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Virginia doesn't have licensed poker rooms. A state gambling board chairman opened one anyway.
Spat over charitable gaming prompts concerns from lawmakers about gambling oversight
When a new Virginia police took outcome last year letting charities run Texas Concur 'Em poker tournaments, the charitable gaming industry, unremarkably associated with fading bingo halls, was eager to get going.
Possibly a little besides eager, according to lobbyist Matt Benka, who warned state officials on behalf of the now-dissolved Virginia Charitable Poker Clan in July 2020 that potentially illegal poker rooms were popping up before the state had approved whatever regulations or permits.
Things haven't gotten smoother since. Equally Virginia pushes further into legalized gambling, the failed rollout of charitable poker over the past year is a stark example of inventive gambling interests — at times writing their own rules — moving too fast for lawmakers and regulators to keep up.
In that location are even so no poker regulations or permits, partly out of growing concern among legislators about whether the state is capable of constructive oversight of charitable gaming.
The lack of permits hasn't stopped Chuck Lessin, the chairman of the state'south Charitable Gaming Lath, from opening a poker room, Popular's Poker, at his Richmond bingo hall and sports bar. Lessin has also started a for-profit poker operations company other charities can rent to run their games.
Terminal year, he and other board members clashed with state regulators over how strict the rules for poker should exist, disregarding a recommendation for safeguards to prevent the same person from profiting off poker games while controlling the charity required to employ at least 2.5 per centum of the proceeds for charitable purposes.
After Benka's warning, Lessin told officials at the Virginia Department of Agronomics and Consumer Services, which oversees charitable gaming along with the board, the emergence of unregulated and unlicensed poker was a reason to beginning giving out permits every bit shortly as possible instead of insisting the industry play by the rules and wait.
"We are all aware many charities are ignoring that asking," Lessin wrote to VDACS officials in an Baronial 2020 electronic mail. "The path of least resistance here is to only exist gear up and license the charities and operators at the primeval opportunity."
When things didn't go every bit Lessin planned, he accused bureau officials of undermining his lath's authority and sabotaging the poker rollout past slowing downward the enactment of the regulations. So he sued them.
The poker controversy is part of a broader battle playing out in the little-understood globe of charitable gaming — Virginia's outset form of legalized gambling — equally it fights to protect its turf against newly legalized slots parlors, casinos and sports betting apps. The dispute involves two land-ordered reviews of how the industry works, at least one lawsuit and the unusual dynamic of a state lath's leadership strikingly at odds with its agency partners.
The board's vice-chair, Amy Solares, also appears to accept a stake in a Virginia Embankment bingo hall that has been advertising poker events for more than a year. That facility, the Bingo Palace/Beach Poker Room, was 1 Benka flagged for officials in July 2020 as hosting poker without a allow. In an email to VDACS a month later, Lessin seemed to validate Benka's claim, maxim: "Amy e mailed me today informing me that she is ceasing the activities of the charity hosting poker in her facility." The Beach Poker Room continues to promote poker events on its Facebook page.
Neither Solares nor her lawyer responded to the Mercury's inquiries about her connexion to the facility. Solares'southward 2019 financial disclosure, required of all land board members, listed "Independence Associates t/a Bingo Palace" as a business interest. Her most recent disclosure is blank.
Lessin is a legislative appointee to the Charitable Gaming Board. He was terminal reappointed in 2019 past former House Speaker Kirk Cox, R-Colonial Heights. Solares is an appointee of Gov. Ralph Northam.
'Everything's out the window'
By the 2021 legislative session, the General Associates had seen enough to try to freeze the implementation of charitable poker until 2022 through an amendment to the state budget. The Charitable Gaming Board signed off on final poker regulations at the end of 2020, simply the legislature'south activity nullified those rules. In response, VDACS told applicants in May the agency could no longer issue poker permits.
That prompted Lessin'due south lawsuit, which argued the agency should have given his charity a poker permit because the regulations had taken effect before legislators stopped them.
A Richmond judge disagreed, faulting the agency for not fully processing Lessin'southward application but concluding no one has an inherent right to a state-issued poker allow. That ruling came in August.
