02 Mar 2012

Should Australia legalise interactive gambling services, asks new review

by Tony Rein

Australia's interactive gambling laws are under review, with the release of the discussion paper Review of the Interactive Gambling Act 2001 (Discussion Paper).

One very significant element in the Discussion Paper is a recognition that, despite the existence of the Interactive Gambling Act 2001 (Cth) (IG Act), Australians are still accessing a wide range of overseas interactive gambling services. As a result, it asks whether the ban should be partly lifted to give Australians access to what it calls "strongly regulated access to interactive gambling services operated by licensed providers (both in Australia and overseas), including options for strong harm minimisation and probity measures."

The review is to be conducted by the Department of Broadband, Communications and the Digital Economy, and will take into consideration the findings of the Australian Parliament's Joint Select Committee on Gambling Reform inquiry into interactive and online gambling and gambling advertising (which is yet to report) and the Productivity Commission Inquiry Report on Gambling (2010).

The final report is due by the first half of 2012, subject to the Joint Select Committee reporting by the end of 2011.

The full terms of reference appear at the end of this article. In this article we will sketch out the main details of the current regime, and the key problems identified by the discussion paper.

What is the current law in Australia on interactive gambling?

The IG Act was introduced as a response to concern about the availability and accessibility of gambling in Australia, in particular problem gambling, which had been set out in an earlier report into gambling by the Productivity Commission. Greater access to gambling online was considered to have the potential to significantly exacerbate problem gambling (Interactive Gambling Bill 2001, second reading speech).

The IG Act has three main elements:

  • the offence of providing an "interactive gambling service" to a person physically located in Australia, or providing Australian-based interactive gambling services to customers in designated countries (but not to use the service);
  • A complaints scheme; and
  • A ban on advertising an "interactive gambling service" in Australia.

What is an "interactive gambling service"?

In short, the IG Act prohibits "interactive gambling services" from being provided to customers in Australia using any of the following:

  • an internet carriage service;
  • any other listed carriage service;
  • a broadcasting service;
  • any other content service; or
  • a datacasting service.

There are various exemptions in the IG Act in relation to specific gambling services, such as poker machines in a "public place", certain wagering services, and certain online promotions or games that that involve the purchase of a product.

The three main concerns over the existing IG Act

The Discussion Paper identifies three main concerns with the current form of the IG Act.

Jurisdictional issues

The first arises from the borderless nature of the online world. While it is easy enough to enforce the IG Act against local providers (in theory at least), those based overseas present real practical problems for regulators. Indeed, the paper says that "most allegations of companies offering prohibited services to Australians concern overseas-based companies."

Enforcement mechanisms

Currently the enforcement of the two main offences under the IG Act (the provision of interactive gambling services, and the advertising of the same) is split between two regulators.

The Australian Communications and Media Authority (ACMA) considers complaints about prohibited internet gambling content, but only overseas-hosted content. Complaints about Australian-based content are referred to the Australian Federal Police (AFP).

Advertising of prohibited services is not part of ACMA's responsibilities under the IG Act, nor does the Act contain a complaints mechanism in this regard. The Department currently conducts a preliminary assessment of such complaints, and then refers the matter to the AFP.

The Discussion Paper notes "the apparent lack of successful enforcement activity" under the IG Act, and suggests the use of alternative enforcement options such as civil penalty provisions.

Limitations of the existing IG Act

As noted, the IG Act prohibits advertising interactive gambling services, but sets up no way to complain about them. This is one of the problems with the IG Act identified by the paper.

Overly complex drafting is another. Stakeholders have reported difficulties in interpreting certain sections – for example, does broadcasting a foreign sporting event sponsored by an interactive gambling service breach the Act? Broadcasters say they are not sure.

Opening the door to interactive gambling services?

At the heart of the Discussion Paper is a recognition that Australians, including problem gamblers, can access interactive gambling services, regardless of the IG Act's ban. This is because the IG Act does not ban the customer's use of such services, and the regulator's extraterritorial reach exceeds its grasp. What then should be done?

Perhaps bowing to reality, the Discussion Paper cautiously proposes a partial lifting of the ban of the provision of interactive gambling services. Such access would be strongly regulated, and would only be to services operated by licensed providers whose strong harm minimisation and probity measures meet certain criteria.

This follows from the Productivity Commission's recommendation last year that the Australian Government should permit the supply of online poker card games, subject to a regulatory regime that mandates strict probity standards and high standards of harm minimisation. It also recommended that the Australian Government consider extending this to other forms of online gambling.

Harm minimisation is already used by many major providers – indeed, as the paper acknowledges, the fact that the services are provided online makes harm minimisation arguably relatively easy to provide. Types of harm minimisation already available from Australian providers of permitted online sports wagering include self-exclusion, pre-commitment and age verification. Other methods which are also available include monitoring users' expenditure of time and money, and advising them of this, and of ways to control their gambling.

The Productivity Commission's suggested harm minimisation methods included:

  • prominently displayed information on account activity, as well as information on problem gambling and links to problem gambling support 
  • automated warnings of potentially harmful patterns of play 
  • the ability to pre-commit to a certain level of gambling expenditure, with default settings applied to new accounts, and the ability for gamblers to set no limit on their spending as one of the system options (with periodic checking that this remains their preference); and
  • the ability to self-exclude.

The key questions in the Discussion Paper are whether these measures are effective in limiting gambling, especially that of problem gamblers, and what additional measures would be required. Of course, any such liberalisation of interactive gambling laws would require greater clarity in regulatory responsibility (including between State and Federal levels of Government), and amendments to taxation laws.

What other inquiries are underway?

As noted above, this review must also take into consideration the findings of the inquiry currently being conducted by the Australian Parliament's Joint Select Committee on Gambling Reform into the prevalence of interactive and online gambling and gambling advertising.

Its findings are expected by November 2011, but at the time of writing, the inquiry was not complete.

What happens now?

Submissions on the discussion paper were due by 21 October 2011. The Department might conduct further consultations with submitters to clarify aspects of their submission or to gather further information.

As noted at the outset of this article, the final report is due by the first half of 2012, subject to the Joint Select Committee reporting by the end of 2011.

The terms of reference of the report are as follows:

  • "the growth of online gambling services (both regulated and unregulated) in Australia and overseas, and the risk of this to the incidence of problem gambling;
  • the development of new technologies, including smart-phones, and the convergence of existing technologies that may accelerate the current trend towards the take-up of online gambling services in Australia and overseas;
  • the adequacy of the existing provisions of the Act, including technical, operational and enforcement issues relating to the prohibition of interactive gambling services and the advertising of such services;
  • consideration, where appropriate, of technology and platform neutrality including current distinctions relating to betting on the run and micro-betting;
  • international regulatory approaches to online gambling services including consideration of their effectiveness and cost;
  • examination of the social, tax, jurisdictional and enforcement aspects of regulated access to interactive gambling services currently prohibited under the Act;
  • harm minimisation strategies for online gambling;
  • the findings of the Joint Select Committee on Gambling Reform inquiry into interactive and online gambling and gambling advertising (which is yet to report) and the Productivity Commission Inquiry Report on Gambling (2010); and
  • any other relevant matters."

This was first published in the World Online Gambling Report.

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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.