Opinion - Interactive Gambling Act 2001

Last week, late on the last sitting day before the long winter recess, a monumental piece of legislation passed through the Senate, and then in the early hours of the morning through the House of Representatives--it now waits for Royal Assent from the new Governor-General. Some may think it ironic, but I think it profound, that one of the first Acts that Archbishop Hollingsworth will be called upon to sign into law is the Interactive Gambling Act 2001.

During its passage through the Parliament this legislation has come under much attack – it, and its supporters, have been denigrated – the former as ineffectual and window dressing and the later, including the Prime Minister, as variously as naive or motivated by shallow political purposes--in my opinion neither could be further from the truth.

Firstly, the Australian Constitution in s51, the first clause outlining the powers obtained from the states at Federation 100 years ago, says:

"The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: and amongst the 39 paragraphs "(i.) Trade and commerce with other countries, and among the states:" and "(v.) Postal, telegraphic, telephonic, and other like services:"

This legislation undeniably uses those powers here for good government.

You don't have to be a High Court judge to understand that the federal government has the power to deal with matters pertaining to communications, any ordinary Australian reading the Constitution would find it blindingly obvious. What is amazing is that looking at it from the 21st century is that when the founding fathers were drafting it back in the late 1800's that communications ranked so highly in the powers transferred from the states.

Secondly, if this legislation were politically motivated the Prime Minister, the government, and the cross-bench senators would not be so muted in claiming the plaudits due to them.

What various commentators on the Interactive Gambling bill have failed to grasp is what this legislation can achieve and what powers the Parliament has now given to the executive government. It is also important to understand that this was by a significant majority in the Senate, which is not controlled by the Coalition.

The Interactive Gambling Act 2001 at its simplest makes ALL gambling using communications in Australian illegal--no ifs, buts or maybes--at the stroke of a pen the Minister for Communications could remove all exemptions and prohibit all gambling using everything from the humble letter through to much touted Internet, that supposedly lawless sacrosanct virtual world. Well those in the virtual world woke up to reality on Friday, June 29.

Contrary to views expressed by some--this is not a prohibitionist act. If the government wanted to do that it could have done so. This act is a prophylactic measure to stop what is viewed a major expansion in both new gambling product and increasing the accessibility of existing tightly regulated physical gaming product. It doesn't stop people having a bet, or going to the local pub to play a poker machine, or buying a lottery ticket. It just says enough is enough!

This bill will one day be viewed very favorably with the benefit of hindsight, in the same way if legislation had been passed years ago keeping the gaming machines mechanical, coin driven one-armed bandits rather than allowing them to be come 'electronic' where you can do all your dough on 21 lines for 100s of credits at the push of a button.

Why has the federal government been so muted in success? Because at the end of the day it knows, and I believe respects, that the states and territories control the licensing and regulation of physical gambling in their jurisdiction and that they have the expertise, resources and obligation to administer all gambling in the public interest. If that is the case, why has the commonwealth 'interfered' in state and territory issues? Because they couldn't agree between themselves to a national framework! One only has to look to NSW's and Western Australia's strident opposition to online gaming as against some states and territories virtual grab for the 'rivers of gold' to understand that Federal intervention was warranted.

What troubled the federal government, and anyone else who thought about this, was why, when all states and territories were trying to assuage the public outrage against the explosion in electronic gaming, (the pokies), by winding back the clock on the access to physical gaming, why would they want to want to licence a virtual poker machine and casino into anyone's home?

Well, to borrow a word or two from Senator Alston's second reading speech, I think the answer was casuistry on behalf of some state and territory governments and sophistry on behalf of would be providers of online casino services.

The states and territories that advocated the licensing of these online casinos were at worst blinded, or best misled:

• by the opportunity of all the additional taxation revenue promised by the sophistry of would be licensees – money that would come from the losses of users not resident in their jurisdictions;

• by the casuistry that assuaged their domestic concerns that problem gambling couldn't be any worse – that any transfer from physical gaming to virtual gaming, even at the risk of new problems, could be reasoned as introducing new technology to apply harm minimization measures; and

• a patronizing perspective that those same harm minimization measures would be helpful for the gamblers in those countries that didn't regulate as well as they did.

What was overlooked, as was so succinctly pointed out by Senator Woodley, was that "the offer of the states to regulate online gambling is an offer to regulate the extension of gambling outlets. Let us underline that. It is not an offer to limit gambling, to wind back gambling outlets. It is an offer to regulate the extension of gambling in terms of online gambling." How presumptuous to think that those other countries wanted this kind of help.

Something most Australian's wouldn't know, though every bookmaker, race club, TAB, casino, pub, or club knows well, is that a license to provide a gambling service is a privilege is not a right--one that can be withdrawn as easily as it is given. It is a privilege granted by the relevant state or territory racing and gaming minister and various regulatory bodies responsible to the Minister--if you have any doubt ask Robbie Waterhouse!

