Title of Regulation: 11VAC15-40. Charitable Gaming Regulations (amending 11VAC15-40-300).

Statutory Authority: § 18.2-340.15 of the Code of Virginia.

Public Hearing Information:

March 14, 2017 - 10:45 a.m. - American Veterans Post 7, 1340 North Liberty Street, Harrisonburg, VA 22802

Public Comment Deadline: May 5, 2017.

Agency Contact: Michael Menefee, Program Manager, Charitable and Regulatory Programs, Department of Agriculture and Consumer Services, 102 Governor Street, Richmond, VA 23219, telephone (804) 786-3983, FAX (804) 371-7479, or email michael.menefee@vdacs.virginia.gov.

Basis: Section 2.2-2455 of the Code of Virginia establishes the Charitable Gaming Board as a policy board. Section 18.2-340.15 of the Code of Virginia authorizes the board to prescribe regulations and conditions under which charitable gaming is to be conducted in Virginia.

Purpose: This proposed regulatory action increases the number of electronic pull-tab devices that may be used at private social quarters. Increasing device limits provides an opportunity for participating charitable organizations to increase revenue. Many of these nonprofits use these revenues to support numerous community programs that often benefit and promote the welfare of the citizens of the Commonwealth. The board seeks to increase the number of electronic pull-tab devices used in private social quarters from the currently allowed five devices to nine devices. The department does not anticipate any potential issues that may need to be addressed as this regulation is developed.

Substance: This regulatory action consists of one amendment to 11VAC15-40-300. The amendment is substantive and increases the number of electronic pull-tab devices that qualifying charitable organizations may operate in private social quarters from five devices to nine devices.

Issues: The decision to increase the permissible number of electronic pull-tab devices from five devices to nine devices is the result of a petition for rulemaking submitted by a manufacturer of electronic pull-tabs. This manufacturer requested that the board review the number of electronic pull-tab devices allowed in private social quarters, and the board granted the petitioner's request. Special interest groups that are concerned with the expansion of gaming in the Commonwealth typically monitor the progress of all regulations pertaining to charitable gaming. The department is not aware of specific concerns with the proposed regulations. This regulatory action poses no specific advantages or disadvantages to the public or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. As a result of as petition for rulemaking,¹ the Charitable Gaming Board (Board) proposes to amend its regulation to increase the number of electronic pull-tab devices allowed for private social quarters.

Result of Analysis. Benefits likely outweigh costs for this proposed change.

Estimated Economic Impact. This regulatory action affects private social quarters. Charitable gaming at private social quarters is where entrance to the premises is limited to members of the organization operating the social quarters and their guests.

This action increases the number of electronic pull-tab devices permitted at private social quarters. According to 11VAC15-40-10, an electronic pull-tab device may "take the form of an upright cabinet or a handheld device or may be of any other composition as approved by the department."² More recent versions of the devices resemble tablet computers.³

Current regulation allows a maximum of 10 stand-alone (cabinet style) electronic pull-tab devices⁴ and 50 handheld electronic pull-tab devices in premises where bingo sessions open to the public are conducted. Private social quarters are currently limited to a total of five electronic pull-tab devices, regardless of device type. The Board now proposes to increase the number of pull-tab devices allowed in private social quarters to nine.

This change increases the number of devices allowed, but not required, for private social quarters. Accordingly, charitable organizations that have private social quarters are unlikely to incur the costs of procuring additional devices unless they expect the revenue from having extra gaming devices available would outweigh the costs. This regulatory change does not increase regulatory compliance costs for any entity. Charitable organizations with private social quarters may see increased revenues if they increase the number of pull-tab devices available at gatherings for members and their guests. Revenue and profits for manufacturers of electronic pull-tab devices may also increase as this regulatory change may increase demand for electronic pull-tab devices.

Businesses and Entities Affected. Board staff reports that there are approximately 330 charitable organizations in the Commonwealth that are allowed to conduct gaming open to the public and that there are seven manufacturers of electronic pull-tab devices that sell such devices in Virginia. All of these entities, as well as any charitable organizations that only have private social quarters gaming for members and their guests, will be affected by this proposed regulatory change.

