A bad bet? ‘Skill machines’ could cost the Virginia Lottery and local schools millions

Investigative

HAMPTON ROADS, Va. (WAVY) – After 30 years, the Virginia Lottery has become part of Virginia culture.

Last fiscal year, the Virginia Lottery recorded its biggest sales ever, bouncing above $2.29 billion.

But the lottery expects to lose nearly $140 million in sales by next June and blames unregulated gaming machines.

“It’s keeping me awake at night,” said Virginia Lottery Executive Director Kevin Hall. “It is not right; they are allowed to operate without any oversight, any regulation, any rules of the road, with no tax benefits to the locality or to the state?”

Hall is talking about the new “skill machines,” often called gray machines, because they operate in the gray area of Virginia law. Operators claim there is skill involved, which makes them legal. If the machines do not require skill, the machines are considered illegal. Virginia has chosen not to shut them down, leaving it up to localities to decide.  

Aaccording to the Virginia Lottery, the following localities are taking action against the “skill machines.”

  • Charlottesville – The Commonwealth’s Attorney ordered businesses remove the machines. All have been removed, pending litigation at federal level.
  • Grayson County – The Commonwealth’s Attorney required removal within 30 days of 10/21/19.
  • Warren County issued a letter this summer requiring removal, but since the Charlottesville lawsuit, they have essentially retracted the position from illegal to neutral and are awaiting an outcome of the case to tell them how to proceed.
  • Danville The Planning Commission required a specific license to host machines. All have been removed. The Zoning Board is taking case-by-case action to approve permits.
  • Dumfries requires a permit and fees to host more than two machines in a single location.

It would appear the proverbial toothpaste is out of the tube. There were 500 gray machines around Virginia in March and now there are over 6,000.

Hall gave a Powerpoint presentation to legislators, which includes charts. The most alarming is a graph that shows as the number of machines grow, the blue lottery profits are turning into declining red losses.

The presentation shows the Virginia Lottery is losing tens of millions of dollars. “See our sales are cut by $140 million in this fiscal year that ends June 30, 2020. That means almost $40 million less profit that would go to K-12 schools,” explained Hall.

That has a real impact on our schools.  Consider all the millions that went to our public schools last year. The list below shows the school districts in Hampton Roads that received the biggest contributions.

Lottery profits to local schools

  • Norfolk – $29 million
  • Virginia Beach – $29 million
  • Newport News – $27 million
  • Chesapeake – $19 million
  • Hampton – $16 million
  • Portsmouth – $13 million

Hall sums it up this way: “I am not going to be producing that level of support for local schools in the coming year because of these gray machines.”

10 On Your Side went to a Portsmouth 7-Eleven to see how a skill machine works.  The goal is to get three symbols in a three square row.  The ‘wild’ symbol can represent any symbol to complete the three. Peter Francis was playing the gray machines that day and quickly made $6 off his $1 bet.

With the Virginia Lottery, you win or lose; there is no skill involved. The gray machines provide an alternative for people and that appears to be in conflict with The Virginia Lottery.

With the skill machines, players can get an opportunity to win back the money they lost by applying memory skills to remember patters. If you continue to punch the correct sequence, you can earn back your money. One mistake with the sequence and it’s game over.

The most popular gray machines are the “Q”, owned and operated by the Queen of Virginia.  Spokesperson Joel Rubin actually wants his skill games regulated, “Legal skill games like ours need to be regulated.  Tax them and enforce it to keep out the guys who don’t have skill games. We have skill games.”

A customer playing a gray skill machine at the More and More convenience store on Mercury Boulevard in Hampton told 10 On Your Side he enjoys playing the machines and the lottery. “I put money in the machine, but I put more money into the lottery,” said the customer, who didn’t want to be identified.

Store Manager Nick Patel has paid out hundreds in prizes and insists his customers play both gray machines and the Virginia Lottery, and buy drinks, chips and cigarettes, “People come in here. More people come in because of the machines, and they play the lottery, and they buy things.  I’m going up, not down.”

Rubin says that’s the point, “The real beneficiaries of the skill machines are the bars, taverns and convenience stores who are then able to hire more people, pay more taxes, buy more equipment and in many cases stay open. Small businesses are doing well thanks to the games.”

State Senator Louise Lucas (D) emphatically does not want the gray machines. There is real pressure to eliminate the machines even if regulated because there’s a new priority for gaming in Virginia: casinos, especially in Portsmouth.

Lucas, who represents District 18, which includes part of Portsmouth, said, “Look … I don’t want the gray machines in Virginia interfering with my casino. Bottom line. End of subject.”

Back at the Hampton convenience store, operator Jay Joshi told 10 On Your Side, “I do think casinos are coming in, and they will try to shut down the skill machines. Absolutely.”

Copyright 2020 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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