Undeterred, Lessin opened Pop'southward Poker in early on September, where games are held from ii p.m. to ii a.m. Thursdays through Sundays. They take identify at the aforementioned South Richmond accost where Lessin and other board members held official concern meetings terminal year to write the poker rules.
In an interview, Lessin said he's running his new venture equally if the regulations were in place. But he doesn't plan to file disclosure reports with VDACS. If he did, he says, the agency probably wouldn't take them.
Lessin argues that because legislators passed a police force allowing charitable poker with regulations coming later, that past itself made charitable poker legal as of July 2020. If legislators wanted everyone to wait for the regulations, he said, they could have made that articulate in the bill. But it wasn't.
"I waited, and I didn't want to exercise it," Lessin said. "Now, in my opinion, everything'southward out the window."
The tumultuous outset of charitable poker in Virginia may have gone largely unnoticed because some see footling damage in people playing cards for money when they'll exist able to do it at casinos soon anyway. Simply some policymakers see information technology every bit a stunning failure of good-regime principles, one that warrants a serious reevaluation of the state's fragmented gambling laws and how they're enforced.
Sen. Bryce Reeves, R-Spotsylvania, an ex-cop who began sounding the alarm about overreaches past the charitable gaming industry afterward seeing slots-similar bingo machines in places they shouldn't exist, said he wants to cease what he sees every bit obvious self-dealing.
"If people get locked upwards because of that, then shame on them," said Reeves, who'southward serving on a joint legislative subcommittee studying charitable gaming.
Del. Paul Krizek, D-Fairfax, the subcommittee'due south chairman, said pausing poker was meant to permit a fresh look at how the industry is regulated. The poker rooms opening up despite the freeze, he said, cut against that effort.
"I retrieve we made it pretty clear that everything is frozen with respect to opening new ways to do charitable gaming until we are finished with this process," Krizek said. "If it's non against the law, information technology certainly would be against the spirit of what the General Assembly has asked that we do."
The Function of the Inspector Full general, the state's watchdog bureau, was also instructed to look into charitable gaming. Its report is due Oct. i.
'The whole affair is upside down'
In improver to poker, officials are examining whether legally questionable charitable gaming machines are filling the void created by the ban on skill machines that took effect in July.
Legislators are also concerned about the possibility of regulatory gaps arising from exemptions for charitable organizations' "private social quarters," or guild-like spaces only open to members and invited guests.
Electronic bingo games, which resemble slot machines but work a footling differently, played in private social quarters aren't subject to the aforementioned reporting and audit requirements as regular bingo sessions. According to VDACS information, the profitability of those machines, beginning authorized in 2007, has surpassed one-time-fashioned bingo. In 2019, before the numbers fell significantly due to the COVID-19 pandemic, charitable organizations reported almost $250 million in gross gaming receipts, with $26.6 million going to charitable purposes. That year, the machine manufacturers reported $964 million flowing through their games, an indication most machines fall under the social quarters exemption. Charitable gaming proponents take said nearly of that money goes back to players in prizes, making net proceeds smaller than the totals might propose.
Just similar bingo, electronic bingo and raffles, it was understood that some poker proceeds would exist dedicated to the charitable activities of the nonprofit or tax-exempt grouping involved, which could include VFW or American Legion posts, fraternal lodges, religious organizations, volunteer fire departments and police groups, schoolhouse booster clubs and more amorphous social welfare groups. The prospect of state-sanctioned poker rooms as well meant money-making opportunities for people lined up to run or host the games.
In Lessin's telling, a land now flooded with gambling interests and their lobbyists is unfairly casting a curtain over the 1 gambling sector meant for social practiced, taking a harder line against charities than for-profit companies. Charitable bingo halls and poker rooms, he says, present competition for bigger commercial players. And that has fabricated them a target.
"I think the whole matter is upside down," Lessin said.
Lessin has at least 1 lawmaker in his corner. Sen. Chap Petersen, D-Fairfax, who sponsored the Texas Concur 'Em legislation in 2020, is representing Lessin in his lawsuit against VDACS. Petersen'southward law firm is existence paid for the piece of work. The senator, who abstained from poker-related votes in the 2021 session, said he wants to ensure charities aren't "treated as an afterthought" as gambling grows.
