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As Republican Governor Glenn Youngkin considers the fate of skill games in Virginia, leading casino executives are urging Youngkin and lawmakers in other states where the terminals have proliferated to either prohibit grey-market machines or tax and regulate them on the same scale as slot machines.

Jim Allen, CEO of Seminole Gaming and chairman of Hard Rock International, told conference delegates on Thursday (April 18) that he and several other gaming executives met with Youngkin three separate times to discuss the issue as Virginia's General Assembly reviewed legislation to regulate skill-game machines.

Hard Rock operates a temporary casino in Bristol near the Tennessee border but is preparing to open its permanent $500m Virginia casino-resort with 1,500 slot machines and 75 table games in July.

“How can you ask us to spend a half-billion dollars or $700m and you are going to allow 50,000 grey machines to be legalized in your state?” Allen said. “If that is what you want to do, we respect that but please don’t ask us to build these integrated resorts.”

Over the two-day East Coast Gaming Congress conference at the Hard Rock Casino in Atlantic City, Allen and other executives from major U.S. commercial casino companies expressed their opposition to the proliferation of skill games in major casino states such as Virginia and Pennsylvania.

Allen stressed that the U.S. gaming industry is aligned on making sure that this illegal activity is contained.

“It can’t be the industry by itself,” Allen said, “but we have to do something about this grey-market activity.”

As gaming executives were in New Jersey expressing their frustration with skill games, the Virginia Senate on Wednesday rejected Youngkin’s proposed amendments to Senate Bill 212 that would toughen regulations in new legislation to expressly legalize them in Virginia.

Youngkin had proposed to cap the number of machines allowed in Virginia at 20,000, raise the tax rate to 35 percent, allow cities to ban the machines, limit the number of devices per location, and require that host locations sell lottery tickets. Machines would also not be permitted within 35 miles of a casino or racing facility. In contrast, the General Assembly had agreed to a 25 percent tax on the machines and no location restrictions.

The Senate's 34-6 vote sent the measure back to the governor. If Youngkin now decides to veto the bill, that would mean the machines remain prohibited throughout Virginia under a ban first approved in 2020.

A local judge barred the state from enforcing the ban that became effective in July 2021, but the Virginia Supreme Court reinstated the ban late last year.

Gina Smith, deputy director of gaming compliance with the Virginia Lottery, admitted that skill games was a hot topic in Virginia but as a regulator the state's lottery does not take a position on legislation.

“If it comes to the lottery as it is proposed, we want strict regulations,” Smith said. “We want to regulate all of our parties in the same manner, whether they are a sportsbook operator, whether they are casinos, or whether they are people providing so-called skill games.”

Lawmakers also announced on Wednesday that they are returning to Richmond later this spring for a special session to reach a deal on the state budget, creating another opportunity to consider skill-game machines.

“With regards to skill games, the governor’s concerns with the bill remain and his amendments addressed those concerns,” Youngkin’s press secretary Christian Martinez said in an email on Thursday. “He is open to continuing discussion to alleviate issues with both perimeter provisions.”

Tim Drehkoff, CEO of Rush Street Gaming, described the company's Rivers Casino properties in Philadelphia, Pittsburgh and Portsmouth, Virginia, as “transformative, not transactional developments” that are now being put at risk by so-called skill games as they proliferate in both states.

“It seems to be beat up on skill games today, and I’m going to continue that trend,” said Drehkoff, adding that the unregulated and untaxed slots-like devices are “costing our industry jobs and hurting revenues.”

Drehkoff stressed that revenue and job losses are what would occur if skill games are legalized in Virginia and Pennsylvania, where the state's governor recently proposed to tax and regulate the machines as part of the state's budget.

To make his point on Thursday, Drehkoff highlighted charts that showed slot revenues had increased at the Portsmouth casino since the skill-game ban was implemented in November following the Supreme Court ruling.

Rivers Portsmouth posted slot revenue of $14.7m in November, which increased to $16.3m in December, dropped to $15.7m in January and then grew to $18.2m in February and $19.9m in March.

“In my humble opinion, these games are the worst our industry has to offer,” Drehkoff said. “We can’t understand how local governments think these are a good idea.”

Currently, he said, slot machines have a hold of 8 percent or pay out 92 percent of coin-in to players, while the hold rate for skill games is 25 percent.

“We as an industry need to fight this type of gaming,” Drehkoff said.