Focus: Regulating interactive gambling
2 April 2013
In brief: In response to a final report into Australia's interactive gambling legislation, the Federal Government has pinpointed harm minimisation and consumer protection as a necessary first step before further reforms can be considered. Partner Ian McGill, Senior Associate Robert Muñoz and Lawyer Matthew Tracey examine the scope of the report's recommendations.
How does it affect you?
- The Minister (Senator Stephen Conroy) has announced that the Department of Broadband, Communications and the Digital Economy (DBCDE) will work with the various state and territory regulatory bodies to establish a consistent national framework for harm minimisation and consumer protection that covers all legal online gambling activities.
- The Minister notes the Final Report 2012 Review of the Interactive Gambling Act 2001 (the Final Report) recommends reforms to in-play sports wagering and casino-style gaming but does not identify these as an area for immediate reform at least until the Minister can secure the cooperation of the various state and territory regulatory bodies to create a national standard.
- With the possibility of nation-wide reform, Australian operators should reflect on their current customer policies and their approach to planning future products and services.
The Interactive Gambling Act 2001 (Cth) (the IGA) prohibits the provision of interactive gambling services if that service has an Australian customer link (subject to certain exceptions, such as betting on a horse, harness or greyhound race or a sporting event).1 More broadly, the IGA seeks to minimise the scope of problem gambling in Australia by regulating access to gambling via, among other things, the internet or a broadcasting service.
On 27 May 2011, the Council of Australian Governments Select Council on Gambling Reform announced that the DBCDE would undertake a review of the IGA. The DBCDE released the Final Report on 12 March 2013.
The Final Report highlights estimates which suggest Australians lose around A$1 billion annually to online gambling services many of which are located in foreign jurisdictions with favourable tax laws and gaming regulations. Further, the Final Report notes that the IGA may be 'exacerbating the risk of harm because of the high level of usage by Australians of prohibited services which may not have the same protections that Australian licensed online gambling providers could be required to have.'2
Harm minimisation and consumer protection
The Final Report recommends that a minimum national standard should be developed by federal, state, industry and gambling researchers to be implemented into state and territory legislation so that the various state and territory bodies will continue to have the responsibility for harm minimisation and consumer protection.
The Minister drew from the Final Report three key areas where harm minimisation standards could be introduced or strengthened:
- allowing pre-commitment capability of users;
- stricter rules around offering users a line of credit; and
- limits on the inducements that online gambling providers can offer.
The Final Report also suggested that a national standard should include:
- protection of customer information;
- making data on harm minimisation available for research;
- mandatory identity verification before opening an account;
- a national self-exclusion database;
- easily accessible spend tracking facilities;
- targeted warning messages;
- prominent links to the National Gambling Hotline; and
- links on service provider websites to the relevant state authority's complaint form.
Key submissions to the DBCDE generally supported the development of national minimum standards.
Micro-betting on sporting events
The IGA prohibits the provision of online betting facilities to Australians where those facilities allow internet betting on the outcome of:
- a horse, harness or greyhound race; or
- a sporting event,
after the race or event has begun (micro-betting, also known as 'live betting' or 'in the run betting').3 Micro-betting, which remains available over the telephone, was seen to represent a potential problem area for high-risk gamblers owing to its highly addictive and easily accessible nature.4
The Final Report recommends that the ban on micro-betting be extended to all platforms and physical outlets and the Minister would be responsible for drafting regulations that determined which bets would constitute micro-bets. This recommendation highlights the tension between adopting a platform neutral approach when legislating and seeking to treat different content delivery platforms in unique ways. Some submissions noted that the sporting bodies themselves would be in a better position to determine appropriate constraints on micro-betting.
The Minister stated that 'a nationally consistent approach to harm minimisation and consumer protection needs to be agreed before those recommendations are given further consideration'.5
Casino-style gaming and online poker
Certain types of online gaming are prohibited under the IGA including casino-style games such as roulette, poker and slot machines if customers pay money to play or enter the game.6 Interestingly, the Minister flagged that he would seek further information from providers of casino-style gambling simulators (accessible through social media), who typically charge a one-off set-up cost to play or buy a game.
The Final Report considers that online tournament poker is relatively low-risk in comparison to other types of online gaming such as electronic gambling machines (EGMs). The Final Report recommends the amendment of the IGA to enable online gaming sites (whether currently licensed or not) to become licensed in Australia. A condition of that licence would be that such providers cease offering high-risk online casino-type games to Australians in exchange for being able to offer low-risk gambling services (such as online tournament poker). Because online tournament poker is typically a slower-paced game with an up-front, fixed financial commitment, it is seen as a lower-risk option for problem gamblers.
The Final Report envisages that licensed providers would be required to adopt the agreed harm minimisation standards.
Enforcement and education
Enforcement remains a jurisdictional challenge for the IGA given the borderless nature of the internet. It is an offence to offer interactive gambling services to Australians unless the service fits into one of the exceptions outlined above. However, it is not an offence for Australians to access interactive gambling services (whether these services are exempt or not). Instead, people who have a reason to believe that end-users in Australia can access prohibited gambling content over the internet may lodge a complaint to ACMA about the matter.7
The Final Report identifies that obtaining evidence for a claim in Australia is difficult because the conduct must often be an offence in both countries for mutual legal assistance between nations. Many online services are hosted in jurisdictions that are attractive to such service providers in terms of extradition and taxation laws.
In response to these challenges, the Final Report highlights three strategies in dealing with jurisdictional challenges. They are to:
- streamline enforcement provisions of the IGA by, for example, introducing a strict liability offence, enforceable by ACMA, to help increase the capacity of law enforcement agencies and regulators to take action;8
- increase awareness of the IGA among directors and principals of prohibited service providers and among relevant overseas authorities. This might include notifying such directors and principals that their names will be added by the Department of Immigration and Citizenship to Australia's Movement Alert List to alert relevant agencies if these people seek to enter Australia;9 and
- encourage restricted access to prohibited service providers by, for example, providing a safe harbour for financial institutions to voluntarily block financial transactions between Australian consumers and unlicensed online gambling service providers10.
Ultimately, the biggest challenge to enforcement remains the lack of criminality in jurisdictions where the prohibited service providers are hosted. The Final Report identifies that educating Australians on the risks of using prohibited gambling services may be effective in reducing the number of Australians accessing these services.
The Minister will need the cooperation of the states and territories in establishing a consistent national framework for harm minimisation and consumer protection. Australian operators should reflect on their current customer policies and their approach to planning future products and services, particularly to what extent a national framework as the Final Report outlines would impact on their operations.
- It is still an offence to provide a service to the extent that the service relates to betting on the outcome of a sporting event, where the bets are placed, made, received or accepted after the beginning of the event; or the service relates to betting on a contingency that may or may not happen in the course of a sporting event, where the bets are placed, made, received or accepted after the beginning of the event. See section 8A(2) of the IGA.
- Final Report, page 6.
- s8A(2) of the IGA.
- Supplementary Explanatory Memorandum p4 and Revised Explanatory Memorandum p 41.
- Senator the Hon Stephen Conroy, Media Release: Strengthened consumer protection for online gambling, 12 March 2013.
- s4 'gambling service' and s5(1) of the IGA.
- s16(1) of the IGA.
- Final Report, p 66.
- Final Report, p 71.
- Final Report, p 80.
- Ian McGillPartner,
Ph: +61 2 9230 4893
- Niranjan ArasaratnamSenior Counsel,
Ph: +65 6535 6622
- Gavin SmithPartner, Sector Leader, Technology, Media & Telecommunications,
Ph: +61 2 9230 4891
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