Sports betting, addiction resources and the mob: 5 more takeaways from Virginia’s big gambling report

By: - November 27, 2019 12:01 am


Monday’s presentation covered the big picture, but there’s a lot more to parse in the 202-page gambling report Virginia lawmakers received this week.

Here are five more takeaways from the Joint Legislative Audit and Review Committee (JLARC) study that’s meant to guide lawmakers’ thinking on casinos, sports betting and other types of gambling for the 2020 General Assembly session.

Sports betting could be done faster than casinos

The report predicts it would take four years for the first casinos to open, but Virginia has more immediate options if it wants to get into the rapidly evolving world of sports betting.

The fastest way to do it, the report said, would be to let the Virginia Lottery regulate an online sports betting market run by an operator like FanDuel or DraftKings, gaming companies that already operate online sportsbooks in other states.

While the online-only model would eliminate the need for brick-and-mortar facilities, the report said, it would create fewer jobs and have less of an economic impact.

Another alternative to waiting for casinos, the report said, would to be to allow sportsbooks at the Rosie’s off-track gambling parlors operated by Colonial Downs Groups. But some competitors have said that would give Colonial Downs a “competitive advantage over potential casinos that may be years away from operations.”

In a similar vein, the report notes that launching online-only sports betting now could make it harder for casinos to get in the game later.

Rolling out casinos and sports betting at the same time could even the playing field, the report said, but that would mean waiting years for casinos to be approved and built.

Thirteen states have legalized sports betting, and six more are in the process of doing so.

A fully operational sports betting industry could generate up to $55 million in tax revenue for the state, JLARC found, a relatively small portion of the $367 million in net gambling revenue the state could see overall.

“Virginia is unique because it is considering adding both sports wagering and casino gaming at the same time,” the report said. “Other states that have legalized sports wagering in recent years have had either an established casino industry or adopted sports wagering as a standalone expansion of gaming.”

The state could do a lot more to help problem gamblers

Virginia’s existing efforts to treat gambling addiction and the social ills that come with it are “minimal compared with other states,” the report found. Those efforts, mainly run through the Virginia Lottery, include $30,000 for a problem gambling hotline administered by the Virginia Council on Problem Gambling and one Lottery staffer who works on problem gambling part time.

State law also requires the horse racing industry to set aside 30 percent of its “breakage” — all the pennies left over from rounding down payouts — for educational programs or problem gambling services, but the report notes that funding has been “minimal” in recent years.

Though the report stops short of saying more gambling will create more gambling addicts, the JLARC staff said having casinos in Virginia would put more people “at risk of experiencing gambling problems.”

“According to the National Council on Problem Gambling, Virginia provides less public funding per capita for problem gambling treatment and prevention than any of the 40 states that provide funding,” the report said. “Adopting additional forms of gaming would require a substantial increase in state efforts and resources dedicated to this issue.”

An adequate problem gambling prevention program could cost $2 million to $6 million annually, according to the report. That could cover more robust prevention services administered by the Department of Behavioral Health and Developmental Services as well as a self-exclusion program that would let problem gamblers essentially ban themselves from casinos.

The report found that problem gambling is “more prevalent in individuals with low income and education, young adults, the elderly and military personnel and veterans. Problem gambling has been associated with depression, suicide, substance abuse and domestic violence, the report said, as well as financial consequences that can affect the families and friends of problem gamblers.

“For example, family members are affected if a problem gambler loses so much money that bills cannot be paid, loses his or her job, or neglects family responsibilities,” the report said. “Problem gamblers may borrow money from close friends that they do not repay.”

Location matters

Richmond and Northern Virginia haven’t been at the forefront of the casino conversation, but those were the two regions with the biggest moneymaking potential, JLARC found. Of the five localities included in the pending casino legislation that sparked the study, Richmond is projected to generate the most revenue. But populous Northern Virginia could have the most potential of any region, even though it wasn’t under enough consideration to get studied to the same degree.

Due to its market size and potential to lure in players from Northern Virginia, JLARC found a Richmond casino could take in $297 million annually by 2025. On the low end, a Bristol casino is projected to make $130 million annually, according to the projections, which were based on each potential venue’s market potential, proximity to competing casinos and general attractiveness due to “location, size and amenities.”

Though the Hampton Roads area could generate around $350 million in gambling revenue, that money would be split between casinos in Norfolk and Portsmouth.

No specific plans for a Richmond casino have emerged. The capital city was added to the bill last year mainly to serve as a backup plan for the Pamunkey Indian Tribe, which has said it wants to build its planned casino in Norfolk. However, the tribe hasn’t ruled out the possibility of having two casinos. And if the General Assembly opens the process to competitive bidding, another Richmond casino operator could emerge.

The report suggests some of Richmond’s market potential is tied to Northern Virginia and the likelihood that some gamblers would travel to Richmond instead of crossing over to casinos in Maryland or West Virginia. As such, a Richmond casino would have the most to lose if lawmakers choose to add Northern Virginia to the areas under consideration.

After crunching the numbers, JLARC found a casino in an unspecified part of Northern Virginia could generate up to $595 million in annual net gaming revenue, dwarfing the numbers for the five cities that were officially part of the study.

Unregulated machines could already be pulling in $83M to $468M per year

The report found that unsanctioned gaming ventures operating in a legal gray area may already be doing big business. So-called skill games, slots-like machines that have appeared in bars and convenience stores all over the state, could already be generating $83 million to $468 million in annual revenues.

JLARC acknowledged that,  because skill games aren’t regulated or taxed by any governmental authority, the revenue estimates are only an educated guess based on revenue from similar machines. The report said the number of unregulated machines could be anywhere from 4,500 to 9,200.

“Estimating revenue for grey machines or their impact to other types of gaming is difficult because of the unregulated nature of the industry,” the report says. “The number of devices, amount of customer play, payout percentages and locations are generally unknown to the state. Furthermore, one of the prominent device manufacturers declined to provide the JLARC study team data on machine revenues.”

The mob’s probably not involved

Casinos and the clientele they attract may bring some crime, but hopefully not the organized kind.

“Experts suggest that organized crime is not involved with casinos, in part because of stricter regulatory and licensing requirements than existed in the early days of casinos,” the report says.

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Graham Moomaw
Graham Moomaw

A veteran Virginia politics reporter, Graham grew up in Hillsville and Lynchburg, graduating from James Madison University and earning a master's degree in journalism from the University of Maryland. Before joining the Mercury in 2019, he spent six years at the Richmond Times-Dispatch, most of that time covering the governor's office, the General Assembly and state politics. He also covered city hall and politics at The Daily Progress in Charlottesville.