The terms of reference of the Review Group were as follows:

1. To review the regulatory environment with-in which gaming and lottery activities are carried out with particular reference to:
   • the 1956 Gaming and Lotteries Act;
   • any other relevant or proposed Irish legislation;
   • international developments in the Gaming and Lotteries area.
2. To identify the issues arising from such a review and to make recommendations designed to address these issues in the context of securing a modern regulatory envi-ronment while fulfilling necessary social policy objectives.
3. To furnish a report on the above for consideration by the Minister and by Government by the end of 1999.

1956 Gaming and Lotteries Act no longer appropriate to current needs

The 1956 Act is not, for a number of reasons, providing the required control or regulation of gaming and lotteries activities. It has been overtaken by major developments in technology, national lotteries, Internet-based gaming, and changes in the socio-economic profile of the country. There are serious problems with the enforcement of the laws governing gaming, and the nature of the regime governing lotteries (as also identified in the 1990 Costello report) is unsatisfactory. Against this background, therefore, the Review seeks to (a) provide those involved in promoting gaming and lotteries activities with a modern regulatory structure and (b) provide the public with the required safeguards and protections.

Conflicting images of gambling, gaming and lotteries

Gambling in its various forms is a popular social activity in this country, in particular, betting on horse racing and the National Lottery. In the public mind, gaming and gaming machines basically mean either the seaside funfair with a variety of amusement and slot-machines or the less family-oriented urban-based arcade which reflects, perhaps, the less sociably acceptable face of gaming. There are conflicting images here and gaming, therefore, has generally had a less than positive image. Lotteries, on the other hand, do not attract the same negative connotations.

International develoment

There has been a major expansion of legal gambling throughout the UK, Europe and the US over the last twenty to thirty years. This has been facilitated by the growth of State lotteries and the legalisation of gaming and casinos both in Europe and in the US. The Internet, a medium which poses unique regulatory difficulties for the traditional law enforcement agencies, has been targeted by those seeking to provide gambling opportunities either legally or illegally. There are particular dangers inherent in Internet gambling, particularly for children and those with potential addictive problems. States, including Ireland will be required to form a response to gambling on the Internet through forms of national regulation, prohibition or otherwise, all of which pose serious operational and legal problems.

Need for a balanced approach

The 1958 Act is basically a restrictive measure, framed at a time when gambling world-wide was much more restricted and tightly controlled than is the case today. The Review Group's terms of reference suggested neither a liberal approach nor a movement towards liberalisation, in line with international trends. The Group, in endeavouring to set out the legal framework upon which gaming and lotteries activities should be based, did, however, take into account relevant developments both here and abroad. These include the establishment and rapid growth of the National Lottery, as well as other forms of gambling, the impact of the Internet and the relatively recent decision of the Government not to provide for casinotype gambling in this country. It also considered the various submissions received from a wide range of interests.

New legislation

In examining the overall situation, it became apparent that in order to give effect to what was emerging as a comprehensive set of changes and recommendations, a new statute would be required to replace the 1956 Act. While as a possible interim measure a number of amendments to various key provisions were considered, it was decided, with the exception of increasing the maximum prize for one category of lottery, not to proceed on this basis. This is primarily due to the desirability of having the overall regulatory and control machinery in place prior to the introduction of any new regime.

Gaming and Lotteries Authority

The Review Group noted the current roles of the Gardai and the Revenue Commissioners as the bodies directly responsible for the regulation and control of gaming and lotteries activities. It noted also the trend towards specialised regulation of niche activities across a number of sectors. In examining the situation, it concluded that the front-line control and regulation of what is basically an economic activity should reside in the first instance with a dedicated agency other than the Gardai. There will, however, be a continuing role for the Revenue Commissioners in relation to excise duty and related matters. In making this recommendation, the Review Group was anxious to ensure that such an arrangement would be as self- as possible and based on outline estimates of the turnover involved, and it is satisfied insofar as is possible at this stage, that this should prove to be the case.

The local authority role

The local authorities effectively control the extent of gaming throughout the country at present. The Review Group gave very careful consideration to their role in this respect.

This has been a controversial issue at times and the function does not, at first sight, sit easily with the roles usually associated with local authorities. However, it must be recognised that these are elected bodies reflecting the wishes of those whom they represent. In addition, the group noted the planned devolution of further powers to local government and the risk of proliferation of gaming were the powers to be totally removed. It therefore decided to recommend their retention, with certain safeguards.

