Gov. Glenn Youngkin’s administration is tentatively backing a top Republican lawmaker’s proposal to reauthorize so-called skill machines in Virginia and use some of the money they generate to crack down on illegal gambling, according to multiple Capitol Square sources.

That stance could potentially mean another reprieve for the slots-like games the state has spent years trying to ban from convenience stores, sports bars and truck stops, only to face sustained lobbying and legal pushback from the industry and its promoters. The state is currently locked in a prolonged court battle with the industry, and officials are unable to enforce the ban on skill machines as that lawsuit proceeds. But a reversal of the state’s official position on skill games could make the lawsuit moot.

House Majority Leader Terry Kilgore, R-Scott, said he’s been told he has “possible” administration support for his proposal to let thousands of the machines continue operating and restore an old system of regulation in place before the General Assembly voted to outlaw the games in 2021. That would be a shift from the position of Youngkin’s predecessor, Democratic Gov. Ralph Northam, who allowed the machines to be briefly regulated and taxed to raise money for COVID-19 relief but ultimately followed through on banning them.

Asked if the governor is supporting the bill, Youngkin spokeswoman Macaulay Porter didn’t give a direct response.

“The governor has asked stakeholders to come to the table and work on legislation that would crack down on illegal gaming,” Porter said.

Kilgore’s proposal would essentially restore the legal status of a type of video game the General Assembly has tried repeatedly to classify as illegal gambling. But the Youngkin administration appears to view Kilgore’s bill, which has not been heard in the House of Delegates, as the only viable mechanism for raising new funds to go after illegal gambling.

Supporters of skill machines, also known as gray machines due to the legal gray area they occupy, argue they give smaller businesses a chance to profit from Virginia’s newly relaxed approach to gambling. Business owners hoping to continue hosting skill machines have characterized the push to ban them as the legislature doing the bidding of big casino interests that want to clear away competitors.

Opponents say they cannibalize revenue from more tightly regulated forms of gambling, and some legislative critics have warned against the moral hazard of granting legal status to an industry that rushed into Virginia under legally murky circumstances.

Under Kilgore’s bill, the Northam-era regulations would be reinstated until at least the summer of 2024. In that time, according to the legislation, the state would come up with new oversight rules. Just as they did under the prior regulatory system, skill-machine distributors would have to pay a flat monthly tax of $1,200 per machine. Convenience stores could have up to five machines under Kilgore’s proposal. Truck stops could have up to 10 machines.

Kilgore’s bill calls for some of the revenue generated from legalized skill machines to go toward law enforcement efforts to combat illegal gambling, an issue the state has struggled with recently after policymakers gave a greenlight to horse racing-themed slots parlors, casinos and sports betting. That money would be spread among police, local prosecutor’s offices and the Virginia attorney general’s office, all of which play a role in enforcing the state’s gambling laws.

In an interview, Kilgore indicated the specifics of his legislation are up for discussion. His goal, he said, is to allow Virginia to get some tax benefit from machines that are currently operating with no oversight whatsoever while getting tougher on illicit gambling enterprises that have thrived in the state’s atmosphere of legal and regulatory confusion.

“The main thing that I’m wanting to do is put these mini-casinos out of business,” Kilgore said, referring to pop-up businesses that offer skill machines and not much else. “There’s a lot of these game room-type deals that have sprung up all over the commonwealth.”

Skill machines — which mimic the spinning reels and tic-tac-toe patterns of slots but have a small element of skill that has allowed promoters to argue they technically aren’t a form of illegal gambling — are often placed in businesses already licensed by the Virginia Alcoholic Beverage Control Authority. The first draft of Kilgore’s bill envisions restoring ABC’s responsibility to regulate skill machines and ensure the presence of official state stickers that mark the difference between legal and illegal games.

SOURCE: VIRGINIA MERCURY