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9/9/20  2:45 pm
Commenter: Handle 19, Inc. (Ian G. Thomas)

Minority Inclusion (11 VAC 5-70-50(T)(4))

Handle 19, Inc. (“Handle 19”) writes to provide comment on 11 VAC 5-70-50(T)(4), which states that in considering an application for a Sports Wagering License, the Directors shall consider, inter alia:


Whether the applicant has demonstrated that it has made serious, good faith efforts to solicit and interview a reasonable number of investors that are minority individual as defined in Article 1, Chapter 16.1 (§ 2.2.-1604) of Title 2.2 of Virginia Code….;


This regulation, as written, is identical to the language contained in Va. Code § 58.1-4032(D)(3)(d).  The regulation does not to clarify the language in Va. Code § 58.1-4032(D)(3)(d) which is itself ambiguous.  Moreover, this ambiguity detracts from the clear legislative intent of the relevant statutory provision which is to promote the inclusion of minority individuals in the newly legalized sports wagering industry.  As such, Handle 19 recommends that this regulation be amended to clarify the statutory language and to incorporate considerations that will demonstrate actual inclusion of minority individuals in the sports wagering industry. 


            At the outset, it is important to understand the legislative intent behind Va. Code § 58.1-4032(D)(3)(d).  The statute’s instruction that the Director consider minority investment in an applicant is a legislative acknowledgement of the importance of diversity in the sports wagering industry.  Any doubt about this legislative intent can be easily resolved by the statute’s reference to Va. Code § 2.2-1604, which is part of a statutory scheme that has a stated goal that includes, amongst other things, “[c]oordinat[ing] as consistent with prevailing law the plans, programs, and operations of the state government that affect or may contribute to the establishment, preservation, and strengthening of small, women-owned, and minority-owned businesses.”  See Va. Code § 2.2-1605(A)(1) (emphasis added); see also (A)(2).  In short, equality of opportunity and diversity in the newly legalized sports wagering industry is an important consideration that the legislature purposefully included in the statute and that legislative decision should be clearly reflected within the regulations.


            Notwithstanding the intent of Va. Code § 58.1-4032(D)(3)(d), the proposed regulation (11 VAC 5-70-50(T)(4)) does not clarify how the aforementioned legislative intent will be practically implemented, but instead simply mirrors the statute’s language.  Unfortunately, the statute as written is ambiguous, and in need of regulatory clarification.  Specifically, it is unclear what is meant by “interview[ing] a reasonable number of investors.”  What does it mean to “interview” an investor that is a minority individual?  Similarly, what constitutes “solicitation” of a minority individual for investment?  These ambiguities may be easily answered in certain circumstances, but in others, it is far from clear how these considerations apply. For example, it is not clear how the aforementioned language applies to a large publicly traded company, for which investment is available to everyone. Indeed, because the shares in such a company are available to everyone, one could argue that such public availability would satisfy this regulatory consideration, without the public company having to make any real effort to increase minority involvement in the industry.  The converse is equally applicable as well.  A smaller private company has certain legal restrictions on its ability to solicit investment and it is unclear how the statute and the proposed regulation would apply in the context of those limitations.


            Due to these ambiguities, Handle 19 respectfully requests that 11 VAC 5-70-50(T)(4) be amended so that it’s language is clear and consistent with the statute’s legislative intent – to provide opportunity for minority business owners to participate in the sports wagering industry in the Commonwealth.  In furtherance of this end, Handle 19 proposes the following amendment to this regulation (additions are in italics and deletions are struck):


The Director may award a sports betting permit after consideration of the application and based on…(4) Whether the applicant has demonstrated that it has made serious, good faith efforts to solicit investment directly from and interview a reasonable number of investors that are minority individuals as defined in Article 1, Chapter 16.1 (§ 2.2.-1604) of Title 2.2 of Virginia Code or entities in which the majority owner is a minority individual, and whether the applicant does in fact have any minority individuals as investors.


            The proposed amendment clarifies the language from the statute and helps enact the statute’s legislative intent to provide opportunities for minority individuals to participate in the sports wagering industry.  The proposed text clarifies how consideration of an applicant’s attempts to solicit minority individuals as investors is to be practically implemented by removing the ambiguous term “interview” and replacing it with “directly solicit.”  This would require an applicant to take affirmative steps to seek investment from minority individuals and not simply allow an applicant to passively rely on investment from the public at large.


Similarly, the new proposed language also helps clarify what is meant by “good faith” attempts to solicit minority investment.  The term “good faith” is an amorphous term that can be subjectively applied.  To provide more clarity to the term, the proposed amendment adds as a consideration whether the applicant has obtained investment from minority individuals.  Nothing is a better indicator of whether an applicant has made “good faith” attempts to obtain investment from minority individuals than actually obtaining such investment.  Due to the fact that “good faith” can be an amorphous term, the focus on actual success provides a quantifiable measuring stick that the Director can consider.


At bottom, the proposed amendment not only clarifies the statute’s language but also furthers the statute’s legislative intent.  Clear regulation on this matter is important, as this is the only area of the legislative scheme that promotes diversity and minority inclusion within the sports wagering industry.  Inclusion and equality of opportunity are important goals in today’s society, now more than ever.  This policy was recognized by the legislature when the statute was enacted, and should be reflected in the regulations that govern the application process.  According, Handle 19 respectfully requests that the Virginia Lottery modify the proposed regulation as discussed above.     

CommentID: 84570