Title of Regulation: 3VAC5-80. Games of Skill (adding 3VAC5-80-10 through 3VAC5-80-170).

Statutory Authority: Chapters 1217 and 1277 of the 2020 Acts of Assembly.

Effective Dates: July 1, 2020, through July 1, 2021.

Agency Contact: LaTonya D. Hucks-Watkins, Legal Liaison, Virginia Alcoholic Beverage Control Authority, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4698, FAX (804) 213-4574, or email latonya.hucks-watkins@abc.virginia.gov.

Preamble:

Section 2.2-4011 of the Code of Virginia authorizes an agency to adopt emergency regulations upon consultation with the Attorney General, and the necessity for the action is at the sole discretion of the Governor. Chapters 1217 and 1277 of the 2020 Acts of Assembly amended § 18.2-325 of the Code of Virginia relating to the definition of illegal gambling and skill games and added §§ 2.2-115.1 (COVID-19 Relief Fund) and 18.2-334.5 (Exemptions for family entertainment centers). The emergency regulatory action creates a new chapter, 3VAC5-80, that establishes the requirements, restrictions, and penalties associated with the operation of skill games at Virginia Alcoholic Beverage Control Authority licensed retail establishments and truck stops, including those for (i) registration, monthly reporting, and required bonds; (ii) the labeling for skill game machines; (iii) limits on the number of skill games allowed in a qualified location; and (iv) penalties for noncompliance.

CHAPTER 80
GAMES OF SKILL

3VAC5-80-10. Scope.

In conformance with Chapters 1217 and 1277 of the 2020 Acts of Assembly, this chapter adopts regulations relating to "games of skill." This chapter expires on July 1, 2021, subject to the provisions of 3VAC5-80-170.

3VAC5-80-20. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless context clearly indicates otherwise:

"Authority" means the Virginia Alcoholic Beverage Control Authority as established in § 4.1-101 of the Code of Virginia.

"ABC retail licensee" means a person licensed by the authority pursuant to Title 4.1 of the Code of Virginia to sell alcoholic beverages.

"Board" means the Board of Directors of the Virginia Alcoholic Beverage Control Authority.

"Coin operated amusement games" means games that do not deliver or entitle the person playing or operating the game to receive cash; cash equivalents, gift cards, vouchers, billets, tickets, tokens, or electronic credits to be exchanged for cash; or merchandise or anything of value.

"COVID-19 relief fund" means the fund established in § 2.2-115.1 of the Code of Virginia.

"Distributor" shall mean any person that (i) manufactures and sells skill games, including software and hardware, and distributes such devices to an ABC retail licensee or truck stop or (ii) purchases or leases skill games from a manufacturer and provides such devices to an ABC retail licensee or a truck stop, or that otherwise maintains such games and is otherwise responsible for onsite data collection and accounting.

"Family entertainment center" means an establishment that (i) is located in a building that is owned, leased, or occupied by the establishment for the primary purpose of providing amusement and entertainment to the public; (ii) offers coin operated amusement games and skill games pursuant to the exclusion created by this regulation; and (iii) markets its business to families with children.

"Gambling device" means:

a. Any device, machine, paraphernalia, equipment, or other thing, including books, records, and other papers, that are actually used in an illegal gambling operation or activity; and

b. Any machine, apparatus, implement, instrument, contrivance, board or other thing, or electronic or video versions thereof, including those dependent upon the insertion of a coin or other object for their operation, that operates, either completely automatically or with the aid of some physical act by the player or operator, in such a manner that, depending upon the elements of chance, it may eject something of value or determine the prize or thing of value to which the player is entitled; provided, however, that the return to the user of nothing more than additional chances or the right to use such machine is not deemed something of value within the meaning of this chapter and provided further that machines that only sell or entitle the user to items of merchandise of equivalent value that may differ from each other in composition, size, shape, or color shall not be deemed gambling devices within the meaning of this section.

"Skill" means the knowledge, dexterity, or any other ability or expertise of a natural person.

