Australia’s recent review of online gambling was a missed opportunity to take the regulatory lead in the Asia Pacific region and may even contribute to growth in illegal offshore betting if its recommendations are implemented, industry experts say.
With Australia's 2001 Interactive Gaming Act becoming increasingly challenged by new technology and changes in customer preferences in gaming, the federal government last year commissioned a review that was meant to address the perceived shortfalls of the increasingly out-dated law.
The 2001 Act, implemented at a time when online gaming was in its relative infancy, failed to address the use of new technologies. The review was expected to bring the regulations up to date and at the same time explore measures to combat the increasing leakage of taxable revenue to offshore operators.
Instead, critics say, the timing of the review – which falls in an election year - contributed to it being hijacked by conservative political power-brokers aligned with anti-gambling groups. As such, the end result became an exploration of possible harm minimization measures for problem gamblers that seem out of step with the worldwide trend.
“Australia had a chance to become an online betting market leader, both in the region and globally but this is a setback,” said Edward Beesley, strategy consultant & founder of TSoK Consultancy. “There's a real mixed message from this review. Australia is a country steeped in wagering history, but the anomaly is that the legislation here isn't developing the sector in line with new technologies, or for the benefit of regulated online operators and their customers.”
Australia boasts healthy betting numbers. According to the Queensland Treasury, which compiles figure for the country’s gambling industry, total revenue in the fiscal 2013/2014 year was A$21.5 billion, an increase of 1.8 percent. Sports betting made up a small part with $625.9 million, but was the fastest growing at 29 percent. The bulk is spent on pokies and lottery.
According to a Morgan Stanley Research paper, six percent of the 2014 turnover was made up of online wagering, which was also growing at a strong clip of 15 percent per annum, far outstripping growth in casino gambling and horse racing at 6.5 percent growth and a 2.4 percent decline respectively.
Beesley warned that Australia's privileged place as a destination for overseas investment could eventually come under threat as “sleeping giants” in the region awake from their current regulatory strangleholds and became more liberal with their online laws.
“Australia is ahead of a lot of countries at the moment, including the likes of the United States, India and China – where online betting is essentially outlawed - but if Australia doesn't start to upgrade its online legislation, and one of those three countries flipped its switch – things could change very quickly and Australia may not seem so attractive anymore to overseas investment.
I am astonished, but not surprised by the recent recommendations, here we have a good, but not great, foundation that is bringing money into Australia, creating jobs and opening up to further opportunities from suppliers into the region.”
Problem gambling focus
Fourteen of the 19 recommendations from the review were accepted by the government, with another four agreed to in principle - but the vast majority of the suggestions regarded initiatives to mitigate losses by problem gamblers, including self-exclusion programs and a blanket ban on credit betting.
In a note on the review, Australian law firm Addisons said, as a result of the review “Australia’s regulatory regime relating to online gambling will remain inconsistent with the regulatory regimes in countries like the United Kingdom, Italy, Spain, Ireland and Denmark.”
Setting aside the fact that the suggestions are still required to be passed as law, critics add that the review failed to address the most pertinent issues at hand: that of the new bet types and the loss of revenue to the growing number of offshore bookmakers, many of whom are taking on the look and feel of legitimized operators. This will also exacerbate the harmful consequences that may result – the overseas providers will be beyond the reach of Australian regulators and will not be subject to the restraints imposed by Australian law, thereby making their product offerings far more attractive than the services local licensed operators can provide.
Firmly in the cross-hairs of the review was “in-play” sports betting, banned in 2001 before internet betting had become prevalent, and specifically the contentious “phone to click” technology being utilized by some bookmakers, including William Hill and Paddy Power.
“Click to Call” was developed as a technical means where customers could simply call a number that enabled them to place an in-play bet on a sporting event in progress thereby falling within the letter of the law but not, according to the government, within the interest or spirit of the law.
Even though the review was at least in part aimed at targeting customers betting with overseas operators online – an illegal act in Australia – if the status quo is maintained and customers choices remain limited, experts say it could actually result in even more money flowing into the hands of foreign bookmakers based in jurisdictions where myriad bet types and new technologies can more easily be put into play.
Driving punters offshore
“I'm bewildered by it, gambling is a huge revenue earner for the government, but this review seems to be aimed at penalizing tax-paying, legal operators and in some ways may end up benefiting the offshore operators – where no tax is paid,” Beesley said.
Addisons agreed that while the recommendations if implemented are likely to bring greater efficacy domestically, “it remains a matter of some uncertainty as to whether these measures will be effective outside of Australia.”
Submissions to the review on the scope of illegal wagering varied widely, one estimate put the figure at A$400 million, or more than one quarter of the legal market and while officials acknowledged this figure in the report, the government response was far more conservative in its estimates.
The review stated that illegal betting could best be tackled using a “multifaceted” approach, with clearer definition on what constitutes an illegal offshore operator, and measures like payment blocking and attempting to block the websites of unwanted operators.
Critics say it’s the limitations such as the ban on on betting products that could result in customers being driven into the clutches of foreign bookmakers.
Beesley described the situation simply by saying “If you fail to strengthen your onshore online product portfolio, the offshore propositions will continue to grow as customers look elsewhere so that they can continue using their smart phones, tablets or laptops for all their betting requirements.
This was similar to the view of sports betting integrity watchdog ESSA, whose submission also outlined how there was no proven evidence to support that in-play betting was a significant contributor to problem gambling.
In response to the review, ESSA said the position on in-play was “inconsistent” and also pointed to a 2011 Victorian state government review into betting legislation, that determined that the ban on in-play betting laid out in 2001 served “no useful purpose” and that the bet type actually may assist sports from an integrity standpoint.
Beesley went on to to say that there was little doubt that the current political landscape in Australia is a major contributing factor in the seemingly conservative findings of the review.
“It's an absolute winner politically with the upcoming election,” he said. “ While at this stage these are just recommendations – nothing has happened yet as they still have be voted into legislation and that wouldn't seem likely with the election so soon. Hopefully after the outcome of the election some products and services can be trialled online to support the tax-paying legal operators whilst the government assesses problem gambling management and looks to develop the appropriate technology to limit the usage of offshore betting platforms. ”
But this is unlikely in Jamie Nettleton’s view. There is considerable widespread public concern about the extent of advertising of legal wagering products. Politicians fear that any extension of legal gambling would result in a public backlash, and it would appear that any efforts at attempting to liberalise Australia’s online gambling regime, at least in the short term, are unlikely to be successful. This is despite the understanding, at least from the perspective of Australia’s leading sports bodies, that one of the key allies in promoting integrity in sport (and this is particularly relevant in light of this week’s match fixing claims involving the NRL), is the betting information provided by legal online sports betting operators.
Having said this, the real test will be after the 2 July election and the manner in which the new government decides to amend the Interactive Gambling Act.
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