In case you missed the news, Virginia is weighing potential locations for six casinos throughout the Commonwealth, including in Richmond - the first (legally authorized) casinos to ever be built in Virginia. Your first thought might be, “I thought casinos were in Vegas or on riverboats - when did gambling become legal here?” And no, this isn’t an article about the recent market volatility and use of risky options contracts to bet on the ebb and flow of the American securities market (although it certainly could have been).

Gambling has a long and rebellious history in the United States. Images of the wild-west cowboy playing poker with one hand on his cards and the other on his revolver in the smoke-filled back room of a dusty saloon are burned into our cultural zeitgeist as the pinnacle of Americana. As urbanization took hold in the early 20th century, card- and games- based gambling became simultaneously more commonplace and more taboo, as Prohibition-era restrictions and mores broadly swept across a wide swath of activities deemed too morally problematic.

Gambling is also inextricably tied to sports - allowing a non-athlete to hold a stake in the outcome of a contest without participating in that contest. One of the most popular and storied forms of sports gambling is tied to the horse racetracks. Our earliest records of quarter-mile horse races date back to 1674 right here in Henrico, Virginia. In 1868, horse racing was officially organized through the American Stud Book, and with it came a vast underground network of bookies and bettors looking to stake a claim on their favorite thoroughbred. Similarly, the all-American sport of baseball was professionally organized in 1875 with the National Association of Professional Base Ball Players (later the “National League”). The American League of Professional Baseball Clubs (later the “American League”) followed in 1901, with the unifying Major League Baseball (MLB) founded in 1903. Despite concerted efforts by the leagues to curb it, the thrill (and potential lure of huge profits) of gambling took hold in the sport. Players were even swept up, culminating in the infamous Black Sox Scandal of 1919, where eight players from the Chicago White Sox were accused (but technically acquitted at trial) of being paid to throw the World Series against the Cincinnati Reds by a gambling syndicate intent on profiting on the fix.

Despite its illustrious history in the United States, gambling remained illegal in all forms (including racetrack betting) until Nevada first broke the mold in 1931. Three states followed suit a half-century later to allow limited forms of sports-based gambling - Delaware in 1976, Montana in 1986, and Oregon in 1989. Congress responded in 1992 by passing the Professional and Amateur Sports Protection Act (PASPA), which outlawed sports gambling nationwide (except for the four states listed above) until it was overturned by the Supreme Court in 2018.

States, recognizing the immense market that gambling occupies (and the monopoly power that they hold), seized on the opportunity to establish lotteries to raise additional revenue (typically ostensibly to support the state’s public education budget). 45 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands all have state-run lotteries; Virginia’s lottery generated 595.36 million dollars in net proceeds in 2020. See Virginia Lottery Fiscal Year 2020 Report, available at https://www.valottery.com/-/media/pdf/Financial-Report-FY20.ashx.

While most states cracked down on gambling within their jurisdiction, tribal gambling halls and casinos began to emerge in the 1970s and 1980s on Native American land, which proved to be a murky area of regulatory authority. In 1988, Congress passed the Indian Gaming Regulatory Act (IGRA), which authorized a national framework for permitting regulated gambling by tribes on reservation land. While the IGRA permitted certain smaller scale cultural gambling and bingo halls with little regulation, it only permitted larger-scale Class III casino gambling on reservation lands if the state in which the reservation was located already permitted Class III gambling in other forms.

However, Virginia opted-out entirely from Class III gaming, and Congress specifically prohibited the federally-recognized tribes in Virginia from participating in gambling under the Thomasina E. Jordan Indian Tribes of Virginia Federal Recognition Act of 2017. Virginia joins Georgia, Hawaii, Kentucky, New Hampshire, South Carolina, Utah, and Vermont as the only 8 states to not have any casinos.

But change has come swiftly to Virginia. Perhaps trading on the legacy that horse-racing has in the Commonwealth, Virginia was one of the first states to pass a bill in favor of sports betting after PASPA was overturned in 2018. In enacting SB 384 last March of 2020, Virginia legalized sports betting and authorized the Virginia Lottery Board to promulgate regulations to facilitate the permitting process for licensed establishments to conduct sports betting.

Betting launched on January 21 of this year, and nearly sixty million dollars were wagered in the first 10 days of operation. Virginia is not currently accepting new license requests, but more may be available in the near future. Virginia SB1254, which proposes expanding the number of sports licenses available by exempting licenses issued to casinos from being counted, just passed the Virginia Senate on March 9, 2021, and is before the Governor now.

Virginia’s approval of casino gambling followed soon thereafter with the passage of SB 36, also in March of 2020, although rollout is more delayed. Again, the Virginia Lottery Board is overseeing casino licensing, and official regulations are slated to take effect around October 7, 2022.

Virginia’s approval of sports betting and six casinos throughout the Commonwealth may signal a sea change in Virginia’s acceptance of gambling and a loosening of restrictions, which could open up a huge new market for restaurants, bars, and other smaller establishments to facilitate a new generation of high-stakes (or not-so-high-stakes) gaming - one that doesn’t involve buying short-run options contracts with your student loan checks.

If raffles, bingo, lottery giveaways, gaming, sports betting, or full-on casino gambling is part of your business plan, you should consult with an attorney before proceeding. It’s a huge market, and there’s a lot of opportunity to be an early mover. But the rules are complex and in a state of flux right now, and institutional licenses are very limited. But if history has taught us anything, it’s that America is trending towards deregulation and decriminalization in areas that were once considered more taboo. Anticipating the continued loosening of restrictions on various forms of gambling... well that just seems like a pretty safe bet.

If you have any questions about this article, please contact Matthias Kaseorg (mkaseorg@setlifflaw.com) at 804-377-1273 or Steve Setliff (ssetliff@setlifflaw.com) at 804-377-1261.