Taking stock Down Under
With Australia’s Interactive Gambling Amendment Bill 2016 now finally in force, EGR Intel looks at what the long-term impact of the legislation will be on the country’s online gambling market
It was almost exactly two years in the making but Australia’s revised online gambling legislation is now officially on the statute books. What originally started as a review into the impact of the country’s offshore market quickly morphed into a major overhaul of its gambling laws – one which is set to have significant short- and long-term ramifications for Australia-facing operators.
The Interactive Gambling Amendment Bill 2016 (IGA Bill), which was finally passed by both Houses on 9 August and received Royal Assent the following week, still primarily aims to clarify rules on offshore wagering. But more importantly, it also includes a ban on online poker and in-play ‘click-to-call’ betting, much to the distress of the majority of the industry. In addition, it introduces a civil penalty regime to be enforced by the Australian Communications and Media Authority (ACMA) and establishes a register of eligible regulated interactive gambling services to be published on the ACMA website.
“We expect online wagering providers to meet community expectations,” Alan Tudge, human services minister, said after the Bill had been officially rubber stamped by his political colleagues. “The tougher laws will seriously disrupt illegal offshore providers from acting unscrupulously or targeting vulnerable Australians. The government is committed to taking tougher action against illegal offshore wagering providers and this bill does exactly that.”
The Australian Parliament recently approved the IGA Bill 2016
The wide-ranging amendments to the Interactive Gambling Act 2001 will have met the expectations of many Australian politicians, particularly renowned anti-gambling Senator Nick Xenophon. But with a number of new restrictions in place, the bulk of the online gambling industry was clearly bitterly disappointed by the outcome. And based on recent announcements by federal ministers since the Bill was passed, it seems like there is much more still to come on the regulatory front Down Under.
Reviewing the situation
When the Review of Illegal Offshore Wagering was first announced in 2015 there was actually a hint of optimism it could lead to positive regulatory changes and open up new opportunities for operators to grow the market. At the time, there were mutterings that the review of the old 2001 framework would in fact take a close look at removing restrictions around in-play betting and the ban on online casino. But that initial hope quickly waned and the opposite occurred.
Australian betting operators were already prohibited under the Interactive Gambling Act 2001 from accepting online bets on live sports events, limited instead to accepting in-play wagers placed in person or over the phone. In response to the ban, a number of firms, including William Hill, bet365 and Sportsbet, launched so-called click-to-call products, enabling customers to place bets online so long as the device’s microphone was switched on.
The closing of any previous in-play loopholes has already taken its toll on many Australian online bookmakers. “The removal of click-to-call has had a massive impact across the board and seen turnover and revenue drop,” one source who did not want to be named says. “This isn’t just for the likes of bet365 in the Australian marketplace, but all the major players. It does feel like an attack on Australian sensibility, where it’s getting harder to place a bet online.”
“The removal of click-to-call has had a massive impact across the board and seen turnover and revenue drop”
On the gaming side of the sector, a number of brands have since headed for the exit door. GVC-owned partypoker told customers it would cease operations on 31 August ahead of the changes, while PokerStars had previously informed its own players of plans to leave the market by mid-September. Many other poker operators have since followed suit.
The ban on online poker was arguably the most controversial part of the Interactive Gambling Amendment Bill 2016, with Senator David Leyonhjelm of the Liberal Democrats among those criticising a ban on the relatively “un-harmful” activity. “We regret that this day has come as Australia is a strong poker market,” partypoker managing director, Tom Waters, added following the brand’s withdrawal from Australia. “We will continue to work with the Australian player alliance to lobby the government to provide a safe regulated environment for residents to play online poker in the future.”
Credit where credit is due
From a political perspective the legislation has helped remove some of the unlicensed operators from the Australian shores and helped educate players about online gaming’s illegality. However Jamie Nettleton, a partner at Sydney-based law firm Addisons, believes there are still questions about what impact the ban will have on the size of Australia’s offshore online gambling market.
“Most of the leading operators providing online gambling services to the Australian market have ceased to provide those services,” he says. “This will be announced as a great success of the new Australian regulatory regime. What will be unknown is the size of the illegitimate market going forward. Those services will continue to be provided and the relevant providers will be less willing to heed any encouragement by the Australian authorities for them to cease to provide gambling services.”
Senators approved the Bill despite some disagreement over amendments proposed by the government, including an exemption on the prohibition of credit betting for on-course bookmakers. Meanwhile, online gambling operators with annual wagering turnover of less than AU$30m are also exempt from the ban on credit betting – but few so-called ‘corporate bookmakers’ will fall into this category.
The regulation of lottery betting is arguably the biggest talking point in the Australian gambling market and one that may run on for some time. Lottoland in particular is facing a barrage of criticism and scrutiny at both a federal and state level, with calls in some circles for an outright ban on bet-on-lotteries.
The Gibraltar-headquartered firm hasn’t been afraid of ruffling a few feathers or disrupting the status quo since entering the market in January 2016. This includes signing a seven-figure sponsorship deal with National Rugby League side Manly Sea Eagles, an agreement which controversially saw the club’s home ground renamed ‘Lottoland’.