Social downside of gaming and lotteries activities

A number of problems have been identified with gaming and slot-machine use. The exposure of children to gaming machines has been demonstrated to have potentially harmful effects. High-stakes slot-machine use, where the maximum prizes available can exceed £1000, constitute hard gambling. For those with a compulsive or addictive habit, regular exposure to such machines can, potentially, be extremely damaging. Problems on a similar scale have not generally been associated with lotteries in Ireland, although there is some evidence of addictive behaviour with lottery scratch cards.

Gaming machines

Insofar as the Review Group could ascertain, breaches of the law in relation to gaming and gaming machines are widespread. Problems have arisen with enforcement and definitions, and the use of tokens or credits in order to circumvent the law as it stands is common. The Review Group decided to recommend that provision be made for two classes of gaming machine, one to be located only in premises/areas licensed for gaming, as well as a low prize-level, non-cash, amusement-with-prizes machine with no restrictions on siting or use. To underpin the new arrangement, a centrally-controlled system of certification/classification of all gaming machines is also recommended.

Gaming - stake and prize limits

The current limits are unchanged since 1956 and this situation clearly needs to be addressed. The Review Group considered a wide range of suggested increases for revised prize and stake limits received via the submissions to the review. In recommending a 50 cents maximum stake and a 20 Euro maximum prize for gaming machines, it also took into account the lack of demand for increased levels from the public. In addition, it recommended that these limits not be enshrined in primary legislation in the future.

Lotteries

While the operation of lotteries has not, over the years, given rise to problems or concerns of major proportions, their regulation and control under the 1956 Act has raised a number of issues. These have included difficulties with the reporting requirements under the 1961 and 1966 regulations. The Review Group decided to recommend a revised structure comprising four classes of lottery, all of which should be regulated by a Gaming and Lotteries Authority. It considered that sales/marketing promotions which contain a lottery element should require a permit (in respect of the lottery element). The review recommended an immediate increase of 50% in the maximum weekly prize fund for the larger, periodical-type lotteries. The basis for the monitoring and control of all lotteries should be set out in detail in regulations to be made by the new Gaming and Lotteries Authority with the consent of the Minister.

Need for consultation

The Review Group felt that some form of consultative mechanism should be put in place to provide for ongoing consultation between the various regulatory bodies involved in the control of gambling in this country.

Implementation of the recommendations of the review

A Bill should be brought forward to replace the 1956 Gaming and Lotteries Act, which should largely cover the same areas as the existing Act.
[Paragraph 72]

Overall control and regulation of gaming and lotteries

Direct responsibility for the overall regulation of gaming and lotteries should be vested in a Gaming and Lotteries Authority which should, as far as possible, be self-financing on the basis of fees and other charges for the range of inspection and other services provided. Such fees and charges, should, when introduced, be separate and distinct from the existing range of revenue excise duties which will remain in force.
[Paragraphs 4.20, 7.3]

Local authority powers

The new legislation should provide for the retention of local authority powers as, currently provided by the 1956 Act (but with certain adjustments) in respect of gaming within their administrative areas, subject to statutory provision for what follows: In cases where a local authority decides to rescind a motion which allows gaming to take place, consideration must be given to hardship arising for existing operators whose compliance with relevant requirements is not in question. In doing this, a deferral of the coming into force of a rescinding motion for a period of up to two years should be considered.

All rescinding motions should be accompanied by a detailed statement giving reasons for the motion and setting out the background to the reasons for the rescinding.
[Paragraphs 4.2, 7.41]

Licensing of premises for gaming

Subject to the exercise of the local authority function, premises in which gaming machines are to be located, including amusement halls, arcades or other premises should continue to require a licence which may be obtained from the Revenue Commissioners, on the basis of a certificate obtained, on application, from the District Court.
[Paragraphs 4.3, 7.51]

Gaming machines

Definitions of gaming machines should be revised to remove any scope for circumvention of the law.

A new fee-based system of classification of gaming machines should be introduced with two classes of machine: (i) gaming and (ii) amusement with prizes (AWPs).

Gaming machines should be located exclusively in premises which are licensed for the purpose and sited in discrete areas of such premises, free of AWPs, and away from video or other forms of amusement-only machines. If it is proposed to site such machines in the same premises, the proposed siting layout should be submitted in advance of the licence application and should be subject to the approval of the Gaming and Lotteries Authority. There should be no restrictions on the siting of (non-cash prize) amusement - with - prizes machines (AWPs), operated in accordance with the permitted stake and prize limits. A minimum verifiable percentage payout level, to be set by the Gaming and Lotteries Authority, should apply to all gaming and AWP machines. Arrangements for the calibration of the machines and for inspection checks etc. should be put in place by the Gaming and Lotteries Authority.

