: The House gaming subcommittee still has five additional bills that follow up on the original proposal passed in 2019, all of which would allow the commonwealth's first online and retail options for sportsbooks and casinos. Nearing the halfway mark of the 2020 session, it appears lawmakers in the now Democrat-controlled General Assembly are prioritizing the new legislation (and HB 896 / SB 384 in particular) over the bill passed before the 2019 elections. Those bills were passed when Republicans had control of both chambers, but the bills then (and now) are largely being spearheaded by Democrats and done so with bipartisan support.

Next Steps

Along with the sports betting bill advanced Tuesday lawmakers on both sides of the capital are working on a host of remaining gambling bills.

  • Senate: The full Committee on General Laws and Technology is scheduled Wednesday to discuss a pair of bills to allow Virginia to join a handful of other states with online lottery sales as well as a measure to clamp down on illegal gambling devices. On Thursday, the subcommittee on gaming will meet and could advance or defeat some of nearly a dozen gambling bills on its docket.
  • Crossover: All bills must pass through its chamber of origin by Feb. 11, meaning lawmakers in the Senate (as well as the House) will have less than two weeks to see their proposals survive to the opposite side of the statehouse.
  • Bottom Line: House General Laws Chair Dave Bulova reminded his committee members Tuesday that every remaining meeting was critical with Crossover looming. Virginia’s throng of gambling bills are still all in their early stages, but they won’t have long to pick up critical votes or, as is the parlance in Richmond, get “passed by indefinitely.”

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