I want to thank the Virginia Alcoholic Beverage Control Authority on behalf of Banilla Games, Inc. for the opportunity to inform their decision making on these regulations related to the deployment of Skill Games in Virginia (3VAC5-80-10 et seq). We appreciate the challenge the ABC faces in quickly drafting new regulations under the current global conditions, and we are committed to doing all we can to ensure a functional and compliant system that maximizes the revenues Virginia collects for its COVID-19 Relief Fund.
Suggested Language Changes/Edits
C. No distributor shall locate more than six 12 skill game machines at any ABC retail licensed establishment or more than 12 24 skill game machines at any truck stop.
While we understand the intent of the original proposal, we think a six and 12 skill game machine limit would frustrate the purpose of this program – revenue for the Commonwealth’s COVID-19 Relief Fund. Distributors will not place more machines than they feel the market will bear. In other words, a distributor will not place a machine in a location if they do not think it is fiscally viable in light of the monthly tax. Increasing the per location limit as we suggest will still ensure a cap is in place but would better allow the market to determine how many machines to place in a specific location, thereby ultimately increasing the revenue to the COVID-19 Relief Fund.
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.
This requested change eliminates the words “malfunctioning” and “replacement” as subsection A of this section does not limit the relocation of skill game machines to only malfunctioning machines. Therefore, this change will ensure clarity and consistent interpretation and application of subsection A.
C. Should an internal hardware component of a skill machine malfunction or break, the distributor may repair or replace the internal component(s) provided the distributor notifies the Authority Bureau of Law Enforcement at least one day prior to the repair, but the Authority Bureau of Law Enforcement need not formally approve the repair; such repair of an internal hardware component shall not count towards the 10% relocation maximum established in subsection A of this section. Should a skill game machine malfunction such that it is irreparable, the distributor shall follow the procedure set forth in subsection B of this section, except that the distributor only need to provide five days’ notice to the Authority Bureau of Law Enforcement, and, if approved by the Authority Bureau of Law Enforcement, the distributor may replace the malfunctioning machine with a replacement machine of the same make and model; such replacement of a malfunctioning machine shall not count towards the 10% relocation maximum established in subsection A of this section.
The first sentence in this new subsection C clarifies that a distributor may repair or replace an internal hardware component, such as the circuit board or bill acceptor, of a skill game machine. The distributor would need to notify the Authority Bureau of Law Enforcement at least one day prior to the scheduled repair. However, the Authority Bureau of Law Enforcement would not need to formally approve the repair because a hardware repair is readily distinguishable from relocating or replacing an entire machine and the notice would still ensure that the Authority Bureau of Law Enforcement is kept fully apprised and able to perform its oversight duties. Lastly, the repair would not count towards the 10% cap in subsection A of this section as a hardware repair is not the same as relocating a machine to another qualified location, and the distributor should not be punished or negatively impacted for keeping their machines in optimal or working order.
The second sentence in this new subsection C permits a distributor to replace an irreparable malfunctioning machine with a machine of the same make and model. The distributor would still be required to notify and gain approval of the Authority Bureau of Law Enforcement prior to replacing the machine, except that the distributor must only notify the Authority Bureau of Law Enforcement five days prior to replacement. We think five days is ideal because it still provides enough time for the Authority Bureau of Law Enforcement to approve the request and does not require that the distributor have an idle machine for 10 days. Waiting 10 days would not be fair to the distributor as they would have an idle, unusable machine for approximately one-third of a month yet still be required to pay the full $1,200 monthly tax. Similar to the first change, the replacement would not count towards the 10% cap in subsection A of this section as replacing a malfunctioning machine is not the same as relocating a machine to another qualified location, and the distributor should not be punished or negatively impacted because a machine is malfunctioning and cannot be repaired.
D. A distributor may exchange or swap a skill game machine with a different make or model machine provided the distributor (i) does not exceed the total number of machines initially registered pursuant to 3VAC5-80-50, (ii) registers the new machine pursuant to 3VAC5-80-50, and (iii) complies with the notice procedure set forth in subsection B of this section. An exchange or swap under this subsection shall count towards the 10% relocation maximum established in subsection A of this section.
Under this new subsection, a distributor could replace a poor-performing skill game machine with a different machine. For instance, a distributor initially places a single screen skill game machine and it is not performing well enough to be fiscally viable, but the distributor thinks a dual screen machine would perform much better. This subsection would permit the distributor to exchange or swap the single screen machine with a dual screen machine. This is logical because, currently, if a skill game machine does not perform well enough to justify paying the monthly tax and the distributor does not have another qualified location to relocate the machine to, the distributor’s only option is to permanently warehouse the machine to alleviate their monthly tax burden. This in turn hurts the Commonwealth as it would be one less machine from which the state receives the $1,200 monthly tax. This new subsection D, on the other hand, would give distributors one last option or alternative before permanently warehousing the machine and decreasing the tax revenue the Commonwealth ultimately collects. Importantly, this new subsection prevents an increase in the total number of machines, requires registration, and ensures notification to the Authority and requires its approval pursuant to the procedure established in subsection B of this section. Moreover, by including such an exchange or swap in a distributor’s 10% relocation allowance under subsection A, the Authority can remain assured that there is a hard maximum cap and that its agents and employees will not get bogged down or lose track of the machines.