The prohibition on locating gaming machines in licensed premises should be maintained and extended to all premises licensed for the sale of alcohol and excisable liquor.
[Paragraphs 4.9, 4.11, 7.6]

Gaming machine stake and prize limits

(i) An increase in the stake and prize limits for all gaming and gaming machines to 50 cents and 20 Euro (39p and £16) maximum respectively, should be introduced as soon as the revised regulatory machinery is in place and (ii) amusement - with - prizes machines (AWPs), should have a maximum stake of 25 cents (19p) and maximum non-cash prize to the value of 6 Euro (£5.00).

The maximum amount/value of "credits" that gaming machines should be permitted to hold or display at any one time should be not greater than twice the permitted maximum stake.

Provision should be made for the adjustment of stake and prize limits for gaming by Order, by the Gaming and Lotteries Authority, with the approval of the Minister.
[Paragraphs 4.8, 7.7]

Gaming at funfairs, carnivals, and other special or once-off events

Gaming in conjunction with carnivals, travelling shows etc., conducted in accordance with the general provisions of the new legislation, should be allowed under temporary permit from the Gaming and Lotteries Authority. Such permits may attach additional conditions as appropriate to the circumstances.
[Paragraph 7.8]

Casinos

The ban on casino-type gaming included in the 1956 Act, should be retained in the new legislation to confirm current policy in this area.
[Paragraphs 4.7, 7.9]

Lotteries

Provision should be made for four types of lottery:

Category 1 Lotteries
Lottery schemes (including bingo) with a maximum prize fund of £15,000 per week, or £50,000 per month, operated under a licence issued by the Gaining and Lotteries Authority.

Category 2 Lotteries
Lotteries (including bingo) with a maximum prize fund of £3,000 per three month period, operated under a permit to be issued by the Gaming and Lotteries Authority.

Category 3 Lotteries
Lotteries with a maximum prize fund of £500, limited to one lottery per month, without the requirement for a permit or licence but complying with requirements as set out in regulation by the Gaining and Lotteries Authority.

The beneficial interest in the above lotteries should rest with philanthropic, charitable or other similar interests, and no personal gain should accrue to the operators/promoters accrue to the operators/promoters

and

Category 4 Lotteries
Lotteries operated in conjunction with, or as part of, sales or marketing promotions. The lottery clement of such enterprises should not involve airy personal gain for tire promoters/ operators. A permit should be obtained from the Gaming and Lotteries Authority on application in a prescribed form.
[Paragraphs 4.12 to 4.16 incl., 7.12]

Appropriate fees should be payable on application to the Gaming and Lotteries Authority for lottery licences, permits, registrations, etc..
[Paragraph 7.3, 7.12]

Cap on lottery prizes

The Review Group recommends that the prize limit for periodical lotteries under section 28 of the Gaming and Lotteries Act be revised to £15,000 per week. This adjustment should be implemented as soon as possible by Ministerial Order.
[Paragraph 7.73]

Foreign lotteries

The prohibition on the promotion of foreign lotteries within the State should be retained
[Paragraph 7.14]

Internet gaming and lotteries

New legislation should ensure that prohibitions on specific elements of gaming and lottery activities within the jurisdictions should be enforceable in both on-line and off-line environments. Providers of such on-line services should be able to guarantee that national law in this area is capable of being complied with.

It should he noted that regulation of any Internet-based National Lottery activities will remain subject to the provisions of the National Lottery Act 1986.
[Paragraphs 5.6, 7.15]

Age limits for gambling

An age limit of 18 years should apply to the use of gaming machines other than AWPs, the purchase of all lottery tickets, and tire placing of bets with the tolalisator.

The new Act should place the responsibility for ensuring that the age limit is strictly enforced on the operators/proprietors of gaining premises and the vendors of lottery tickets.
[Paragraphs 4.21, 7.16]

Offences, enforcement, penalties and related issues

Stringent penalties which reflect the gravity of the offence, and which are in line with those for illegal betting included in the Finance Act should be provided to ensure sufficient deterrent for compliance. Penalties should include provision for the forfeiture of machines and equipment.

In the case of alleged breaches of the law, prosecutions should be instigated by the Gaming and Lotteries Authority. This will not affect the existing powers of the Revenue Commissioners to act in revenue-related cases.
[Paragraphs 4.20, 7.17]

Coordination of gambling policy

A non-statutory mechanism should be put in place to facilitate ongoing consultation between the various agencies involved in the control and regulation of all forms of gambling in Ireland. The primary objective should be to provide for an integrated and balanced approach to the various social policy considerations which arise in the gambling area.
[Paragraphs 1.8, 7.18]

5.6 The Internet

The other international constituent which has impacted on gambling is the Internet. Those with an interest in providing gambling services, lawfully or otherwise, have not been slow to exploit the potential of this new means of service provision. Industry sources in early 2000 estimated the number of on-line casinos at around 1,200 and growing.

