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Virginia Legal Sports Betting Hitting Hurdle Over Licensing Fees

Virginia is the next state trying to attempt to launch its sports betting market. Their lawmakers were able to pass the legislation for sports gambling in March 2020. The legislation appeared to be moving in the right direction until they received a proposed amendment from the Governor.

As such, you would expect to see this play out within the next months if everything goes according to plan. Virginia’s governor has sent a new proposal to make amendments to the legislation that would be bad news for this process.

New Proposal And What It Means

Governor Ralph Northam recently sent back his proposed amendments for the legislation. His suggestions were not entirely out of reason, but there was one scenario that could threaten Virginia sports betting.

Northam wants any future sportsbook to cover a $50,000 fee that has to do with background checks regarding any principles. This means that $50,000 would be forced from operators to cover background checks for every member of management.

State Laws And More Fees

In addition to the new proposal, state lawmakers have already made Virginia sportsbooks $250,000 for a three-year licensing fee and another $200,000 whenever they want to renew that license.

Taking into account that a sportsbook makes roughly five percent off of each bet, this would be difficult for Virginia sportsbooks to make money. Virginia only has nearly 8.5 million residents, and you can bet not every single person and their dog is not going to gamble.

So after it is all said and done, these fees for licensing and background checks would be a ridiculous cost to any sportsbook wanting to start up. You are looking at nearly seven figures to get the ball rolling.

For reference, you can see how gambling, in general, has its pros and cons for the state. Casinos have made progress up until this point here.

A Way Around The Fees?

One scenario to help buffer the upfront costs is to have sportsbooks pass those expenses onto their customers. This, in theory, would ultimately make the customer suffer.
The customer would likely have fewer options for bonuses when joining or lack thereof. As compared to other states’ sportsbooks, you could also expect a cut on deposit bonuses.

This is potentially a terrible bet for the customer. Sportsbooks will have to pass these costs off somewhere if the upfront costs do not ease down.

So What Now?

This is a huge first step for Virginia in getting the ball rolling for sports betting. Northam has not completely demanded that this is the way it has to be done, but merely his suggestions going forward. If Virginia can persuade a new scenario, this could be more beneficial.

If you were a sportsbook wanting to have a market in Virginia, would you want these fees? Other states have had different upfront costs and fees that deter the typical sportsbook from doing business in a state.

For example, Pennsylvania has a ridiculously high licensing fee of $10 million. They are nearly one and a half times the size of Virginia but has a very thriving market for gamblers.

Final Thoughts

Many states that have very successful sportsbooks are ones that have outstanding business models. In some scenarios, high fees are dealt with if the business can perform well and make a profit over the long term.

However, if these fees are here to stay, sportsbooks in Virginia may not even get off of the ground. The fees appear to be too costly for the average sportsbook and would hurt the customer base in the long run. Hopefully, Governor Northam can be persuaded and make adjustments to these proposed fees.

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