"Skill games" means an electronic, computerized, or mechanical contrivance, terminal, machine, or other device that requires the insertion of a coin, currency, ticket, token, or similar object to operate, activate, or play a game, the outcome of which is determined by any element of skill of the player and that may deliver or entitle the person playing or operating the device to receive cash, cash equivalents, gift cards, vouchers, billets, tickets, tokens, or electronic credits to be exchanged for cash, merchandise, or anything of value whether the payoff is made automatically from the device or manually.

Each terminal of a skill game machine where a player may play a game shall constitute a game made available for play, regardless of whether it is a standalone terminal or a terminal that is part of a skill game machine that has multiple terminals.

"Truck stop" means an establishment (i) that is equipped with diesel islands used for fueling commercial motor vehicles; (ii) has sold, on average, at least 50,000 gallons of diesel or biodiesel fuel each month for the previous 12 months, or is projected to sell an average of at least 50,000 gallons of diesel or biodiesel fuel each month for the next 12 months; (iii) has parking spaces dedicated to commercial motor vehicles; (iv) has a convenience store; and (v) is situated on not less than three acres of land that the establishment owns or leases.

3VAC5-80-30. Exclusions from chapter, certain skill games offered at family entertainment centers.

The provisions of this chapter shall not apply to coin operated amusement games located on family entertainment centers operated in accordance with § 18.2-334.5 of the Code of Virginia, nor shall such coin operated amusement games be considered a gambling device or otherwise unlawful pursuant to § 18.2-325 of the Code of Virginia.

3VAC5-80-40. Applicability of chapter.

The provisions of this chapter shall only apply to ABC retail licensees in good standing that possess a valid authority retail license issued by the board pursuant to Title 4.1 of the Code of Virginia and the regulations applicable to any such retail license or truck stops meeting the definition in 3VAC5-80-20. For purposes of this section, a retail licensee is not in good standing if the license has been suspended or is inactive for any reason.

3VAC5-80-50. Initial registration and monthly reporting.

A. No later than July 7, 2020, each distributor shall file a registration statement with the Authority Bureau of Law Enforcement on such form that may be prescribed by the authority. The registration statement shall include all skill games that are available for play by the distributor filing the registration statement as of June 30, 2020. The registration statement shall include such information as may be prescribed by the authority. The registration statement shall include (i) the total number of skill games provided for play in Virginia by the distributor; (ii) the address of each location where skill games are provided for play in Virginia by the distributor; (iii) the total number of skill games provided for play by the distributor at each respective location; (iv) the total amount wagered during the previous month on each skill game provided for play in Virginia by the distributor at each respective location where the skill game was provided; (v) the total amount of prizes or winnings awarded during the previous month on each skill game provided for play in Virginia by the distributor at each respective location where the skill game was provided; and (vi) the name, address, and contact information of the individual person responsible for full and total compliance with this chapter and law and a statement that such individual shall be responsible for any penalty assessed for violations of this chapter or law applicable to the distributor of any skill game. Such individual shall certify that the initial registration is a true and accurate accounting of the information provided in the initial registration statement.

Failure to file the registration statement by July 7, 2020, shall result in the barring of any such games not registered. Any such game not included in the registration statement shall be considered an illegal gambling device.

B. Each distributor shall, no later than the 20th of the succeeding month, file with the Authority Bureau of Law Enforcement on such form prescribed by the authority the following requisite information.

The monthly report shall include (i) the total number of skill games provided for play in Virginia by the distributor; (ii) the address of each location where skill games are provided for play in Virginia by the distributor; (iii) the total number of skill games provided for play by the distributor at each respective location; (iv) the total amount wagered during the previous month on each skill game provided for play in Virginia by the distributor at each respective location where the skill game was provided; (v) the total amount of prizes or winnings awarded during the previous month on each skill game provided for play in Virginia by the distributor at each respective location where the skill game was provided; and (vi) the name, address, and contact information of the individual person responsible for full and total compliance with this chapter and law and a statement that such individual shall be responsible for any penalty assessed for violations of this chapter or law applicable to the distributor of any skill game. Such individual shall certify that the monthly report is a true and accurate accounting of the information provided in the monthly report.

