Beyond Australia's Review of the Interactive Gambling Act

11 March 2005

After three years of speculation, Australia's federal government has opted to leave the 2001 Interactive Gambling Act intact. With no changes to the federal policy, the focus has shifted to the state and territorial governments.

The Pacific Congress on I-Gaming, which was recently held in Sydney, opened with a round table discussion on the implications of the federal government's decision. Moderated by Sue Schneider from River City Group, this article takes a look at comments made by the panelists.

The Panel
Chris Downy (CD), Executive Director, Australian Casino Association, Australia
Jamie Nettleton (JN), Attorney, Addisons Lawyers, Australia
Anthony Seyfort (AS), Attorney, Lander & Rogers, Australia
Rick Smith (RS), Executive Director, Interactive Gaming Council, Australia/Canada

"The 2004 review of the IGA recommended no changes--apart from one exception. Therefore, there are no opportunities here for online casino providers."
- Anthony Seyfort

Chair: 2005 is shaping up to be a “killer” year for the industry in a positive sense. There’s tremendous growth fuelled by products such as betting exchanges and poker, in addition to potential developments in jurisdictions such as the UK, Europe, and more recently North Dakota. In terms of Australia, there have been tremendous ups and downs over the years. It has now stabilized but it’s not optimal. Australia was expected to be the global hub for I-gaming, which federal politics effectively reversed. Australia reviewed the I-gaming climate, enacted legislation in the 2001 Interactive Gambling Act, and then re-visited the legislation last year.

AS: The 2004 review of the IGA recommended no changes--apart from one exception. Therefore, there are no opportunities here for online casino providers. However, there’s a relatively viable business for wagering, sports betting and lottery operators - although there are restrictions. The federal government has declined to take action against betting exchanges, and are therefore addressed by state and territory governments. The one recommendation for change is the power to prosecute or investigate breach of the advertising rules. There is currently an anomaly in the act: If there is a complaint about a Web site or content, it is dealt with by the Australian Broadcasting Authority (ABA). However, advertising complaints are dealt with by the federal department, who refer complaints to the police. The report recommends that the act be changed to give power to the ABA to pursue infringement of advertising prohibitions. The government is yet to respond to this recommendation.

JN: Matters are investigated by the ABA, and where appropriate referred to the federal police, but there is no publicity of these incidents. To date, no action or prosecution has been taken for contravening the legislation, despite the indication that clear breaches have taken place.

CD: Part of the restriction of online casino gaming is due to the perceptions of politicians. Wagering is not seen to be as “evil” as the playing gaming machines. The attitudes of politicians on problem gambling always relates to the prevalence of poker machines in our community, and the so-called damage they cause. I don’t believe that we will ever see the opportunity again to amend the legislation to allow online casino gaming.

In reviewing the IGA, the Australian Casino Association recommended no further changes. In that respect we were successful. We will continue to monitor internet gambling, but there is no push from the ACA members to take an active role.

JN: In terms of legislation, online poker is treated exactly the same as an online casino game. Therefore it would be prohibited under the federal legislation. In terms of betting on the outcome of a poker game as if it were a sporting event, that would still be problematic under the legislation.

RS: From the perspective of the Interactive Gaming Council, it is interesting to note that Lasseters, which is the only online casino licensed in Australia, is prohibited from allowing Australian residents to wager at their site. It appears contradictory that the services are good enough to be exported, yet not good enough for local residents. The report stated that the aim of the IGA is to ensure that “new interactive gambling services do not exacerbate the level of problem gambling in Australia.” The word “new” clearly diminishes the scope of the act. There is further narrowing of the scope due to the fact that wagering and lotteries are exempt. The potential to thrive appears to be with sports books and betting exchanges. Another important issue is the implications of cross-border gambling. The IGA clearly focused on the incidence of problem gambling. However, one of the issues that appears to be ignored is the potential for problem gambling to be exported. Traditional thinking has been to look at problem gambling in the context of the jurisdiction in which it occurs. There needs to be greater co-operation and consistency between the states and territories. In terms of I-gaming, responsible gambling guidelines cannot be developed within the jurisdictions independently, due to the nature of the product being offered.

"Part of the restriction of online casino gaming is due to the perceptions of politicians. Wagering is not seen to be as 'evil' as the playing gaming machines."
- Chris Downy

JN: The federal legislation included some provisions which dealt with designated countries. This novel approach essentially meant that the legislation would protect Australian citizens from a prohibited interactive services provider, as well as prohibition on parties providing services to residents of a country which had corresponding legislation. Initially this was in respect of Baltic countries, particularly Denmark, who made submissions to the review on the basis that they believed that they had corresponding legislation. As a result, there should be a prohibition built into the legislation on operators providing services to Danish citizens. From a cross-border perspective, and in practice, the regime has not worked.

A second element with regard to cross-border gambling is the prohibition of overseas operators providing services to Australian citizens. In the history of the legislation there may have been some investigations conducted, but there has been no prosecution. Numerous poker operators, for instance, do not prevent Australians from gambling at their sites. I believe that the legislation does not have its intended effect of preventing this.

It is interesting to note the exemptions relating to bookmaking and wagering. The legislation only applies to in-the-run or in-play betting, which are prohibited. Otherwise, it is left to states and territories to regulate. In the next year I believe that conflicts will arise between various states and territories, as some may be prepared to take more of a permissive attitude towards online bookmakers--such as granting licenses and facilitating the provision of services over the Internet.

There is currently a review of the New South Wales law as to the level of restrictions that can be introduced. For example, the review mentions introducing restrictions to any facility or business that is involved with offshore or interstate betting. Therefore, a call center in New South Wales which relates to an offshore interactive gambling service provider would be prohibited under the legislation, as would affiliate marketing activities.

RS: The future of betting exchanges is still in the grey area. The impetus now appears to lie in trying to receive a license from one or more of the states and territories. If there is no permitting legislation for betting exchanges, the individual state or territory would need to view it as a high enough priority to change or introduce new legislation. If and when an exchange is licensed, it would not prevent the federal government from taking action against the operation.

AS: According to current laws, a betting exchange could try to apply for a license in a state or territory other than South Australia and Western Australia. Another obstacle to the licensing process would be how to resolve the framing of the current provisions with regard to the treatment of tax. At the moment, there is a diverse result in terms of the application of tax rates. This is a difficult issue. Betting exchanges are more involved in commission play, so it would be expected that tax would be levied on a percentage of income held, compared to turnover. The Northern Territory, possibly Tasmania and the Australian Capital Territory are potential opportunities. It is doubtful that the other states would consider licensing betting exchanges, as the racing industry has too much political sway over the government.

In terms of business opportunities, we’ve focused on wagering. The other potentially exciting area in terms of growth off a low base is Internet lotteries. The IGA does allow Internet lotteries and the sale of internet lottery tickets. The only restriction is on instant and scratch lotteries. In addition, there are some development occurring in some of the states and territories. For instance, Victoria currently has a policy review on its lottery licensing regime, and the New South Wales public lottery license expires in 2007.

Even if there is no change to public lottery licensing, there is enormous growth in trade promotion lotteries and trade competitions. I believe these present real business opportunities for revenue streams, as they combine a lottery product and entertainment value by using forms of technology such as text messaging and mobile phone gaming.