24 Aug 2011

Betbox successfully challenges Victorian gambling legislation - where to now for retail exclusivity?

by Tony Rein, Chris McLeod, Kym Fraser

The Victorian gambling legislation that operates to ban online betting kiosks was recently overturned by the Federal Court , opening the door to further challenges to similar laws in other States and Territories. The Federal Court found in favour of Sportsbet and Eureka Hotel that the provisions of the Gambling Regulation Act 2003 (Vic) that prohibit the operation of the Betbox (Sportsbet's online betting kiosk) breaches section 92 of the Constitution and imposes a discriminatory burden of a protectionist kind, preventing free trade and commerce between the States and Territories of Australia.

The proceedings were instigated by Sportsbet and Eureka Hotel in Victoria in September last year in the Federal Court. In March 2011, Tabcorp was added as a third respondent, joining the Victorian Commission for Gambling Regulation (VCGR) and the State of Victoria.

The Betbox is effectively a touchscreen computer that connects to the Sportsbet website and allows a customer to place a bet in Victoria with Sportsbet, a bookmaker licensed in the Northern Territory. The Betbox is licensed by Sportsbet.com.au and is regulated by the Northern Territory Racing Commission.

The impact of betting kiosks on the traditionally exclusive "retail"-front presence has the potential to significantly impact the wagering landscape. It also has potential implications for the funding structures for the various racing industries. We understand that Tabcorp has already indicated its intention to lodge an appeal. Relevant to the consideration of the potential impact of the decision is the fact that as an instrument of the internet, Betbox does not appear to compete for cash transactions in the relevant jurisdictions.

Betting kiosks are not a new issue in the industry. For example, in Victoria itself, a betting kiosk "Venuenet" (also owned by Sportsbet) was seized and removed by the VCGR as an "unauthorised instrument of betting" almost two years ago. In 2008 in NSW, the Cameron Report recommended that retail bookmaking kiosks should not be permitted in NSW. The NSW Government responded on 31 December 2010 by introducing new provisions to prohibit the provision of "remote access betting facilities" which includes any device (such as a computer terminal or telephone) used primarily or exclusively for betting on any event or contingency, or for facilitating betting on any event or contingency.

We understand that Sportsbet is considering challenging these provisions as well on the basis that they also breach section 92 of the Constitution.

The internet is undeniably playing its part in challenging existing market structures in the wagering sphere and breaking down traditionally well-defined State and Territory boundaries. A further more detailed analysis of the Betbox decision will follow shortly, as well as a discussion of the upcoming section 92 Betfair/Sportsbet race field cases, both of which are scheduled to be heard in the High Court in Canberra next Tuesday.

Clayton Utz will be closely monitoring these key industry developments. In the interim, please contact Tony Rein, Chris McLeod or Kym Fraser for further information.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.