Singapore adjusts to online laws, social gaming still a grey zone

Singapore has made its position against online gambling clear, outlawing the practice through some of the most draconian legislation anywhere in the world. However, the law has left major grey areas, in particular when it comes to social gaming.

Singapore’s Remote Gambling Act (2014) came into effect on Feb. 2 and criminalizes the entire spectrum of remote gambling activities. The restrictions are extremely broad and will be felt by operators, agents, brokers, service providers, advertising networks, payment processors, financial institutions, ISPs – and, of course, players.

The legislation included the unprecedented steps of allowing government agencies to geo-block websites, stop bank payments and even issue extradition orders to offshore parties.

So what happened before February 2, prior to the law coming into effect, what has happened since and, more importantly, what do experts expect to happen next?

Matt Pollins, a lawyer from Olswang who specializes in gaming law, watched closely from his Singapore base as the industry tried to make sense of the far-reaching laws.

"It's fair to say that the industry didn't know what to expect and the overwhelming feeling was one of uncertainty in the lead up to the laws being passed,” Pollins said. “There had never been a law in Singapore like this. There were a lot of companies that didn't know how it would effect them, not just in Singapore, but companies outside of Singapore that were maybe taking bets from Singapore citizens or in some way targeting Singaporeans. The laws also came into effect at reasonably short notice – it was late 2014 when the law was passed and there was only a one or two week notice period when it was known exactly when the law would take effect.”

It seems that most of the changes caused by the laws actually came about through self-regulation as nervous betting agencies ensured they weren't open to prosecution.

"As a risk management step in anticipation of the laws, most reputable operators had already taken steps to ensure they were safe,” Pollins said. "People took quite a conservative view of it and operators had already started to geo-block Singapore from their sites, and most had started to send emails to Singaporean players saying they would shut down their accounts and return any funds in accounts.”

Amid the speculation surrounding the laws was the suggestion that social games that contain elements of chance or monetary payment for “tokens,” rankings or points would be banned – and games pushed on social media like Candy Crush Saga and Farmville would be under threat.

Singapore's Media Development Authority (MDA) took the unusual step of sending a notice just ahead of the activation of the laws, clarifying its stance on social games – one which seemingly still leaves some grey area and grounds to prosecute certain operators. The clarification, released on January 28, stated: “The Act will prohibit casino-style games which give players a chance to win money or real-world merchandise” and added, “the act does not cover games which do not, as part of the game design, enable players to receive money or money's worth consequent to the outcome of that game.”

Gaming software operators with staff or headquarters in Singapore were still concerned – and some say they are still to receive full clarification of where they stand in relation to the laws.

“The whole situation is tenuous at best,” one source said. "The laws are so wide-ranging and open to interpretation that we have even heard that Twitter, because of some related advertising, is concerned. Even though these types of companies aren't the intended target of the laws, they are in the crossfire and it is hard to be completely relaxed.”

The Industry of Home Affairs is the driving force behind the legislation and, in conjunction with the Singapore Police Force, is regulating the laws. The Monetary Authority of Singapore is responsible for payment blocking while the MDA deals with site blocking.

So far there have only been one set of arrests under the Remote Gambling Act as police busted a suspected illegal gambling ring early last month. Nine men and two women were arrested in various locations, but all in Singapore, in early May. Police suspect the group of taking S$3million ($2.2 million) worth of bets in the space of two weeks and seized computers, betting records, bank details and more than S$200,000 in cash during a raid on May 2.

So what is next? There is no sign that the full extent of the laws, like arrests in foreign jurisdictions and extradition orders, will be enacted by authorities on overseas operators – at least for small cases.

Gambling law expert Yap Wai Ming, a director at Morgan Lewis Stamford LLC, believes that unless an overseas operator is particularly aggressive in targeting Singaporean residents, authorities will be content to stick with the mechanisms used so far.

"As the arrests show, if they are located in Singapore, they will go after them, but I think if they are offshore they will simply use blocking mechanisms to stop them reaching Singaporean players," Yap said.

Further to that, Yap believes that if an operator has displayed due diligence in key areas, they should have a solid statutory defense should they be investigated.

“If the sites have notified customers that betting from Singapore is not allowed, that would give them a full statutory defense under the remote Gambling Laws,” he said. “As long as they have undergone geo-blocking, have sought full verification of customer information and they have actually put notice on their websites, then they cannot be prosecuted.”

Under the laws certain operators are able to apply for exemption and apply for special online betting licenses – a loophole seemingly aimed at Singapore's two established legal operators – Singapore Turf Club and Singapore Pools, both not-for-profit, charitable organizations whose applications are believed to still be pending.

“They should qualify for the exemption but I think are the only two,” Yap said. “To qualify for the exemption they must be local operators and they must be for charitable purposes. They are both government-owned and the profits are returned to social causes.”

Pollins said there may be even more boxes the Singapore Turf Club and Singapore Pools will have to tick to qualify for the exemption.

“There are certain provisions that come with that exemption, that we know of - like having to be Singaporean-based and distribute profits to charity, but there may also be certain social safeguards in the form of restrictions that need to be met as well. We won't know those details until they are granted a license."