online gambling & the review of the interactive gambling act – my analysis

Three days ago, the Department of Broadband, Communications and the Digital Economy (the DBCDE) released a report that has swept across the Australian media like a bushfire. That report was the interim report of their review of the Interactive Gambling Act 2001 (IGA), and reactions to it have been mixed. It’s been praised (cautiously), condemned (widely) and sensationalised… but what is all the fuss really about?

The matter at hand is online gambling, widely considered to be the “next big thing” for the gambling industry in general. Many believe that online gambling will be the end of us all, although few really have a handle on what it covers and the laws that regulate it. So to try and clear things up, here is my analysis of the DBCDE’s review of the IGA (without the sensationalism), the reactions to it, and what the future may hold.

Background

The IGA was introduced by the Howard government just after the turn of the century. It was supposed to address concerns about the growing online gambling industry, as at that point in time Australian law was seriously lacking in this area.

What was delivered was underwhelming. The IGA effectively made it illegal to offer online gambling services in Australia, with the exception of sports betting. Australian gambling websites were prohibited, and overseas gambling websites that offered their services to Australians were theoretically subject to fines of up to $1.1 million a day. The act of actually gambling online was NOT made an offence; the focus was on the industry, not the gamblers.

The advertising of prohibited online gambling services was, naturally enough, also made illegal; so too was “in-play” betting on the internet. “In-play” betting refers to bets placed on sporting events after they have already started, and while this is legal when done in person or over the phone, it is illegal to do so online.

The IGA has proven to be a toothless tiger. International casino websites completely ignored the ban and the threat of fines and continued to operate at their leisure; in the ten years since the IGA was introduced, not a single fine has been applied. The only impact was that no Australian company could offer online casino gambling… so all the money lost has gone offshore, and Australian gamblers are taking an even bigger risk by using sites that do not have to comply with Australian laws and regulations.

Advancements in technology have also rapidly left the IGA behind. The internet is far more widely used and accepted now than it was a decade ago, and the smart phones that we take for granted today were unheard of in 2001… as were the gambling “apps” that have since been developed in their thousands. The landscape has changed beyond all recognition.

Ten years on, this review of the IGA was seriously overdue.

The Report

In May 2011, the Council of Australian Governments (COAG) announced that the DBCDE would undertake a review of the IGA. The DBCDE subsequently released a discussion paper for the review in August 2011, and took submissions on the paper until October 2011.

Then they thought, and pondered, and spoke to a number people and read all the submissions… and on 29 May 2012, they released their interim report of the review. This was a hefty document, 158 pages in total, and contained 30 recommendations with regards to the IGA and, by correlation, all forms of online gambling in Australia.

There have been plenty of headlines about the report, most of which focus on only one or two “hot topic” areas. Ignore those for the moment; here is a summary of what the report recommends.

• We need a national standard, a framework of harm minimisation and consumer protection measures for all forms of permissible online gambling. Online gambling providers who do not sign up to this standard should be prohibited. A number of harm minimisation measures are suggested, including pre-commitment, credit restrictions, warning messages and links to gambling helpline services.

• The Australian Communications and Media Authority (ACMA) should be responsible for administering penalties to those who provide prohibited online gambling services. Accordingly, they should be given stronger powers to enforce these penalties. Financial institutions should be able to block transactions with prohibited gambling sites, and ISPs should be able to block access to prohibited gambling sites or at least display warning messages when they are accessed.

• Steps should be taken to ensure that the risk of children accessing online gambling sites is minimised.

• Advertising of prohibited online gambling services, either directly or indirectly, should attract civil as well as criminal penalties which should also be administered by ACMA. This should include “free-play” gambling sites that are associated with “real money” gambling sites.

• Online tournament poker should be legalised in Australia, subject to signing up to the proposed national standard for harm minimisation and on the basis of a five year trial. All other forms of online “gaming” (including all other online poker games, as well as casino games such as roulette and poker machines) should remain prohibited. Further restrictions should apply to these tournament poker sites with regards to access and frequency of play.

• Online “in-play” betting on sporting events should be legalised. At present, “in-play” bets can only be placed in person or via the phone; this recommendation would allow “in-play” bets to be placed online as well, subject to state law and the regulations of the relevant sporting code.

