Commentary: as gaming explodes, lack of oversight puts virginia at risk

Commentary: As Gaming Explodes, Lack of Oversight Puts Virginia at Risk

​Nearly a decade ago, Virginia became the first state to establish a framework that legalized and regulated fantasy sports.

Since then, fantasy sports and other forms of gaming have proliferated amid a marketplace that has continually evolved. Virginia’s once-innovative regulatory model, unfortunately, is now outdated and  fails to provide the clarity, fairness and accountability that Virginians deserve.

The solution is simple. Virginia needs to establish and empower a single, self-funding agency to protect consumers and ensure operators comply with legal requirements for responsible play.

Virginia’s current system

Today, Virginia has three entities charged with regulating various forms of legal gaming.

The Virginia Lottery, an in- dependent agency, regulates lottery games, casinos and sports betting.

The Office of Charitable and Regulatory Programs, in the Virginia Department of Agriculture and Consumer Services, regulates fantasy sports and charitable gaming such as bingo, slot-like electronic pull tab machines and Texas Hold ’em poker tournaments.

The Virginia Racing Commission, an executive agency, oversees horse race wagering, including slot-like historical horse racing games.

A 2022 Joint Legislative Audit and Review Commission study reported that neither the Virginia Racing Commission nor the Office of Charitable and Regulatory Programs has adequate staffing to effectively carry out their regulatory oversight responsibilities.

The lack of clarity and consistency in Virginia’s regulatory system is colliding with the reality of a rapidly evolving marketplace, and the risks to Virginians are troubling and real. Resetting the regulatory model will strengthen existing protections against operators engaging in illegal and exploitative financial practices.

Here are two examples that demonstrate how the market has evolved beyond the regulatory capacities of Virginia’s current system:

Fantasy Sports v. Sports Betting

Fantasy sports, regulated by the Office of Charitable and Regulatory Programs, include league contests where the value of prizes or awards is known at the start. Participants select players and compete against other participants. Winners are determined by accumulated statistical results rather than a score, point spread or single performance. Operators must register with the state annually and pay an $8,300 registration fee. There is no tax rate on these operators’ adjusted gross revenue.

Sports betting, regulated by the Virginia Lottery, involves participants who don’t compete against each other; they compete against metrics set by the operator, or “the house.” These are bets placed on a single game’s outcome, a single player’s game performance or a similar combination.

Sports betting operators must undergo a rigorous background investigation and pay a fee of $250,000 prior to being awarded a state license. They also must secure a bond and pay a 15% tax on adjusted gross revenue.

Yet fantasy sports operators are increasingly circumventing this structure, without consequence, by offering single-player contests against the house, which is essentially sports betting. This is drawing more participants to platforms run by fantasy sports operators, who pay no tax on adjusted gross revenue, and undermining the oversight framework established for registered sports betting operators.

Internet gaming

Internet sweepstakes casinos are very popular in Virginia. They’re also illegal.

These offshore companies use sleek online design and marketing practices to entice Virginia consumers. They operate without complying with consumer protections verifying players’ age, providing resources for problem gambling, complying with financial auditing and reporting requirements supported by Virginia’s legal casinos.

The illegal operators also do not undergo rigorous background investigations or pay the $15 million license fee required from each of Virginia’s land-based casino operators.

Internet gaming has become so popular in the absence of a regulated market with trustworthy operators that it was the No. 1 form of gambling cited by callers to the Virginia Council on Problem Gambling’s hotline, according to the council’s 2024 annual report.

There is no tax revenue generated through illegal sweepstakes casinos. These activities serve only to skirt licensing requirements and oversight from state regulators, placing consumers at considerable risk from bad actors.

Our inconsistent, inefficient and inadequate oversight system is being played by noncompliant operators who seek to leverage the system’s weak points and blind spots, creating an unfair market that increasingly leaves Virginia consumers at risk and tax revenue uncollected. It also undermines and devalues the compliance efforts and licensing requirements followed by Virginia’s legally authorized sportsbook and casino operators.

Addressing these challenges is a task for a unified Virginia gaming commission with the authority and resources to protect the public, enforce the law and evolve with the marketplace.