C. No distributor or combination of distributors shall locate more than eight skill game machines at any ABC retail licensed establishment or more than 24 skill game machines at any truck stop. No ABC retail licensee or truck stop shall exceed this maximum number of games.

D. Failure to file such form by the 20th of the month shall result in a civil penalty of at least $25,000 per incident. Each incident of noncompliance shall constitute a separate offense.

3VAC5-80-60. Labeling of skill game machines.

No later than July 20, 2020, the distributor of each skill game placed in an ABC retail licensed establishment or truck stop that the distributor has registered pursuant to 3VAC5-80-50 shall cause to be adhered to each skill game a label as prescribed by the Authority Bureau of Law Enforcement. The authority shall provide the required labels. All labels shall be adhered on the side of all skill games in a conspicuous and visible location to the authority, its law-enforcement agents, and players of the game. Any skill game without the requisite label adhered to the skill game machine by July 20, 2020, shall be in violation of this chapter.

3VAC5-80-70. Total number of skill games by any single distributor.

A. The total number of skill games provided for play in ABC retail establishments and truck stops shall not exceed the total number of such machines reported by a distributor to the authority as games provided for play as of June 30, 2020. Only those skill games that were provided by a distributor and available for play in ABC retail licensed establishments or truck stops as of June 30, 2020, and registered by the distributor by July 7, 2020, may continue to operate on or after July 1, 2020.

B. Any exceedance of the number of skill games machine determined by the authority shall result in a civil penalty of at least $25,000 per machine exceeding the total number of registered machines. Each day the violation continues shall constitute a separate offense. In addition, any such skill game machine exceeding the registered number or not baring the required label shall be deemed an illegal gambling device and may result in the loss of the authority issued retail license to sell or offer to sell alcoholic beverages.

3VAC5-80-80. Relocation of skill game machine from one establishment to another.

A. Skill game machines may be relocated from one qualified location to another qualified location or warehoused and subsequently placed in any qualified location, provided however, from July 1, 2020, through September 1, 2020, a distributor may not relocate skill game machines in excess of 20% of the total number of skill games initially registered and available for play on June 30, 2020. Additionally, from September 2, 2020, through July 1, 2021, a distributor may not relocate skill game machines in excess of 20% of the total number of skill games initially registered and available for play on June 30, 2020, by any distributor.

B. Prior to being relocated pursuant to subsection A of this section, the distributor shall provide notice, including an image (photograph with a clearly visible numeric identifier) of the obliterated label of the malfunctioning machine to the Authority Bureau of Law Enforcement. Such notice shall be provided at least 10 days prior to the relocation date. No skill game shall be relocated prior to approval by the Authority Bureau of Law Enforcement. Upon receipt of such notice and evidence and approval, the Authority Bureau of Law Enforcement may issue a new label to the distributor for the replacement machine. The new label shall be adhered to the replacement machine in accordance with 3VAC5-80-60 prior to the replacement game being enabled for play.

C. Notwithstanding subsections A and B of this section, a distributor may provide routine maintenance on any skill game machine located in a qualified location.

3VAC5-80-90. Taxation generally.

A. All skill games initially registered by a distributor pursuant to 3VAC5-80-50 shall be subject to the taxation requirements of the second enactment of Chapters 1217 and 1277 of the 2020 Acts of Assembly, that is, $1,200 for each skill game located and initially registered in the Commonwealth during the previous month by a distributor. Returns and payment vouchers shall be remitted to the Department of Taxation no later than August 20, 2020.

B. Returns and payment vouchers shall be due on September 20, 2020, and each month following through July 20, 2021, and shall be remitted to the Department of Taxation based on the number of skill game machines provided for play at ABC retail licensees or truck stops determined by the calculation determined in 3VAC5-80-80. Skill games placed in a warehouse for subsequent placement at a qualified location shall not be subject to such tax until such time as the skill game is relocated to a qualified location. Skill games placed in a warehouse for subsequent placement at qualified location shall be subject to taxation for all calendar months during which such games were in play for any portion of any day during the month.