• To minimise the capacity for rapid and potentially harmful online “in-play” betting, the practice of “micro-betting” in sport should be completely prohibited. This is currently covered by the ban on online “in-play” betting, but should be extended to all forms of “micro-betting” on sporting events.

• And finally, a recommendation that other platforms with online gambling connections (such as social media services and online games) revise their user policies, and that the treatment of fantasy sports competitions (such as Dream Team and Super Coach) requires further consultation.

And that’s it, in a nutshell.

The Reaction

Before the report was even formally released the headlines had begun. Some details were leaked a week before the official release and the media told the story.

News Ltd informed us that Online gambling was set to cash in on sport. Fairfax issued a Warning on relaxing online betting rules. There was plenty of speculation much of which was accurate, but none of which painted the complete picture.

Once the report was formally released, everyone had an opinion. I’ve included a reasonably comprehensive list of articles about the report at the end of this analysis, but here’s what a number of key players had to say.

Senator Nick Xenophon

“The report fails to acknowledge that there has been a lack of political will by both major parties to make the Act effective.”

“(The report is a) thinly disguised sellout to expose more Australians to online gambling.”

“By giving it the seal of approval of the Australian government, you will see more people flocking to local sites and with it the problems that arise from that.”

“That raises some serious questions – is the Federal Government looking at online gambling as their next big revenue source?”

Senator Richard Di Natale

“We’ve got a huge problem with gambling in this country. Why on earth would you be making this easier for people?”

Reverend Tim Costello

“The more accessibility, the greater number of problem gamblers and social pain, particularly in young men. If you gamble on shonk sites overseas and lose your money you never try again – it’s a natural protection.”

Dr Charles Livingstone

“… It looks to me like they are trying to push it without first bedding down what good harm minimisation would actually look like.”

NRL CEO David Gallop

“(In-play betting is) an area that we have endeavoured to put safeguards around including prohibiting certain bet types and we would continue to work with the relevant authorities.”

AFL media manager Patrick Keane

“At the moment the restrictions in online betting encourage people to use overseas-based sites where there’s not the same information-sharing agreements in place, that is where we have expressed our concern and that has been on behalf of all sports.”

Betfair director Josh Blanksby

“There’s clearly a demand for it (online poker) and we’re of the view that if possible they should be betting with Australian operators where it’s much safer and controlled.”

It wasn’t long before Opposition leader Tony Abbott made his feelings clear about the report.

Coalition leader Tony Abbott

“This (the IGA) is an Act we established under the Howard Government to address community concerns about the growth of online gambling.”

“The Gillard Government’s Review of the Interactive Gambling Act 2001 is a blatant back-down on its pledge not to liberalise online gambling.”

“This is a whole new frontier of gambling which the government is proposing to open. If it goes ahead, every computer is a casino, every smart phone is a poker game. That’s not on as far as the Coalition is concerned.”

Someone should tell Tony Abbott that “every computer” is already a casino, and “every smart phone” is already a poker game. That horse bolted years ago.

The Prime Minister had this to say in response.

Prime Minister Julia Gillard

“If he’s (Abbott) going to have a pretence of caring about problem gambling he better pledge his support for poker machine reform.”

But the final word went to Senator Stephen Conroy.

Senator Stephen Conroy, minister for broadband, communications and the digital economy

“This is an interim report only. The government has made no decisions about possible changes to the IGA and will not do so until we have had further public consultation with interested parties.”

It’s a valid point. The IGA has been through reviews before, and little has changed. It remains to be seen what, if anything, will actually happen this time.

My Analysis

I’ve spoken to several people about this report over the past few days, most of whom have assumed that I would be opposed to any “liberalisation” of online gambling. Not so; it’s not that simple.

About six months ago, I published an article in The King’s Tribune called Taming The Wild West, which was my recommendation about what to do with online gambling in Australia. That article is best summed up in the following paragraphs:

Australia needs a national framework for online gambling; forget the states, this is one for Canberra. A national framework that stipulates the rules and regulations that any participating company must comply with. A national framework overseen by an independent body with the power to impose sanctions, fines or even shut down companies that don’t comply. A national framework that gives Australian online gamblers the protection of a safe and responsibly-run playing field.

