Thank you for the opportunity to submit comments regarding the proposed regulations governing the conduct of Texas Hold’em poker tournaments by certain qualifying charitable organizations (“QOs”). These comments are proffered on behalf of the Virginia Charitable Bingo Association (“VCBA”) and its myriad non-profit member-businesses and charities. Below, the comments are organized by the proposed Virginia Administrative Code (“VAC”) section affected and in order of priority to VCBA.

1. Proposed 11VAC20-30-170: Use of Proceeds.

            The language of proposed 11VAC20-30-170 would require QOs that choose to conduct Texas Hold’em poker tournaments (“THPTs”) to use the same “use of proceeds” formula originally intended for bingo games, specifically “10% of its gross receipts” must go to “those lawful religious, charitable, community, or educational purposes for which the organization is specifically chartered.” See 11VAC20-20-20(D)(1) and (D). However, bingo is a game with significantly lower operating costs than other charitable gaming options, such as electronic pull tabs (“EPTs”) or THPTs. For example, bingo does not require high-end software or electronics, nor specially trained, professional personnel to conduct the game. Rather, bingo games require little more than paper bingo cards and bingo callers that are typically untrained volunteers of the QO. Moreover, a few unpaid volunteers can manage a single game serving hundreds of bingo players at a time, resulting in a relatively low operating cost.

On the other hand, EPTs have a much higher operating cost, as the conduct of EPTs requires the QO to pay a significant portion of the revenues generated therefrom to the EPT operator or manufacturer to cover its associated costs, including research and development, software licensing, hardware, etc. To accommodate these higher operating costs, the Commonwealth has determined that it is appropriate for a QO to calculate its required “use of proceeds” from the conduct of EPTs using “adjusted gross receipts,” which is, essentially, the net revenue generated from the play of an EPT, as opposed to gross receipts. See Va. Code § 18.2-340.19(A)(1)(b) and 11VAC20-20-20(D)(2). In other words, a QO conducting EPT gaming is permitted to deduct necessary operating expenses from its gross receipts before calculating the appropriate “use of proceeds” percentage. Bingo play has dwindled over the past few years, and this accommodation simply helps to reduce the financial strain on the QOs that choose to conduct more popular games than bingo, which often carry higher operating costs.

Similar to EPTs, THPTs will carry significantly higher overhead costs than bingo. THPTs require specially trained professional card dealers, game managers, and on-site security, not to mention poker tables, chips, and cards. By requiring a 10% of gross receipts standard for “use of proceeds” derived from THPTs, these proposed regulations leave no room for the QOs to cover basic operating costs and expenses. More likely than not, any QO conducting a THPT under this proposed requirement would do so at a loss. Thus, no charitable THPTs are likely to happen at all under these proposed parameters. The “use of proceeds” formula applicable to THPTs ought to reflect modern market conditions: bingo has given way to more engaging, more expensive, forms of charitable gaming. Accordingly, VCBA respectfully requests that the final regulations accommodate the higher operating costs associated with THPTs, just as the Commonwealth deemed appropriate for EPTs.

While many the comments already posted to the public forum have advocated in favor of amending the proposed 11VAC20-30-170 to apply the use of proceeds formula imposed on EPTs (20% of adjusted gross receipts) to THPTs—an idea VCBA wholly supports—we are unfortunately proscribed from doing so by way of the express language of Va. Code § 18.2-340.19(A)(1)(a), which requires the use of proceeds to be calculated using a predetermined percentage of gross receipts for all types of charitable gaming except electronic gaming. Consistent with the Commonwealth’s precedent of accommodating types of charitable gaming with relatively higher operating costs to ensure QOs can generate revenue for charitable purposes, VCBA respectfully requests that VDACS amend proposed 11VAC20-30-170 to reflect a use of proceeds formula specific to the conduct of THPTs.

VCBA recommends that the “use of proceeds” formula applicable to THPTs be set at a minimum of at least 1.4% of gross receipts, which is roughly equivalent to the “use of proceeds” formula applicable to EPTs. Let me explain. Typically, $0.93 of every $1.00 wagered on EPTs is paid out as prizes. The remaining $0.07 is, therefore, the “electronic gaming adjusted gross receipts.” Va. Code § 18.2-340.16, emphasis added. As the “use of proceeds” formula applied to EPTs is 20% of the electronic gaming adjusted gross receipts (0.20 x $0.07 = $0.014), we can determine that $0.014 (1.4 cents) of every $1.00 wagered on EPTs is required to be allocated to “those lawful religious, charitable, community, or educational purposes for which the organization is specifically chartered.” See 11VAC20-20-20(D)(2) and (D). As $0.014 is roughly 1.4% of the $1.00 wagered in this example, we can conclude that the “use of proceeds” formula applied to EPTs is essentially the same as 1.4% of its adjust gross receipts. Therefore, VCBA is merely advocating for parity amongst these two similarly situated charitable gaming types, each with operating costs comparably higher than those associated with bingo, which has fallen out of favor.