"The idea was to expand charitable gaming and to keep the charities economically robust," Petersen said.
'It volition come at a cost'
As the sponsor of the poker nib, Petersen had command over its wording and the legal vagaries that resulted. He said he couldn't annotate extensively on the thing due to his part in the litigation.
Prior to the lawsuit , Petersen filed a public-records request with VDACS for poker-related documents. The Virginia Mercury obtained the same records from the agency, which claimed some of the records Petersen requested were fully exempt from the Freedom of Information Human activity and fabricated extensive redactions to other documents.
Envisioned as a style to allow a little social gambling for proficient causes, Virginia commencement immune bingo in 1973, when no other gambling, not even the Virginia Lottery, existed. Information technology initially fell under the purview of local governments just oversight shifted to the state "largely as a result of local bingo scandals and criminal prosecutions in the early 1990s," according to a country report published in 2003.
Lessin, a homebuilder, has been involved in clemency bingo for almost four decades, a side venture he said arose from his advocacy for Richmond's Jewish community. One of his charities, The Jerusalem Connection, which says its mission is to "inform, educate and actuate support for Israel and the Jewish people," owns the South Richmond belongings where the bingo and poker operations are located, according to city property records. Some other of his charities, Cheers, which has a more general focus on community welfare in Richmond, applied for the poker permit.
Lessin said he spent years pushing for charitable poker, faced with declining bingo revenues and the state's softening anti-casino stance.
"I think we sort of carry the moral loftier basis hither," Lessin said.
The charitable poker bill passed overwhelmingly in 2020, calculation clemency poker tournaments to the activities allowed for licensed charitable gaming organizations. Though the police clearly envisioned a system of regulations and permits for poker, information technology doesn't clearly specify that poker play can't brainstorm until that oversight is in place.
When the law took effect, Lessin and his board wanted to move fast on the regulations. Simply at that place were differing opinions over who should accept first crack at writing them.
Emails prove VDACS officials were prepared to draft regulations and nowadays them to the board, a fairly typical process for technical, industry-specific regulations. Simply the board wanted to write the regulations itself, putting industry members in a leading role with regulators assisting. That setup led to VDACS beingness pressured to rush the process and implement regulations the bureau saw as inadequate and problematic, possibly to the betoken of alien with state law.
"Obviously, they accept the potency to take the activity every bit they did, merely information technology will come at a price," Mike Menafee, a VDACS official who manages charitable and regulatory programs within the consumer protection partition, said in an Baronial 2020 electronic mail to a colleague nearly problems with the proposed regulations.
VDACS objected to language empowering the board to adjudicate poker complaints, authority the agency said properly rests with regulators and prosecutors. That language was removed.
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Another point of contention was whether the rules should include safeguards to preclude whatever 1 person or group from existence paid to run the poker games while simultaneously running the charity getting a cut and interim as the landlord collecting rent on the building. Rules against that mixing of interests are in place for bingo to prevent creative accounting and self-negotiating that could maximize profits while minimizing the corporeality left over for charity. That provision was absent-minded from the board'southward typhoon poker regulations.
Menafee noted its omission could permit coin to flow "unchecked" between charitable and for-profit entities controlled by the aforementioned person or people. In agency editing notes attached to the draft regulations, Menafee wrote that the board appeared to be signaling that that blazon of arrangement was fine as long equally it was disclosed.
"The land took regulatory oversight away from the localities due to the abuses and the intertwining of these interests," Menafee wrote. "The board should consider separating these interests to avoid a historical echo."
'The pull a fast one on guarding the craven coop'
The board overlooked Menafee's advice. The end result, the agency wrote in a regulatory background memo, "further weakens provisions of the regulations intended to prevent conflicts of involvement."
Equally the regulations were revised over more than a dozen meetings in the second one-half of 2020, the board looked favorably on public comments from a homo named Rich Lehman, who, among other things, suggested weakening a provision requiring a representative of the charity to be physically present for poker games and scrapping a dominion preventing people who run charities or their family members from playing in that charity's tournaments. The lath accepted both suggestions. Lehman now works for Lessin as director of operations for Pop's Poker.