If we can get in now, set this up and make it a reality, Australian companies would be queueing up to start locally-operated online casinos. They would be forced to comply with the rules from the outset, thereby avoiding the kinds of problems we’ve seen with pokies and sports betting. Safety features, such as spending limits, time limits and self-exclusion, could be built in to the framework. And a clear and persistent advertising campaign could drive home the message to Australian gamblers: if you want to gamble online, do it on an Australian website. Play by the rules and the rules will look after you.

Banning online gambling has failed. It will always fail. Technology advances and evolves so rapidly that any attempt to prohibit online gambling has been and will always be quickly and easily circumvented.

The problem is not with gambling itself, but with the way it’s presented. Gambling should be a viable and relatively safe recreational pastime; the fact that it isn’t owes more to the predatory and uncontrolled nature of the industry than anything else.

Ten years ago, the government banned online gambling sites but did nothing to enforce that ban. All this did was ensure that any Australian who wanted to gamble online did so on uncontrolled, unregulated websites with no responsibility to their customers.

It’s an untenable situation that needs to change.

Similarly, the rise of mobile internet access has created a whole new subset of problems that the original IGA is woefully ill-equipped to handle. The sports betting industry has comprehensively exploited this situation; it’s high time this shortcoming was addressed.

I agree that we need a national online gambling standard for harm minimisation and consumer protection. This must happen. However, I am disappointed that the reference to pre-commitment with regards to online gambling is still a voluntary measure that gamblers can choose to use or ignore.

I believe that any legal form of online gambling in Australia (whatever that may be) must be account-based, and subject to mandatory pre-commitment measures. The highly-accessibly nature of online gambling makes it imperative that stronger, more binding safety features must be agreed upon and enforced.

I agree that ACMA should be given the necessary power to aggressively target any online gambling providers who offer their services illegally in Australia. If the estimates are to be believed, there are roughly 2,200 gambling websites offering prohibited gambling services to Australian consumers. In theory, that equates to over $2 billion worth of fines that could be imposed every day… yet not one fine has been imposed in over ten years. That situation must change.

I agree that every effort should be made to ensure that online gambling is not accessible by children. I don’t believe anyone could reasonably object to this.

I do not object to the idea of a five year trial for legal online tournament poker, so long as any website offering this adheres to the aforementioned national standard, and so long as that national standard includes mandatory pre-commitment. As I said earlier, the problem is not the gambling itself, but the way it’s presented. I know many people who play tournament poker both online and in real life; it’s the “safest” form of poker because you only pay an entry fee to the game. There is no repeated betting of money involved beyond that initial stake. The report also makes mention of further restrictions such as ensuring that gamblers can only participate in one tournament on a specific website at any given time.

I agree that advertising of prohibited online gambling services should remain illegal. I do not object to allowing online tournament poker sites (if legalised) to advertise, within the restrictions laid out in the report. Those restrictions include limiting TV advertising of such services to broadcasts of poker tournaments, and taking steps to ensure that such advertisements are not displayed at times when children would be watching. I would strongly object to allowing online tournament poker sites to place advertising material in locations where they could be indirectly promoted; sporting grounds, for example.

I agree with the idea of banning all forms of “micro-betting”. This form of gambling has a high potential for harm, and has led to match-fixing and corruption in sport in many countries around the world.

However, I strongly object to the recommendation that online “in-play” betting be legalised. The current requirement that “in-play” bets can only be placed in person or over the phone ensures that a gambler must not only make a conscious and sustained decision to place the bet, but must also interact with someone in order to do so. Expanding the availability of “in-play” betting to the online platform would allow gamblers to place such bets repeatedly within seconds, with no opportunity to reconsider and no interaction with anyone.

Summary

Ultimately, we need to realise that online gambling isn’t going to go away. We can’t afford to bury our heads in the sand and ignore it, as has happened for far too long. The DBCDE’s interim report into the IGA has, with a few notable exceptions, a lot of good recommendations that should be explored, and we should avoid falling into the trap of assuming that it’s all about “liberalising” online gambling or setting up an additional revenue stream for the government.

For the reality is that the IGA, the Interactive Gambling Act 2001, is ancient when compared to the environment it’s trying to regulate. It has little relevance to the shape of the online gambling industry that exists today, and desperately needs a complete overhaul.

Rather than rejecting it on principle (which is always a dangerous practice) or on political grounds (which is simply an exercise in ignorance), we need to pull it apart and look at it closely, piece by piece. The government is taking submissions on the report until June 25, so if there’s something we agree with or oppose, they should hear about it.