C. Any single day of any calendar month during which a skill game machine is provided for play by a distributor at a qualified location shall remit the total $1,200 tax on such machine. No proration of the monthly tax shall be allowed.

3VAC5-80-100. Bond required.

Each distributor of a skilled game machine shall post a surety bond naming the authority as beneficiary. The authority may call the bond for any violation of this chapter or law regulating skill game machines. The bond shall be in the following amounts and shall remain in effect for 14 months following issuance:

Number of Skill Game Machines	Amount of Bond
1 – 50	$50,000
51 – 500	$250,000
501 – 1,000	$500,000
1,001 and above	$1 million

3VAC5-80-110. Records to be kept by distributors generally.

A. All distributors shall keep complete, accurate, and separate records for a period of one year. The records shall be available for inspection and copying by any member of the board or its special agents during reasonable hours. The board and its special agents shall be allowed free access during reasonable hours to every place in the Commonwealth where skill games are manufactured, sold, stored, offered for play, or played for the purpose of examining and inspecting all records, invoices, and accounts therein.

B. At a minimum, each distributor shall retain and maintain the following records: (i) the manufacturer, game name, model, and serial number of each skill game sold or otherwise provided for use and (ii) the name, address, and phone number of each entity to which the skill game was sold or otherwise provided.

C. Records may be retained at a skill game distributor's principal place of business, provided that records maintained at a location outside this Commonwealth are preserved in such a manner as to allow for the electronic transmission of records to the board or its special agents within a reasonable time.

D. "Reasonable hours" shall be deemed to include all business hours of operation and any other time at which there exists any indication of activity upon the premises.

E. All such records shall be maintained for a period of at least the 12 months next following July 1, 2021.

3VAC5-80-120. Minimum age of skill game player; consumer protection.

No person younger than 18 years of age shall be eligible to play any skill game. Any person playing a skill game may have consumer protection rights. It shall be the responsibility of the distributor to provide notice of such age eligibility to the proprietor of the establishment prior to the placement of any skill game machine in any ABC retail licensed establishment or truck stop. The distributor shall adhere to the front of any skill game machine a notice in font – Times New Roman Bold – 16 point as follows: "It is unlawful for any person under the age of eighteen (18) to play this game. The outcome of this game is not regulated by the state."

3VAC5-80-130. Referral to commonwealth attorney.

In the event that the authority determines that an illegal gambling device is located in a retail licensed establishment or truck stop, such skill game may constitute illegal gambling activity pursuant to § 18.2-331 of the Code of Virginia, and the authority may refer such allegation to the Commonwealth's Attorney for the jurisdiction in which the skill game is located.

3VAC5-80-140. Penalty.

Any distributor found by the authority to be in violation of this chapter shall be subject to a civil penalty of not less than $25,000 and not more than $50,000 per incident. All civil penalties shall be paid to the authority and remitted by the authority to the COVID-19 Relief Fund.

3VAC5-80-150. Compliance with COVID-19 related executive orders.

Distributors and qualified locations shall comply with provisions of any effective Executive Order related to social distancing and other applicable provisions in the placement of any skill game machines within a qualified location.

3VAC5-80-160. Public records.

Any information received as the result of required monthly reports shall be determined public information and subject to the provisions Virginia Freedom of Information Act (§ 2.2-3700 of the Code of Virginia) without exclusions.

3VAC5-80-170. Effect of expiration.

A. The expiration of this chapter on July 1, 2021, does not relieve a distributor from filing the required month report for June 2021. The required report shall be filed not later than July 20, 2021. Distributors shall maintain such records in accordance with 3VAC5-80-110 B.

B. Any alleged violation of this chapter, ongoing on July 1, 2021, or commenced prior to July 1, 2022, shall continue until such time as an agreed resolution is achieved or a final non-appealable order has been issued by a court of competent jurisdiction.

FORMS (3VAC5-80)

Final Skill Game Registration Statement Form (undated, filed 6/2020)

Final Skill Game Monthly Report (undated, filed 6/2020)