Stores dedicated to unregulated 'skill game' machines proliferate in Bristol

As electronic "skill game" machines continue to operate unregulated and untaxed in Virginia, they have proliferated in Bristol, where at least three stores — each filled with 25 to 30 of the machines — have popped up in recent months.

Previously, a few of the games could be found in convenience stores and truck stops, but the new storefronts are dedicated strictly to the games and appear to be mini casinos.

City officials are aware of the machines and were sending out letters to the operators asking them to cease operations by Jan. 31, City Manager Randy Eads said Tuesday. But the letter was drafted prior to a judge's decision Monday to extend the injunction of the state's ban on the machines, which allows them to continue operating for at least a few more months.

Eads said that according to Virginia Code Section 18.2-325 et. seq., the games are illegal.

"From my understanding the order to extend the injunction has not been entered yet. Once the order is entered, I will review the order to determine how the city will move forward. The city will not violate the court's order. However, if the court finds skill games are illegal, the city will be positioned to take legal action to force the skill game operators to cease operations," Eads wrote in an email to Cardinal News.

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The stores are within a few blocks of each other, with two on Euclid Avenue, the Lucky Skill Arcade at 1865 Euclid Ave., another at 2118 Euclid Ave. that doesn't have a name on its storefront, and the Lucky Store, which is in a former bank building at 1419 W. State Street.

A small fourth shop, Andy's Store, has five skill machines and operates in a strip shopping center on Gate City Highway, within sight of the temporary Bristol casino at the old Bristol Mall property. A groundbreaking for the permanent Hard Rock Hotel & Casino Bristol is being held Wednesday.

Sometimes dubbed "gray machines," because they mostly operate in a legally gray area, skill games function like slot machines in casinos. However, operators say they don't rely on chance, but require a level of skill for players to win and earn a payout. The machines, formally referred to as "unsanctioned gaming ventures" due to their unregulated status, have been a common sight in restaurants, taverns, convenience stores and other establishments around the commonwealth since the 1970s.

March 2020:

The Virginia General Assembly passed legislation banning skill games in the commonwealth effective July 1, 2020.

April 2020:

Because of the economic impact of the COVID-19 pandemic on small businesses, the General Assembly backed a plan by then-Gov. Ralph Northam to grant a one-year reprieve for the operations of electronic skill games in Virginia, pushing the ban back to July 1, 2021. During this one year extension, the legislature tasked the Virginia Alcoholic Beverage Control Authority with adopting regulations to govern the industry.

July 1, 2021:

Virginia's skill games ban went into effect. That month, a Norfolk Circuit Court judge denied a request from a group of Virginia business owners for an injunction that would allow the continued operation of skill games at their establishments, stating that the plaintiffs failed to prove that they had been "irreparably harmed" by the ban.

Dec. 7, 2021:

A judge at the Greensville County Circuit Court issued a temporary injunction blocking the enforcement of the ban after former NASCAR driver and Emporia business owner Hermie Sadler filed a suit against Northam, Mark Herring, then the attorney general, and the Virginia ABC, arguing that the ban violates free speech by seeking to classify a particular type of video game as illegal gambling. Since, businesses in Virginia were once again permitted to operate skill games, although without regulatory oversight and taxation by the state.

Dec. 5, 2022:

The same Greenville County judge who issued the temporary injunction once again declined to dismiss Sadler's suit. Because Sen. Bill Stanley, R-Franklin County, represents Sadler in his effort in trying to overturn the ban, the judge extended the injunction until after the 2023 General Assembly session wraps in late February.

In 2019, the General Assembly passed legislation authorizing the development of resort-style casinos in five localities – Bristol, Danville, Norfolk, Portsmouth and Richmond – if approved by voters.

The legislature then directed the Virginia Joint Legislative Audit and Review Committee to review the casino gaming laws in other states, evaluate the commonwealth's current and potential gaming governance structures and project potential revenues from expanding legal forms of gaming.

The JLARC study projected that casinos in these five locations would flood the state's coffers with millions of dollars in gaming tax revenue, which lawmakers decided to use to fund Virginia's dire school construction and modernization needs. The study also found that skill games were already generating a similar amount in revenue.

Because some lawmakers were concerned that the electronic betting machines could pose a threat to the profitability of the planned casinos, the legislature in 2020 passed legislation banning the devices effective J​​uly 1 of that year.

