Mr. Hill,

On behalf of American Amusement, a distributor of Skill Games, I want to thank you for the opportunity to comment.

Over the course of the last 6 weeks, the Virginia Alcoholic Beverage Control Authority (“ABC”) has performed the unenviable task of crafting regulations to govern a highly competitive market. We appreciate the opportunity to comment on these emergency regulations and wish to thank John Daniel and the remainder of the ABC staff for their hard work in providing the regulatory template for the deployment of Skill Games in Virginia (3VAC5-80-10 et seq.).

We seek to provide comments that not only maximize revenues for Virginia’s COVID-19 Relief Fund, but also seeks to provide a regulatory framework that lessens the burden on the ABC, while ensuring the integrity of the law and the protection of the public.

Suggested Language Changes/Edits

3VAC5-80-20

“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. Each power supply of a skill game machine shall constitute a game made available play, regardless of whether it is a standalone terminal or a skill game machine with multiple terminals.

-Comment: The idea here is that each machine, regardless of how many terminals are part of the machine counts as one machine. In the alternative, if each terminal is considered a skill game machine, the request is that a skill machine with more terminals than permitted may be disabled to only permit the permitted number of machines.

3VAC5-80-50

C. No distributor shall locate more than six 12 skill game machines at any ABC retail licensed establishment or more than 12 skill game machines at any truck stop.

-Comment: The intent of the legislation is to produce revenue for the Commonwealth. In accomplishing this legislative intent these regulations should equitably apply to retail establishments and truck stops. The only distinguishing feature between truck stops and ABC retail license establishments is simply truck stops, as defined. There may certainly be occasions where ABC retail licensees have significantly more retail space than truck stops, and similarly there may be instances where truck stops have significantly less retail space than ABC retail licensees. Moreover, it seems it appears the large corporate truck stops are receiving more favorable treatment than the local, Virginia owned, small businesses. It is believed that certain market participants have a majority, if not all, of the truck stop locations in Virginia, which not only provides truck stops more favorable treatment, but also provides these certain market participants more favorable treatment.

Additionally, from an enforcement standpoint, requiring parity -- 12 machines per location, regardless of whether it is an ABC retail licensee or a truck stop -- ensures ABC enforcement officers do not have to discern what is or is not a truck stop vs. ABC retail licensee.

3VAC5-80-60

A. No later than July 20, 2020, the distributor of each skill game placed in an ABC retail licensed establishment or truck stop that they have 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.

B. 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."

-Comment: Places the Notice requirements in one place. While not encompassed in the public comment, the addition of subsection B to 3VAC5-80-60 simply moves the clause from 3VAC5-80-120, in order to provide a distributor clarity on its notice requirements.

3VAC5-80-80

A. Once registered with ABC, skill game machines may be relocated from one qualified location to another qualified location, or warehoused and subsequently placed a qualified location, provided however, a distributor may not relocate skill game machines in excess of 20% 10% of the total number of skill games initially registered and available for play on June 30, 2020, by any distributor (e.g., distributor registers 5,000 machines = 1000500 relocations prior to July 1, 2021). A Distributor shall provide notice, as required by subsection E of this section.

- Comment: The current figure of 10% favors those distributors with a larger market share. Specifically, those distributors know where machines perform well and are in turn less likely to move them. Smaller distributors do not have that luxury and will therefore be taking on more risk to find locations that are profitable enough to meet the $1,200 per month tax. Providing the ability to move machines to more profitable locations will ultimately lead to more revenue for the Commonwealth, as well as new and smaller market participants.

B. Should a registered skill game machine malfunction or break, the Distributor may replace the malfunctioning or broken machine with a new machine subject to the notice requirements set forth in subsection E. In the event a skill game machine requires minimal maintenance, such that repair occurs on site, the Distributor need not notify the Authority Bureau of Law Enforcement. In no event, shall the repair or replacement of a skill game machine count towards the 20% relocation maximum established in subsection A of this section.

- Comment: A distributor, who ultimately will be paying the tax and filing monthly reports should be allowed to replace a broken machine with another of the same make and model. It is unreasonable to expect a distributor to wait nearly 2 weeks for approval to fix an idle machine that could otherwise be in operation, yet still be on the hook for the full $1,200 monthly tax. Similarly, if the machine can be fixed on site it is unfair to require the distributor to provide notice and obtain approval for a fix that can occur in a matter of hours.

C. At any time following initial registration of “in play” skill game machines, a Distributor may warehouse, or otherwise store, its skill game machines during the applicable time period. Provided the skill game machine is out of play for the entire month, the Distributor shall not be subject to the tax set forth in 3VAC5-80-90. In the event a Distributor wishes to return its skill game machine to play, a Distributor may return the skill game machine to its last registered location and such return shall not count towards the 20% relocation maximum established in subsection A of this section. In the event the Distributor wishes to return the machine to a new qualified location, such relocation shall count towards the 20% relocation maximum established in subsection A of this section. In both instances, the Distributor shall provide notice to the Authority Bureau of Law Enforcement, as required by subsection E of this section.

D. A Distributor may exchange or swap a skill game machine with a different make or model skill game machine owned by the Distributor, provided the Distributor (i) does not exceed the total number of machines initially registered pursuant to 3VAC5-80-50, (ii) properly registers the skill game machine pursuant to the requirements of 3VAC5-80-50, and (iii) complies with the notice requirements set forth in subsection E of this section. Any exchange or swap under this subsection shall count towards to 20% relocation maximum established in subsection A of this section.

E. A Distributor shall provide notice to the Authority Bureau of Law Enforcement at least 5 days prior to the relocation or replacement date on a form provided by the Authority Bureau of Law Enforcement, with such information including the specific identifying number, the address of the new qualified location, the address of the prior qualified location, and the proposed date of relocation. In the event of replacement, the Distributor shall provide an image of the obliterated specific identifying number and request for new specific identifying number. No skill game machine shall be relocated or replaced prior to approval by the Authority Bureau of Law Enforcement.

- Comment: Again the 5-day notice is a reasonable and fair window for both regulators and distributors. From a regulatory standpoint it is sufficient time for the Authority Bureau of Law Enforcement to be made aware of a relocation, repair or replacement. A distributor is given the ability to keep their machines in optimal working order to service their customers and meet the tax goals established by the legislation.

Additional Comments that have no provided language:

For ease of determining where skill game machines are, ABC shall assign an identifiable number, located on the face of the sticker, that is attributable to each Distributor. I.e. If a Distributor A registers 100 machines, Distributor A’s stickers are labeled 1-100. The specific number is then required as part of the monthly reporting (3VAC5-80-50), and required as part of any movement of machines. (Additionally, ABC may reserve an additional 20 stickers to be issued as part of relocation maximum- in such instance Distributor A would be appropriated stickers 1-100 (with 101-120 serving as its relocation maximum).

Additionally, in order to obtain an accurate count on the location and number of machines provided by and in play by a distributor, we request ABC impose a requirement that as part of the registration of games in play, all Distributors shall provide a location agreement between a Distributor and Location, with an effective date of July 1, 2020.

Again, we thank you for the opportunity to comment, and would be glad to answer any questions moving forward.

Jeff Smith, IV