More than six months before Virginia expects its first legal online sportsbook, state regulators are shaping a strong path forward.
Virginia Lottery officials announced preliminary sports betting regulations Wednesday, the first step in what they expect will be a six-month process to begin legal wagering. Virginia online sportsbooks, which will be licensed and regulated by the lottery, could take bets as early as January 2021.
Critically, officials are already dismissing a 10% mandatory revenue hold. Virginia Lottery Director Kevin Hall told the state lottery board Wednesday “it’s safe to say” regulators won’t impose such a restriction.
The controversial regulatory mandate is in place in neighboring Tennessee, which also delegates sports betting oversight to its state lottery. It requires all sportsbooks to recoup at least 10% profit margins, roughly twice the historical rate of sportsbooks in other states.
Industry stakeholders say this will force Tennessee operators to post non-competitive lines that will subsequently push players back to unregulated offshore sites and black-market bookies, defeating the point of sports wagering legalization. Tennessee legalized sports betting in April 2019 but has yet to take a legal sports bet.
Officials Lay out Timeline
As with any state that legalizes wagering, state-level regulators must work out key details to regulate sportsbooks following the passage of legislation. The lottery’s proposed six-month timeline would be roughly average relative to the speed at which the other 20 or so states with legal sports betting have been able to move.
That law technically took effect July 1, but Hall said officials had already begun regulatory draft work in the prior weeks. Wednesday began a 60-day public comment period, after which officials will evaluate the initial draft, which covers licensee requirements, voluntary exclusion programs and a “Sports Bettor’s Bill of Rights.”
By Aug. 10, the Lottery will release another set of draft regulations for public comment that outline system requirements, financial controls and permissible wagers. Virginia’s sports betting law mandates the board vote on the final regulations by Sept. 15.
The lottery plans to accept and review license applications by the end of October. That process usually takes a four-to-eight weeks, putting Virginia on course to take its inaugural bet sometime in early 2021.
Other Key Facts
With a younger, more tech-savvy and affluent population than the national average, sports betting operators and stakeholders have high hopes for Virginia. Two years since the Supreme Court struck down the federal sports wagering ban, it’s become clear that in addition to demographics, a market’s success depends on a competitive, business-friendly environment and statewide mobile access.
So far, Virginia appears it will check many of those boxes.
Virginia law requires the lottery license at least four – but no more than 12 – mobile sportsbooks. Industry advocates argue the ceiling could squeeze out smaller sportsbooks, but it appears most larger operators will be able to enter the market. Virginia will also allow any of the five casinos the General Assembly approved earlier this year to open sportsbooks, as will certain professional sports organizations that are headquartered and/or host their home events in the commonwealth.
The 15% tax rate is higher than the median average, but stakeholders believe this is still competitive enough to attract operators. The $250,000 application and three-year licensing fee are in line with industry averages.
Tax revenues will be divided between the general fund (12.5%) and problem gaming services (2.5%) which, combined with a legacy-mandated self-exclusion program, creates one of the more dedicated problem gambling assistance initiatives in the country.
Regulators will determine which professional leagues sportsbooks will be able to accept bets on, but no operator will be able to take in-game wagers on college sports. And, despite objection from stakeholders, the law forbids sportsbooks from taking any type of bet on in-state college programs such as the University of Virginia and Virginia Tech.
Officials believe this positions Virginia for $400 million in annual handle and about $45 million in yearly tax revenues by 2025. With a steady legislative framework in place, reaching that goal will be shaped by regulators’ decisions in the coming weeks.