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Lottery board weighs unlicensed gaming risks and details of proposed Internet gaming bill
Summary
Board staff outlined efforts to address unlicensed and offshore gaming, coordination with state police and the attorney general, and walked the board through HB161, a bill to authorize Internet gaming tied to casinos with platform fees, a 15% AGR tax model, a temporary "hold harmless" fund through 2029, and regulatory timelines.
At its Jan. 13 meeting, the Virginia Lottery Board discussed growing agency work on unlicensed gaming, a proposed national exclusion registry, and a detailed staff briefing on House Bill 161, a proposal to authorize Internet gaming platforms attached to casino licenses.
The Director said Virginia has not issued a public letter on unlicensed gaming but has held private conversations with licensees and is coordinating with the Virginia State Police and the Attorney General's Office to pursue broader collaboration. He described work with a vendor, YieldSec, to quantify the illegal market and identify offshore operators: "Being able to quantify the issue, is going to be extraordinarily important," he said.
On HB161 (presented by staff), the bill would allow the five authorized casinos to host up to three internet gaming platforms each, permit separate poker brands on those platforms, and limit platform eligibility to gaming entities already licensed in two or more other U.S. jurisdictions, according to staff presentation. The bill as discussed in the packet would require the Lottery Board to accept notices of intent for platform licenses by July 1, 2026, and to promulgate regulations by specified deadlines. Staff summarized proposed fees and taxation in the bill as described in the meeting materials: an initial platform fee and a $2,000,000 platform application fee cited in the staff slides, a five-year license term, and a 15% tax on adjusted gross revenue with temporary allocations to a "hold harmless" fund (6% of the 15% through 12/31/2029) to compensate casino operators for proven revenue losses attributed to online gaming.
Staff warned the board about the operational and regulatory workload the bill would create if it advances, including implementing evidentiary standards and distributions for a hold-harmless fund and receiving notices of intent as early as July 2026. The Director said staff will produce a deeper memo for the board once they complete a full analysis.
Board members asked procedural and enforcement questions, including whether a national exclusion list would require statutory change (staff said no statutory change would be needed on the Lottery's end) and how the Lottery would handle permitted licensees who operate prediction markets in other jurisdictions. The Director said the Lottery could take swift action against licensees operating illegal activities in Virginia if they emerged.
What happens next: staff will prepare a deep-dive memo on HB161 and other bills and will file required economic impact statements for bills that touch Lottery operations, per staff remarks.