2. Proposed 11VAC20-30-90(F): Prohibiting Concurrent Tournaments.

The proposed 11VAC20-30-90(F) unequivocally prohibits QOs from hosting concurrent THPTs. Respectively, VDACS lacks the requisite authority to promulgate regulations prohibiting concurrent THPTs.  It is well established that “[w]hen the legislature delegates authority to an administrative agency to promulgate regulations, those regulations must neither exceed the scope of the authority delegated nor be inconsistent with it.” Avalon Assisted Living Facilities, Inc. v. Zager, 39 Va. App. 484, 508, 574 S.E.2d 298, 309 (2002). “While we endeavor to discern the true intent of the legislature, and adopt that sense of the words which harmonizes best with the context, and promotes in the fullest manner the apparent policy and objects of the legislature, we typically rely solely on the words used in the statute to evidence that intent.” Mirant Potomac River, LLC v. Commonwealth, State Air Pollution Control Bd., No. 2067-08-2, 2009 WL 1748524, at *6 (Va. Ct. App. June 23, 2009). “In determining that intent, words are to be given their ordinary meaning, unless it is apparent that the legislative intent is otherwise.” Id.

The clear intention of the legislature in enacting Senate Bills 936 (2020), 394 (2022), and 402 (2022), was to allow QOs to host THPTs as a means of generating revenue for charitable purposes. As such, any proposed regulation which inhibits a QOs’ ability to generate revenue for charitable purposes, such as a ban on concurrent THPTs, without specific language plainly evidencing the intent to do so must be read as inconsistent with the legislature’s intent and is, therefore, improper.

In  the same vein, the legislature enacted SB 936 to allow qualified charities to host “poker tournaments,” a specifically defined term. See Va. Code § 18.2-340.16. Also, Va. Code § 18.2-340.28:2 (dealing with the “[c]onduct of Texas Hold’em poker tournaments”) uses the plural form of “tournaments” in its title as well as within all five of its subparts: A-E. As mentioned previously, “[i]n determining that intent, words are to be given their ordinary meaning, unless it is apparent that the legislative intent is otherwise.” Here, we must assume that the legislature envisioned the conduct of multiple (plural), concurrent tournaments unless “it is apparent that the legislative intent is otherwise.” However, as the intent of the legislature was to permit QOs to generate revenue for charitable purposes by conducting THPTs, any interpretation of these statutes in a way that would otherwise restrict a QO’s ability to generate revenue for charitable purposes, e.g., prohibiting the conduct of concurrent tournaments, must be contrary to the legislature’s intent. Hence, VDACS’s proposed 11VAC20-30-90(F) likely is inconsistent with the legislature’s intent and delegation of regulatory authority.

3. Proposed 11VAC20-30-130(G)(1): Restricting Landlords and Related Persons from Participating in the Management, Operation, Conduct, or Administration of Any Poker Tournament Operated, Conducted, or Administered on Landlord’s Premises.

Given the case decisions mentioned in the previous section, VDACS has exceeded its authority with proposed 11VAC20-30-130(G)(1). The General Assembly addressed landlords leasing to QOs conducting THPTs by requiring registration with VDACS:

“The Department may promulgate regulations that require any landlord that leases to a qualified organization any premises devoted in whole or in part to the conduct of bingo games or any other charitable gaming to register with the Department.” Va. Code § 18.2-340.18(11).

The General Assembly could have authorized further restrictions on such landlords but did not do so.  According to the common law principle for construing legislation expressio unius est exclusio alterius, a syntactical presumption may be made that an express reference to one matter excludes other matters.  In other words, by expressly addressing such landlords in requiring registration, a presumption exists that the General Assembly did not authorize additional limits or restrictions on landlords as provided in the proposed regulation.

The same canon of construction can be applied to Va. Code § 18.2-340.19(A) to further bolster this point. It states that VDACS shall adopt regulations that:

“Prescribe the conditions under which a qualified organization may lease the premises of a permitted social organization for the purpose of conducting bingo, network bingo, instant bingo, pull tabs, seal cards, and electronic gaming permitted under this article and establish requirements for proper financial reporting of all disbursements, gross receipts, and electronic gaming adjusted gross receipts and payment of all fees required under this article.” Va. Code § 18.2-340.19(A)(13).

Here, the legislature clearly delegates authority to VDACS to promulgate regulations governing the conditions under which a QO may lease a premises “for the purpose of conducting bingo, network bingo, instant bingo, pull tabs, seal cards, and electronic gaming.” It does not address THPTs. The Virginia Court of Appeals has held that “[i]n interpreting the words in a statute, we presume that the General Assembly acted with full knowledge of the law in the area in which it dealt.” Mirant Potomac River, LLC v. Commonwealth, State Air Pollution Control Bd., No. 2067-08-2, 2009 WL 1748524, at *6 (Va. Ct. App. June 23, 2009). Hence, we must presume that when the legislature gave specific authority to VDACS to promulgate regulations prescribing the conditions under which a QO may lease a premises to conduct various types of charitable gaming except THPTS, that it did so intentionally. Therefore, VDACS has clearly exceed its legislative authority in attempting to promulgate proposed 11VAC20-30-130(G)(1) and it must be stricken.