The genesis of this legislation was to make an attempt to control problem gambling by just heading off at the pass harmful forms of gambling that were enabled by new technology--and was something that the federal government had to interpose itself in because of irreconcilable differences between the states and territories on this issue. Ignore the international implications, this was simply about some states not wanting other states supplying a virtual poker machine or casino game into the computers of its residents.

That's where it may have started--but that's not where it finished. What became apparent, firstly supposedly as “unintended consequences” was the fact that in the 21st century nearly all gambling is transacted through some online communications medium. There are exceptions, like the scratch lottery ticket, the humble chook raffle or a bet with the bookie at racecourse, but nearly everything else is “connected” by communications. From an online lotto ticket, a bet with TAB, or playing an electronic gaming machine with central monitoring or the planned interactive state wide linked jackpots.

Other issues arose, for example, during the course of finalizing amendments, the office of the NSW Minister for Gaming and Racing was asked by Senator Brown's office to confirm a few areas of NSW law, and policy. In particular addressing a major problem of an incursion by offshore bookmakers targeting Australians betting on Australian racing in direct contravention of state law; and with public benefit implications. What was established was that the problem was that offshore operators were beyond the reach of state law because the state lacked the commonwealth's communication powers and that "it was clearly desirable if the commonwealth and state laws were complimentary--it [the state law] would have a better chance of being effective."

What must be remembered is that is that licensed gambling is generally permitted on the basis of some public benefit test--even allowing pokies into pubs was to revitalize an ailing industry--it just took every one by surprise that gaming turnover went through the roof, even in a mature market like NSW.

Until a few years ago, the states managed to strictly control gambling in their jurisdiction, even in fluid markets like wagering, via strict control on advertising and availability of odds or information. The Internet, along with competitive international direct dial telephone rates, has changed forever the dynamics of the threat to state and industry revenues. This revenue, and public interest, is being undermined by offshore operators targeting Australians (with impunity under state law) using low cost Internet technology and the competitive advantage of not paying up to 40-100% of their profits in tax or levies. In racing about 55% of gross margin (or about 8% of turnover) is split between the racing industry and the state government; and for lotteries up to 100% of net margin (gross less operating costs) depending on the state going to its government.

There is no doubt that the service provision of lotteries and wagering on Australian racing that should be restricted to those providers licensed by an Australian state or territory--and the Commonwealth can now provide that.

The government's original preferred legislative approach was prescriptive – it knew what it wanted to stop so define it and forget about it. Without the resources and expertise, they didn't want legislation that required, like state gambling legislation, continual finessing by means of regulation. They found out that objective wasn't that easy!

What government and the cross bench senators found was that they could do more. More to alleviate both problem gambling and excessive gambling in the community--and that there was a heavy burden of duty to do so--without trammelling over states rights and preferably providing a legislative framework to assist the states and territories achieve domestic policy objectives.

I am sure that the government, and in particular Senator Alston's office, wished that they had never ventured into the morass that is gambling legislation, where every attempt to get it right was portrayed as a “back-flip” or “watering down” by when in fact the opposite was happening as it moved closer in alignment to state and territory laws.

So now we have a momentous piece of legislation that can be used with great effect if need be. Implemented by a government, with support of the cross bench senators, that respects the states enough to give them the chance to take initiative themselves in conjunction with Ministerial Council on Gambling chaired by Senator Vanstone, Minister for Family and Community Services. A piece of legislation that allows the states and territories to have the commonwealth's communications powers applied to give greater efficacy to the state and territory gambling laws if they desire. I am sure that the community charities that benefit from lotteries and the Australian Racing Board in the will be pressing them to do so in the public interest.

But woebegone any who exhibit recalcitrance to do so.

One only has to read Hansard to see some of the prescriptive measures that were contemplated before the realization struck home that all exemptions must be subject to regulation. There were draft prescriptive amendments that were circulated for comment that would have been supported by all 12 cross bench senators giving the government a majority of 18--do not doubt the resolve of the cross bench on the desire for this legislation to address problem gambling--look to Senator Greig's second reading amendment motion.

Look to the world-leading framework of this legislation, putting into place what has been contemplated but not enacted in other jurisdictions and applaud the federal government for taking on the leadership and responsibility for it.

I am sure that there will be a lot of other countries, which experience similar problems us on this issue that will be looking carefully at the framework of this legislation.

Why I have I taken the opportunity to voice this opinion? Because the hard work, and dedication to duty of many at Parliament House, particularly in the Senate, should be recognized. So that the ill founded, self-interested and biased criticism of this legislation should stop forthwith! So that the media (who have similarly been misled by interests associated with online gaming-- unfortunately including the Internet Industry Association) are able to focus on how this legislation can now be used for implementing domestic policy in the interest of the Australian public! Bugger a bit of offshore gambling export.

As far as I can ascertain, other than Lasseters Online being affected in respect to 37 users; online bookmakers (including TAB fixed odds sports betting operations) have been the only Australian state and territory licensed gambling service providers prescriptively affected by the legislation on day 1.