Since then the firm has been on the receiving end of some unwarranted attention – or warranted depending on your point of view. In September, an anti-Lottoland campaign was launched by a coalition of newsagent and lottery operators in an attempt to educate Australians about the alleged negative impact of “pretend lotteries”. Claims made in the campaign include that Lottoland is drawing profits away from small businesses and that lost tax revenue is leading to a cut in public funding.
Western Australian Premier Mark McGowan also recently pledged to ban the firm in his state, while in the same week, Senator Pauline Hanson called on both sides of parliament to outlaw online betting on lottery draws. In response, Lottoland called on politicians to tax the Northern Territory-licensed company rather than to ban it.
“I have gone on record as saying I fully support a nationwide Point of Consumption tax in Australia,” CEO Luke Brill (pictured) said. “We have an excellent relationship with the NT and work with them on many positive projects outside of just taxation that has led to a win-win situation for the state, Lottoland, charity and the consumers in the NT. I would like to replicate that relationship with the other states and territories.”
The impact on bookmakers could be substantial. William Hill Australia identified the ban as being a “high” risk to the business in a recent teach-in led by CEO Tom Waterhouse, while Ladbrokes Australia’s growing VIP business and VIP-focused brands such as BlueBet, set up by former William Hill Australia CEO Michael Sullivan, could also be under threat.
An estimated 80% of on-course bookmakers’ business is now done on credit and over the phone with the big staking punters. And the CEO of Victorian Bookmakers Association, John Clancy, also previously told the Herald Sun that a ban on offering credit would force a majority of its 180 members out of business.
However, not everyone viewed the legislation as a complete negative. “Broadly speaking I feel they are a positive, it is my opinion that credit betting was never a good thing and I made the decision to not offer it at Lottoland when we launched,” Luke Brill, CEO of the lottery betting firm, claims. “I’m impressed with the harm minimisation measures and the newly formed Responsible Wagering Australia group, headed up by former minister Stephen Conroy, appears to be speaking to the right level of government to get the best outcome for both the industry and the consumers.”
Taking a stand
But Brill appears to be in a minority on this particular issue. There also seems to be little prospect of a major reversal in policy any time soon on other key aspects of regulation, particularly with regards to legislation on online live betting. “It will be extremely hard to change anything, especially the loosening of any in-play play or casino/poker prohibitions,” one source says pessimistically.
“As we all know, there are very few votes in gambling so the politicians stay away from it”
“It would take a federal government who have had something like three solid terms of government and then on their way out to really take on all the lobby groups, including pubs and clubs with their poker machines, as well as the anti-gambling groups. It would seem like the current trend is continuing, so a greater tightening of the screws, rather than any change which would actually see all these in-play and casino/poker dollars kept in Australia.”
The only light at the end of the tunnel could be on online poker. Australian Liberal Democrat Senator David Leyonhjelm recently revealed the government is examining the possibility of legalising the vertical, with Minister Tudge, one of the main architects of the current regulatory framework, understood to have also indicated his support.
According to Senator Leyonhjelm, he received a letter from Communications Minister Mitch Fifield which claimed his department would “undertake some preliminary work” examining the feasibility of licensing Australian online poker operators. It’s a long road ahead but the efforts of Leyonhjelm and the Australian Online Poker Alliance have at least led to a senate committee examining the merits of the ban.
“I have always found it difficult to understand why online poker is banned, surely the Australian government would benefit from the tax revenue and the Australian players would benefit from a regulated environment where they have recourse if they have an issue with a provider,” Brill adds. “I believe it was never the intention of the bill to ban online poker, it just got caught in the cross-fire and as we all know, there are very few votes in gambling so the politicians stay away from it.”
More to come
Regulatory issues Down Under clearly don’t begin and end with the IGA Bill. In April, it was revealed the federal government was also looking at proposals for a ban on Australian online betting operators from advertising on TV during sports broadcasts. This is expected to commence, via industry codes rather than legislation, in March 2018, and could see all betting adverts banned from the start to the end of matches on both free-to-air and pay TV.
Meanwhile, a fresh round of regulatory reforms on the country’s A$1.4bn online gambling sector, including a potential ban on several types of free bets and inducements, could make barriers to entry much higher for new entrants. The fine print still needs to be studied but this is likely to have the effect of enhancing the market position of existing operators and hamper new businesses which could find it extremely difficult to grow their customer database without such incentives.
However arguably the biggest game-changer has yet to come. A nationwide Point of Consumption (PoC) tax has been mooted for some time now but it finally appears to be gaining real momentum after state and territory treasurers agreed earlier this year to discuss proposals for a uniform tax regime.
And again, although some companies might welcome such an approach, some are worried it could also hurt new market entrants.
“What will not be realised is the effect of the PoC tax – it will make it much more costly for Australian-licensed betting operators,” Nettleton says. “This will constitute a significant barrier to entry for new operators when seeking a licence. But the unknown factor is the significant cost advantage that will be provided to the illegitimate gambling operators who do not have to pay this impost.”
Nettleton expects it to be nationwide in some way by the end of next year at the very latest. Until then it is clear that while the IGA Bill was a watershed moment for the industry, there will be plenty more regulatory surprises along the way.