But after the coronavirus pandemic shuttered thousands of businesses, lawmakers agreed to a one-year reprieve for operations of the electronic skill games and tasked the Virginia Alcoholic Beverage Control Authority with regulating about 6,000 of the estimated 8,000 machines in the state, labeling each with a yellow sticker.

In the fall of 2021, Hermie Sadler, a former NASCAR driver and entrepreneur from Emporia who is currently seeking the Republican nomination in the newly created 17th state Senate District, challenged the ban in court, arguing that it violates free speech. For his suit, Sadler teamed up with state Sen. Bill Stanley, R-Franklin County, an attorney.

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Agreeing with the plaintiffs, a judge in Greenville County ​​last December issued a temporary injunction blocking enforcement of the ban. While the injunction is in place, however, Virginia is not collecting tax revenue on legal skill games.

Sadler's family currently operates two convenience stores in Southside, plus a racetrack-themed restaurant and a truck stop. They began offering skill games in the mid-1980s and operate a total of 41 machines today, including different variations of card-, fantasy-, strategy- sports- and role-playing games, among others.

Sadler doesn't own the machines, but commissions them from distributors like Pace-O-Matic, a skill games manufacturer headquartered in Duluth, Georgia, that operates about 5,500 games in the commonwealth.

After the expiration of the ABC's regulatory oversight ended June 30, businesses across Virginia have been operating skill games in murky legal territory. A spokeswoman for the ABC last week declined to comment, citing the pending litigation.

The state Attorney General's Office, state Sen. Todd Pillion, R-Washington County, and casino officials also declined comment due to the lawsuit.

A trial date scheduled for last month was continued until next year, and on Monday, a judge in Greensville County again declined to dismiss Sadler's suit and, because of Stanley's involvement in the case, extended the injunction until after the 2023 legislative session wraps at the end of February.

Michael Barley, a spokesman for Pace-O-Matic, applauded the court's ruling.

"We are pleased that legal skill games will continue operating in Virginia and providing much-needed revenue to small business owners across the state," Barley said in an email.

"We anticipate the final court decision will uphold the legality of skill games in the commonwealth. However, without further regulation and additional taxation, taxpayers are missing out on nearly $100 million in tax revenue that could have gone toward critical projects along with curbing illegal games that are proliferating in Virginia communities."

According to the State Corporation Commission, Lucky Skill Arcade in Bristol is registered under the entity Shiv9 Inc. under agent Arvind Patel with its registered office address in Emporia, Virginia. It was formed on March 14, 2022.

Lucky Store is registered under Juan Services LLC under agent Juan E. Guzman Corchado with its primary office address in Chattanooga, Tennessee. It was formed on Dec. 28, 2021, according to the SCC.

Neither Patel nor Corchado could be reached for comment.

The windows of each store are covered with posters featuring images of games including Rakin’ Bacon, Dragon Link, Ultimate Fire Link and Ocean King 3 Plus Crab Avengers. All offer ATM machines.

Many of the skill games have bets ranging from 25 cents to $2.

Last Wednesday afternoon, few people were playing the games. At the shop at 2118 Euclid Ave., Georgia Johnson of Bristol, Tennessee was the sole customer, playing one of the "fish tables," where the player tries to shoot fish for money.

She said it's her favorite game because it requires some skill whereas many of the other games are mostly luck.

Johnson, who said she plays the skill games three or four times a week, said she likes to have a strategy when she plays and she added that it's not hard to win $100-$200 at the fish tables.

She said it's easy to see how some people could get into trouble playing the games, so she takes $5-$10 when she goes in and she stops playing when the money runs out.

Occasionally, she said she plays games at the casino, but she said she prefers the small stores because the casino doesn't have the fish game.

Over at the Lucky Store at around 4 p.m., three people were playing, including Nick Holden, of Bristol, Tennessee. While playing the Ultimate Fire Link game, Holden won $14. He said he's won big a couple of times, but he wouldn't say how much.

Holden said he prefers the small stores because "there's just too much to choose from" at the nearby casino.

Susan Cameron is a reporter for Cardinal News. She has been a newspaper journalist in Southwest Virginia... More by Susan Cameron

Markus Schmidt is a reporter for Cardinal News. Reach him at [email protected]. More by Markus Schmidt