Virginia’s Online Gambling Proposal Shelved for Further Review

Virginia lawmakers have chosen to delay discussions on a bill aimed at legalizing online gambling within the state. Senate Bill 827, introduced by Senator Mamie Locke, D-Hampton, proposed granting the Virginia Lottery Board the authority to issue licenses for online casino gaming. Originally scheduled for review by the Senate Subcommittee on Gaming earlier this week, the bill has been postponed to allow more time for lawmakers to assess its potential implications.

Senate Bill 827

Senator Locke emphasized the need for a thorough analysis of the proposal, which she designed to authorize reputable, regulated operators to offer online gaming in a secure and legal framework. “This bill is designed to authorize reputable, regulated companies to offer internet gaming to Virginians within a safe and legal market,” Locke stated. However, she acknowledged the necessity for further study before advancing the legislation.

The proposed legislation outlined a $1 million application fee for online gaming operators and a 15% tax on their earnings. Revenue from online gambling would be distributed across state and local funds, with 97.5% allocated to the state’s General Fund and 2.5% directed to the Problem Gambling Treatment and Support Fund. Local governments would also benefit from additional revenue streams. While promising to generate new income for Virginia, the proposal has also raised concerns, prompting the decision to revisit it by 2026.

Concerns Over Revenue Impact

The bill has drawn significant scrutiny due to its potential effect on existing revenue sources. The Virginia Department of Planning and Budget issued a fiscal analysis warning that online gambling could divert consumer spending from traditional lottery sales and physical casinos, both of which are key contributors to state finances.

The Virginia Lottery projected that online gambling could lead to a net financial loss for the state. Despite arguments that online gaming would create new revenue streams, fiscal assessments suggest that the potential losses from diminished lottery and casino revenues may outweigh the gains. The analysis noted that other states with both iLottery and iGaming have experienced slower lottery sales growth compared to those with only iLottery.

Tax and Fee Concerns

The proposed tax rate for iGaming operators has been another contentious issue. The Virginia Department of Planning and Budget recommended higher taxes and fees to cover the administrative costs of regulating online gambling. According to their fiscal report, the current rates outlined in Senate Bill 827 may not be sufficient to offset the resources needed for proper oversight.

Criminal and Social Impact

Concerns about the potential criminal impact of online gambling have also been highlighted. The Virginia Criminal Sentencing Commission submitted an impact statement suggesting that an increase in gambling-related crime could strain correctional services. While data on the issue remains limited, the prospect of such outcomes has added to the hesitation surrounding the bill.

Looking Ahead: The Future of Online Gambling in Virginia

Given the complexities of the proposal, Senator Locke has decided to put Senate Bill 827 on hold. Initially pre-filed in late December and receiving its first legislative notice on January 8, the bill is now expected to undergo further review by 2026.

This delay is not an isolated incident. Advocates for legalizing internet gambling in Virginia have faced numerous challenges. Notably, no new states approved online casino legislation in 2024, underscoring the difficulties in expanding iGaming nationwide.

The Virginia situation mirrors broader trends in the U.S., where online gambling has seen significant growth in some states but continues to face resistance due to concerns over its impact on traditional revenue models. Critics argue that Virginia must balance the expansion of gambling options with the protection of existing revenue sources, particularly the lottery. However, evidence from other states suggests these concerns may be overstated.

In Pennsylvania, for example, online casino gaming and sports betting have thrived without negatively impacting lottery revenues, which hit record highs in fiscal year 2021. Similarly, New Jersey’s legalization of online gambling and sports betting in 2018 coincided with increased lottery revenues, rather than declines.

Conclusion

As Virginia’s lawmakers continue to weigh the potential benefits and drawbacks of online gambling, the outcome of Senate Bill 827 remains uncertain. The ongoing debate highlights the complexities of regulating this emerging industry and the importance of thorough analysis to ensure that any decisions align with the state’s economic and social priorities.