Online bookmakers, within 28 days, will have to wind back the clock and withdraw services and bet types that have existed for some years. What's now banned is betting online on the result of a sporting event, and some significant events during the course of a sporting event, after the event had started, along with the real target “micro-event wagering”--the “will the next serve be in or out?” type bet.

There was no real legislative alternative then that used to initially capture what we (ARBAC) have agreed are potentially harmful new forms of wagering--“micro-event wagering"--along with the main obviously interactive gaming or online casino product. ARBAC--the peak body of Australia's state bookmaker bodies, along with the Australian Racing Board--has supported this legislation from the outset. We will accept our dose of collateral damage in the knowledge that this legislation provides the framework for the states and territories to work with the commonwealth to eventually sort this out.

Before the legislation was passed ARBAC circulated its code of practice which addresses the micro-event wagering issue via its own ban--one that applies not just to online but telephone and face-to-face. We look forward to working with the state and territory racing ministers to have that code approved on a national basis.

As the Prime Minister has always said this hasn't been about stopping what existed--only preventing an unattractive future before it was too late.

As to the fallacious arguments circulating from some:

Lasseters Online can take whatever they like to the WTO, gambling services are a matter of sovereign public policy--there is no international 'trade' in gambling services. Gambling services are already excluded from the Australian New Zealand CER; and the U.K. Customs and Excise while it will not restricted licensed bookmakers from other European countries (eg Ireland) from operating in the UK – it will restrict them from operating into the U.K. from offshore.

The Australian “good neighbor” provision as it has been dubbed by Greens Senator Bob Brown, is a world first in establishing some sort of mutual recognition, and multi-jurisdictional responsibility, in Internet activities. How anyone could argue against it defies logic--or puts some so high up the ladder of self-interest as they should be treated with distain. For anyone to suggest that this initiative was left field is ridiculous--Senator Alston conveyed this succinctly when quoted in an article in the AFR April 21, advocating to "assist overseas countries that wanted to ban online gaming."

Any suggestion that an unenforceable contracts provision will not be effective has no idea of the already hostile environment that online gambling merchants operate in. There are requirements to declare their operations as gambling, and the merchant acquirers (the banks that supply services to “merchants”) obligate online casinos to install real time anti-fraud systems to mitigate the risk of charge-backs.

A requirement for those systems to block Australian credit cards by their BIN will be “in the mail” within 28 days, if they are quick of the mark, but it may 6 months before the final regulation is in place. Don't think any third party intermediaries will be able to launder the 'money' on their behalf either--Senator Brown's proposed amendments give an indication where this will end up.

There is no doubt that the Australian Internet industry which as been quite active with the online gaming lobby in some sort of symbiotic relationship. However, from the outset ARBAC, and the racing industry, shunned overtures for “united approach against the futility of this legislation”. While there is no doubt there is an opportunity to use Internet technology for virtual products like gaming, the attempt to ban it in Australia has never been an attack on the Internet or gambling per se. This legislation is about gambling, the public interest of sovereign states and their responsibility to their citizens. Therefore I would have thought it more productive support those objectives rather than to promote the Internet as some lawless place where guerilla attacks on sovereign states rights to make laws for their residents are the order of the day.

Lastly I must convey my feeling on the ALP's role, or lack thereof on this issue.

The ALP moved no amendments in committee; they supported no minor party's or independent's amendments; they did not contribute to the debate in any way other than to either try to score an odd political point, or to lay up for one in the future. In my opinion Kim Beazley, by his lack of leadership and failure to understand and rate this legislation as a matter of national importance--of good government, has nailed his coffin on his chance of becoming Prime Minister.

This act, like many others I am sure, requires the executive government to excise leadership in the pursuit of good government. The Prime Minister, and his staff; the Minister for Communications, Senator Alston, his staff, and his NOIE departmental staff; Minister for Family and Community Services, Senator Vanstone and her staff--all demonstrated a commitment to working with the cross bench senators to achieve the best result--and have accepted the responsibility to implement it.

As a result, I for one would like to be at the next Ministerial Council--where next time the Commonwealth is a player at the table, rather an interested onlooker--there to help but with the playing field now clearly marked out.

I thank all the cross bench senators who work diligently to ensure that the Senate is indeed a place of review--not a rubber stamp for the House of Representatives--and certainly not a place where the opposition plays politics. I single out Greens Senator Bob Brown (TAS) and Democrats Senator Lyn Allison (VIC), for specific comment as they, amongst others, were very active on this legislation, and the Senate will be lesser place if they were not retain their seats at the coming election. The same applies for the other Democrats up for re-election, senators Bartlett (QLD), Murray (WA) and their Leader Natasha Stott Despoja.

Kim Beazley and his opposition shadow ministerial team, have in my opinion, on this issue alone failed to demonstrate the requisite qualities to lead this country. He is not going to get my vote. No doubt many other factors will come into play in the months ahead, so I am lucky that NSW law prohibits me from making a book on election results--otherwise I might get fleeced standing by my opinion--but then so will every Australian if he gets the keys to the Lodge.

Tim Ryan can be reached via e-mail at tim@bookie.com.au.