Lessin said that relationship wasn't disclosed because he hadn't initially expected to start a poker operations visitor and didn't have a business organization tie to Lehman at the time.
"If anything at that point he just was somebody who explained to the board chairman how poker works," Lessin said. "I didn't know that he was going to end up working with me."
However, in a YouTube interview with a aqueduct called True Poker Dealer, Lehman indicated his involvement with Lessin started in May, before the regulation writing had begun.
Dissimilar bingo sessions, which can be run by volunteers, charitable poker requires trained dealers. The button for charitable poker would fall apart, Lessin said, if there were no poker operators Virginia charities could plow to for assistance getting games running.
"I really, truthfully, but wanted to run into the clemency play poker," Lessin said. "I don't have the time to run even so another company."
Lessin and his son registered Pop'south Poker LLC in August of 2020, according to State Corporation Commission records, months earlier the lath took its concluding vote on the poker regulations final December.
At a board meeting in September 2020, Lessin entered a disclosure argument into the record, noting his personal interest while declaring he could perform his duties "adequately, objectively and in the public interest."
"I anticipate that I will be one of many potential Texas Hold'em poker operators throughout the state," Lessin's statement read. "This company owned by myself and my son may service a charity with which I am involved also equally other charities."
Krizek sees the situation as untenable.
"The folks being regulated are the ones who are making the regulations. That's kind of the play a trick on guarding the chicken coop," Krizek said. "Even the nearly ethical members of a board like that are challenged no matter what simply because they can't recuse themselves enough."
'You want to shoot me for trying to exist clever?'
Although charitable poker is currently happening without oversight, Lessin said the initial activity at Pop's Poker is expected to do good another religious charity that once operated sleepover camps in Virginia for Jewish boys. Lessin said he's not currently involved with the charity and it "ran out of gas" some time ago.
"One of the thoughts is to raise the coin to get information technology going once again or to donate information technology to other causes that are inside our scope of operation," Lessin said.
Strict firewalls separating entities involved in charitable poker, Lessin said, are unnecessary.
"The casino people are going to come up in. They're going to take their investors. They're going to build the building. They're going to own information technology. And they're going to run the games, et cetera," Lessin said. "Let's simply set upwards Texas Hold 'Em like that."
An overly commercial, casino-like charitable gaming industry is exactly what some lawmakers desire to avoid, partly because the charitable chemical element means it's not taxed like regular gambling.
"How can we make certain this is about charity get-go? And not gaming outset?"Krizek said at a commission coming together this summertime. "The gaming is supposed to only raise the money for the charity to practice the charitable stuff."
The poker regulations specified that a charitable organisation must dedicate at to the lowest degree 2.5 percent of its gross poker receipts for charitable purposes. But the regulations allowed some of that charitable percentage, 0.25 percent, to exist paid to the operator contracted to run the games. More broadly, the canonical regulations allowed up to 50 pct of the net proceeds, the coin remaining after prizes are paid out, to become to the poker operator hired past the clemency.
Equally the regulations were existence hashed out, another disagreement emerged over whether the Full general Associates had only legalized poker tournaments or if the law could be interpreted to allow more lucrative greenbacks games. In tournament play, anybody buys in for the same amount, players eventually drop out as they lose their chips, and the event has a clear ending with known winners. In cash games, players tin come up and get every bit they please and can continue buying in if they lose their chips, allowing more continuous, free-flowing play as opposed to the more than finite schedules of tournaments.
Officials at VDACS advised the board they didn't call up cash games were permissible under a constabulary that only mentioned tournaments. Lessin and others felt they were. Or should be.
"If I become play and I'1000 in there for 45 minutes and my wife says 'Get your butt home,' then I've got to leave right?," Lessin said. "No one thought y'all had to go for a six-hr event."
Tad Berman, a Richmond nightclub bouncer and a regular at meetings on Virginia gambling problems, told legislators the lath was distorting the pregnant of the pecker for its ain ends.