The US approach is interesting and reflects the regulation challenges posed by the new medium. In locations such as Antigua, local administrations are prepared to licence gambling web-sites aimed largely but not exclusively at the US. The Kyl Bill, a measure which makes it a crime to operate sports betting or gambling sites on the Internet, was passed by the US Senate in November 1999 and will be before the House of Representatives during 2000. Gambling in the US has traditionally been controlled on a state-by-state basis and state gaming laws vary greatly. It is felt, however, that federal control of Internet gambling is required because of the threat posed to state regulation by the particular nature of the medium. The type of gambling involved is unrestricted, carried out, often from home, on a wide range of activities, often sports related events (which are extremely popular in the US). Children, and indeed adults, using credit cards are seen as particularly vulnerable. The lack of security for the gambler in terms of guaranteed payment of winnings does not appear to constitute a serious deterrent to prospective players.

The Internet poses a major challenge to the traditional state law enforcement and regulatory machinery, and gambling on the Internet is no exception. A small number of European countries permit various forms of Internet gambling. Sweden, for example, has issued licences permitting Internet betting on horseracing. There has, however, been relatively little overall progress to date in grasping the legislative nettle at national level.

7.15 Internet gaming and lotteries

Issue
The range of illegal uses of the Internet and the enforcement difficulties associated with such use has been well documented in the first report of the Working Group which studied this area. While that report did not examine the specific problems associated with gambling on the Internet, many of the conclusions reached in the report are valid for the gambling area. Conclusions on enforcement difficulties are particularly relevant, and any form of regulation will inevitably have to reflect the unique technical and legal issues posed by this new medium.

While the main debate on Internet gambling appears to have centred in the US and on the current federal proposals for a total ban on Internet betting, it is inevitable that the issue will move closer to these shores. The Group feels that current telephone betting /gaming services will inevitably move to an Internet base, given the advantages of the technology. Jurisdictional issues in this area are already emerging.

Liability issues in the Internet gambling area are likely to be as complex as in other areas of Internet activity. For example, the discussion so far on the regulation of gaming and lotteries has assumed that the provider of the gambling service is located in this jurisdiction and can therefore be made amenable to national law. The focus is on the provider of the service and not on the players. In an Internet environment, special consideration would have to be given to both the liability and protection of the player. The Australian Player Protection Act is a good illustration of this point.

With Internet operations, the provider may not be within the jurisdiction and may be providing a service which may be legal where the service is being hosted, but illegal where the service is being accessed. This is not an unusual phenomenon in Internet services. The logistical (not to speak of legal) difficulties of dealing with this situation and of enforcing the law at player level arc enormous. Attempts to fix liability at Internet Service Provider level are also fraught with difficulties. Internet gambling, despite its growth, is still at an early stage of development and it is difficult to anticipate the way in which it will develop to affect this country. To the extent that the Internet is simply used in this jurisdiction as a medium to transact legal gaming and lottery activities, then it should be subject to the national laws which apply to that activity.

Particular challenges to service providers will lie in the implementation of age restrictions and the regulation of the on-line financial transactions involved. Other legal issues may arise in the form of enforcing gambling contracts. The Group has noted examples of Internet gambling services which, though provided in a particular country, are not available to residents of that country. While this may represent a restraint on the proliferation of gambling activities in that country, in the longer term, as more countries establish such services, the overall effect will be to raise the levels of on-line gambling generally. The other side of this coin is, of course, a situation where a service is confined to a particular country (such as a national lottery service) where restriction on the promotion of gambling services abroad is part of a general agreement between states. Overall, the group felt unable to make specific recommendations with regard to the regulatory environment which should apply to any future Internet gaming and lottery activities, other than to point out that any such activity should be in conformity with national legislation. Internet developments are as likely to be in the area of betting as in the area of gaming and lotteries, thus outside our terms of reference.

It is suggested in view of the complex financial, revenue, legal and technical issues involved, that a special group with appropriate competencies, outside that contained in the present Review Group, could be established to examine this area. The recently appointed Internet Review Board might be consulted in this regard. Whatever regulatory system is adopted, the Group also feels that it should conform with the general principles established in this report for the control of gaming and lottery activities generally. Separate standards for off-line and on-line environments will only create serious problems for society in the longer term.

Recommendation 40
40. New legislation should ensure that prohibitions on specific elements of gaming and lottery activities within the jurisdiction should be enforceable in both on-line and off-line environments. Providers of such on-line services should be able to guarantee that national law in this area is capable of being complied with.