Localities Particularly Affected. No locality will be particularly affected by this regulatory change.

Projected Impact on Employment. This proposed regulatory change is unlikely to have any impact on employment in the Commonwealth.

Effects on the Use and Value of Private Property. This proposed regulation is unlikely to have any impact on the use or value of private property.

Real Estate Development Costs. This proposed regulation is unlikely to affect real estate development costs.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. No small business is likely to incur compliance costs on account of this proposed regulatory change.

Alternative Method that Minimizes Adverse Impact. No small business is likely to incur compliance costs on account of this proposed regulatory change.

Adverse Impacts:

Businesses. No business is likely to incur compliance costs on account of this proposed regulatory change.

Localities. No locality is likely to be adversely affected by this proposed regulatory change.

Other Entities. No other entities are likely to suffer any adverse impact on account of this proposed regulation.

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¹ http://townhall.virginia.gov/L/viewpetition.cfm?petitionid=224

² http://law.lis.virginia.gov/admincode/title11/agency15/chapter40/section10/

³ VTabs, the company that initiated the petition for this action, has some examples of current devices on its website. See http://www.v-tabs.com/.

⁴ Electronic pull-tabs are defined in the regulation as "an electronic version of a single instant bingo card or pull-tab. An electronic pull-tab is a predetermined game outcome in electronic form, distributed on-demand from a finite number of game outcomes by a distributed pull-tab system." Electronic pull-tab devices are upright cabinet style gaming devices or hand-held gaming devices that allow gamers to play pull-tab style instant bingo games. For examples of electronic pull-tab devices, see here: http://www.v-tabs.com/

Agency's Response to Economic Impact Analysis: The agency concurs with the analysis of the Department of Planning and Budget.

Summary:

The proposed amendment increases the number of electronic pull-tab devices used in private social quarters from the currently allowed five devices to nine devices.

Article 4
Electronic Pull-tab Devices

11VAC15-40-300. Electronic pull-tab device general requirements.

A. Each electronic pull-tab device shall bear a seal approved by the commissioner and affixed by the department.

B. An electronic pull-tab device shall not be capable of being used for the purposes of engaging in any game prohibited by the department.

C. In addition to a video monitor or touch screen, each electronic pull-tab device may have one or more of the following: a bill acceptor, printer, and electromechanical buttons for activating the game and providing player input, including a means for the player to make selections and choices in games.

D. For each electronic pull-tab device, there shall be located anywhere within the distributed pull-tab system, nonvolatile memory or its equivalent. The memory shall be maintained in a secure location for the purpose of storing and preserving a set of critical data that has been error checked in accordance with the critical memory requirements of this regulation.

E. An electronic pull-tab device shall not have any switches, jumpers, wire posts, or other means of manipulation that could affect the operation or outcome of a game. The electronic pull-tab device may not have any functions or parameters adjustable through any separate video display or input codes except for the adjustment of features that are wholly cosmetic.

F. An electronic pull-tab device shall not have any of the following attributes: spinning or mechanical reels, pull handle, sounds or music solely intended to entice a player to play, flashing lights, tower light, top box, coin tray, ticket acceptance, hopper, coin acceptor, enhanced animation, cabinet or payglass artwork, or any other attribute identified by the department.

G. An electronic pull-tab device shall be robust enough to withstand forced illegal entry that would leave behind physical evidence of the attempted entry or such entry that causes an error code that is displayed and transmitted to the distributed pull-tab system. Any such entry attempt shall inhibit game play until cleared, and shall not affect the subsequent play or any other play, prize, or aspect of the game.

H. Except as provided in subsection I of this section, the number of electronic pull-tab devices, other than those electronic pull-tab devices that are handheld, present at any premises at which charitable gaming is conducted shall be limited to 10. Except as provided in subsection I of this section the number of handheld electronic pull-tab devices present at any premises at which charitable gaming is conducted shall be limited to 50. The department shall determine whether an electronic pull-tab device is handheld.

I. The number of electronic pull-tab devices used to facilitate the play of electronic pull-tabs sold, played, and redeemed at any premises pursuant to § 18.2-340.26:1 of the Code of Virginia shall be limited to five nine.