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Virginia horse racing officials adopt rules that limit expansion of slots-like gambling machines

A handful of casino-like facilities will open their doors in Virginia next year, but the company planning to reopen Colonial Downs and build a network of off-track betting facilities won’t be able to rapidly expand the gambling enterprise.

On Tuesday, the Virginia Racing Commission voted 3-0 to approve a final set of regulations governing historical horse racing, the newly legal gambling technology that lets players use slots-like machines to wager on past horse races. Gov. Ralph Northam signed a bill authorizing the machines earlier this year, but the General Assembly and the governor left it to the racing commission to make the rules on how the terminals can be rolled out.

The regulations allow up to 3,000 machines statewide, a cap that the new owner of Colonial Downs and many in the racing industry warned could impede the moneymaking potential of a venture pitched as a windfall for Virginia horse racing and government tax coffers. Critics of the 3,000-machine cap urged the racing commission to give itself leeway to raise the cap on its own without going through an extensive regulatory process that requires a public comment period.

Multiple racing commissioners said they agreed the rules may be overly burdensome. But they said the commission had to follow the text of an executive order from Northam that instructed it to set “reasonable limitations” on the expansion of gambling.

Commissioner I. Clinton Miller said he disagreed with some aspects of the regulations and Northam’s instructions, but was “wimping out” and voting to approve the rules.

“I sort of agree with the governor somewhat in that you ought to start slow,” Miller said. “But you ought to have the ability to grow without going back and relegislating.”

In April, Chicago-based Revolutionary Racing bought Colonial Downs from previous owner Jacobs Entertainment, which shuttered the New Kent County track in 2014 during a dispute with horsemen’s groups over the live racing schedule. The legislation allowing historical horse racing machines was critical to the sale. Revolutionary Racing, which will keep the Colonial Downs name, is planning to spend $200 million to renovate the track and open several new off-track betting parlors in Virginia.

Miller said the commission’s hands were also tied by the General Assembly’s decision to require the regulations to be in place within 180 days of the legislation’s passage. The deadline for the commission to act is Sunday, Miller said.
The regulations approved Tuesday are temporary. After 18 months, they’ll be replaced by permanent regulations, and several commissioners said they hope the perceived flaws can be worked out in a year or two.

“While the regulations aren’t exactly the way I would like to see them either, I think they’re regulations that we can utilize to get out to a great start here,” said Commissioner J. Sargeant Reynolds Jr.

The regulations allow up to 700 machines at the Colonial Downs track in New Kent and create a sliding scale for the number of machines allowed at satellite gambling facilities. Populous localities like Richmond can have up to 700 terminals. Medium-sized localities (population 60,000 to 120,000) could have up to 300 terminals, while localities with fewer than 60,000 people could have up to 150 terminals.

Local governments in cities and counties that approved off-track betting can’t block the new gambling sites. But localities would have to give permission before the company could install the maximum number of machines.
Last week, the Richmond City Council gave its approval for a planned off-track betting site in a former Kmart building in South Richmond.

The historical horse racing lounges will operate under the brand “Rosie’s.” The betting center at the track in New Kent is expected to open in March, with off-track facilities expected to follow in Richmond, Chesapeake, Hampton and the town of Vinton in Roanoke County. Live racing is expected to return to Colonial Downs next fall.

Critics said the rule limiting the number of machines based on population size was unfair to smaller localities like Vinton or Martinsville. An off-track betting site in Vinton, Miller said, wouldn’t draw customers only from the 8,000 people who live in the town — it also would serve the entire Roanoke Valley. Similarly, a site in Martinsville , which has a population of roughly 13,500, could draw customers from North Carolina, Miller said. Requiring those facilities to be small because the localities are small, Miller said, “just doesn’t make economic sense.”

Despite the mixed feelings about the rules, Commission Chairman D.G. Van Clief Jr. hailed Tuesday’s action as a “historic inflection point” for Virginia horse racing.

Brent Stevens, an investor in the new Colonial Downs group, said he and his partners “feel the weight” of their opportunity to revive the industry.

“We will make you proud,” Stevens said.

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