Virginia’s refreshed skill-games ban hailed as “big win” for Churchill Downs

Article by : Charles Perrin Oct 18, 2023

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Churchill Downs shouldn’t let the refreshed ban on slot-like skill games impinge upon their growth plans in Virginia, but rather it should be viewed as a “big win”.

Those are the unequivocal thoughts of Barry Jonas, who is an analyst for Truist Securities, a leading corporate and investment banking firm based in Atlanta.

Earlier this week, we revealed that Virginia’s Supreme Court reinstated their ban on skill games, such as slots, overruling an injunction on a motion which would have prevented this.

Virginia has had a contentious relationship with skill-based games, and there have been a series of disputes over the years.

Things came to a head when the Supreme Court overturned the lower court’s decision, with the latter arguing that a ban on skill games would represent an infringement against freedom of speech laws.

But Churchill Downs, which already boasts 2,750 HHR (historical horse racing) terminals in the state, is supposedly looking to bolster that figure to 5,000.

That said, having to control 9,000 skill game machines in the state would have been a burden on Churchill Downs’ revenue streams.

Explaining the impact of the refreshed skill-game ban, Jonas said: “We see the state Supreme Court decision as a big win for the company just months following the Exacta transaction closing.

“This ruling comes four months after Kentucky issued a similar ban, and speaks to CHDN management’s political savvy.”

Virginia is viewed as an exciting growth frontier for Churchill Downs, who already holds a 50% stake in a Richmond casino, and with an established footprint in the Cavalier State, the operator is looking to add more gaming emporiums in Dumfries.

While the increasing number of HHR venues earmarked were expected to contain a plethora of table games and slot machines, Jonas was quick to point out that opportunities for skill-based companies across the state are dwindling.

He said: “Following the Supreme Court’s ruling that the lower court acted improperly, we believe recourse options for skill-based companies are limited.

“While it’s not exactly clear when the ban would be implemented, we think it could occur quickly, and have a relatively immediate benefit to CHDN’s [Virginia] properties.”

Meanwhile, the view from Wall Street appears to be rather bullish, and Churchill Downs’ stock is up 6.60% year-to-date, which serves to confirm the notion that it is a popular gaming equity.

While the gaming ban in Virginia might spell bad news in the short term, Churchill Downs should see this as an opportunity rather than a threat.