"They came upwardly with an off-the-wall definition of what a tournament is," Berman said while testifying to the legislative committee this summer. "It's not even close. I realized at that time that something was wrong."
For now, the dispute over greenbacks games versus tournaments appears moot. Pop's Poker is running what it calls live-activeness tournaments, a format that gives players more flexibility for continuous play by tracking how much time they spend sitting at the tables and comparing it to other players. Winners are determined based on their seated time in a given day, and the prizes are credits that can exist used on food, drinks or buy-in fees for future tournaments. According to results posted online, top finishers typically spend nigh x hours playing per day.
"You desire to shoot me for trying to be clever and figuring out how to make the charities more than money?" Lessin said. "Shoot me."
'In that location is no statewide charitable poker program'
Lessin said he and his attorneys are confident they're on solid legal ground.
Asked whether any charitable poker should be happening in Virginia, VDACS spokesman Michael Wallace said in an email " this is the subject field of a current lawsuit and more of a legal/local police force enforcement question."
"Withal, currently, there is no statewide charitable poker program," Wallace said.
VDACS has indicated it has piffling to no authorization to root out illegal gambling equally a regulatory agency with a narrow focus on charity. Though the agency can revoke gaming permits and occasionally refers violations to police force enforcement, the Virginia State Police and local prosecutors have told the legislature illegal gambling isn't a major part of their workload.
I possible outcome is the country consolidating all gambling regulation, currently spread among the Charitable Gaming Lath, the Virginia Lottery Lath and the Virginia Racing Commission under a new state board providing more than comprehensive oversight. It could include representatives from all the various gambling sectors, but wouldn't leave niche industries similar charitable gaming or horse racing to largely regulate themselves. Before skill machines were banned, they were overseen by the Virginia Alcoholic Beverage Control Say-so because most were in convenience stores and restaurants with alcohol licenses.
Lamentatory upwards enforcement may also be a part of that effort.
"With casinos coming online I call up we're going to need to have some really good expert law enforcement folks that can identify illegal gaming," Krizek said.
Lessin acknowledged in that location may exist some bad actors in charitable gaming. Just he says he's not 1 of them, and he'due south not the merely one with a disharmonize.
"I am confident that I did non become off track," he said. "I understand the perception. I get information technology. Merely again, asking me to not do that would be like saying to every one of the elected officials, you tin can't take whatsoever more political contributions from whatsoever company or whatsoever person that you have anything to do with on any bill. They wouldn't be able to vote on annihilation."
Afterwards restricting the Charitable Gaming Board's ability to implement new regulations until 2022, the General Assembly volition have a run a risk to revisit the issue early next year. At a meeting in May, a representative from Attorney General Marking Herring's function told the board the poker regulations were in "limbo," and the only way to modify that was to convince the legislature to change its heed.
Though Herring's staff brash both VDACS and the Charitable Gaming Board during the poker dispute, his part says gambling enforcement is a local matter and is leaving it to others to sort out the legal defoliation.
"If in that location is a consensus among stakeholders that there needs to be clarification, the General Associates would be responsible for making those changes," said Herring spokeswoman Charlotte Gomer. Though charitable gaming officials discussed asking the attorney general for a formal opinion on the poker law, no such opinion was issued.
As for VDACS, the agency is still dealing with Lessin'southward lawsuit, which he is pursuing on appeal, and seems to be taking a hands-off approach to all things poker.
In an email final October, Larry Nichols, manager of the bureau's consumer protection division, thanked his colleagues for all the hours spent on the cause. He seemed to have mixed feelings on whether it was a worthy ane.
"We have put a lot of time and energy into this and those who will benefit will accept no clue….but nosotros need to recollect that this is all for the charities," Nichols said, calculation four smiley-face emojis. "All 2.5%."
Correction: An before version of this story misstated who appointed Lessin to the Charitable Gaming Board.
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What If You Accept Donations But You Don't Register With Vdacs,
Source: https://www.virginiamercury.com/2021/09/28/virginia-doesnt-have-licensed-poker-rooms-a-state-gambling-board-chairman-opened-one-anyway/
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