P.O. Box 16331, 8018 Vlaeberg, South Africa
32 Kenilworth Road, Kenilworth
7700
NATIONAL RESPONSIBLE GAMBLING PROGRAMME
Submission
on “Remote” Gambling to the Parliamentary Portfolio Committee Responsible for
Gambling Legislation
By
Professor
Peter Collins, Executive Director, South African National Responsible Programme
Introductory
- “Remote” gambling – the term coined by the drafters of the 2005 UK
Gambling Act - may conveniently be defined as gambling which occurs, via
the internet, telephony, interactive TV or other technology, when the
providers and consumers of gambling opportunities are located in different
places. It is thus usually contrasted with “land-based” forms of gambling
which take place in a particular venue rather than in cyberspace. It poses
particular problems for legislators and regulators to the extent that
suppliers and consumers of gambling services may be located in different
jurisdictions.
- Remote gambling – especially gambling on the internet - is already
widely available to South Africans from servers located outside SA of
which there are several hundred commercially successful ones. It is
already fairly popular, with consumers world-wide, especially internet
poker and exchange betting, but at present probably accounts for only
about 2% of all gambling undertaken by South Africans. However, its
popularity is likely to grow substantially here as increasingly
user-friendly and cheaper technology becomes available, as South Africans
become more generally used to participating in e-commerce, and as
operators become more successful at attracting customers away from other
forms of entertainment.
- Thinking about, and devising good policy for remote gambling is,
therefore, not about considering whether to authorise a new form of
gambling: it is about considering how to minimise harm and maximise
benefits from new ways of delivering mainly traditional commercial
gambling products which are already readily available to South Africans
from unauthorised jurisdictions abroad.
- At present, such gambling is illegal in South Africa – although most
South Africans appear to be unaware of this. It is not a prohibition which
South Africa’s
law enforcement agencies could reasonably be expected to enforce, e.g. by
raiding people’s homes, confiscating their hard drives and ascertaining
whether they have been playing poker online. Public opinion would not
stand for such an extravagant use of law enforcement resources nor for such draconian infringements of individual
liberties.
- Thus the main challenge for South African legislators is how to
subject this industry to appropriate regulation so as to protect actual
and potential South African consumers, especially the young and those in
danger of doing themselves and those close to them significant harm by
gambling too much. It would also be desirable to regulate in such a way
that some economic benefits accrue to the general public through various
kinds of taxation, investment and employment.
- In this respect, the challenge now facing the SA government in
respect of remote gambling is very similar to that which faced the
government in the early nineties with respect to authorising and
regulating casinos in circumstances where illegal casinos proliferated in
huge numbers in every large city and most medium-sized towns.
The Dangers
of Remote Gambling
- In general, gambling becomes more risky from the point of view of
stimulating “problem gambling” (i.e. excessive and/or compulsive gambling)
to the extent that it offers opportunities for:
- continuous, “rapid action” play
- high stakes
- high and frequent prizes
- convenience gambling which discourages people from planning
and budgeting for their gambling and encourages them to gamble impulsively
- gambling on whatever they like, as often as
they like, for what ever amounts of money to people who are relatively ignorant
of how gambling works, what are its dangers ad how to avoid them.
From all
these points of view remote gambling via the internet or other technologies,
especially when it is unregulated, is maximally risky from the point of view of
encouraging problem gambling.
- Even so, there is no reason to believe that the vast majority of
people who gamble remotely, like the vast majority of those who gamble at
land-based venues – and the vast majority of those who drink alcohol or go
shopping – will not do so in a sensible and responsible way. (Roughly, the
international consensus is that about 1% of adults in populations where
commercial gambling opportunities are readily available are full-blown
gambling addicts with an identifiable neurological disorder and about a
further 4% gamble excessively to the point where they do significant
damage to themselves by gambling too much largely because they don’t
really understand what they are doing: e.g. they don’t understand odds or they
are prey to all sorts of superstition. Research conducted here suggests
that South African numbers are broadly in line with these international
norms.)
- It is also true that internet gambling is the form of gambling for
which makes it easiest require operators to put in place safety measures
likely to discourage people from gambling excessively. These include:
prominent links to websites where players can self-test for gambling
problems, where they can receive education about how to gamble safely, where
they can be put touch with internet counselling facilities as well as
being given the NRGP free helpline number and information about the other
services which the expert and confidential services which the NRGP offers
free of charge. Operators can also easily offer players, and encourage
them to use, a facility for setting limits to their losses over a given
time period after which they are automatically prevented from playing
further. There is even software which can detect patterns of play
characteristic of problem gamblers and alert players accordingly.
Legislative
and Regulatory Options
- Prohibition of internet gambling was introduced into Australia
by the Federal Government after having been legalised by various State
(i.e. provincial or regional) governments. It has also recently been
prohibited in the US
by making it a criminal offence, identical to supplying illegal gambling
services, for banks to facilitate illegal internet gambling transactions. In
Italy,
for a short period, the Government sough to prohibit Italian Internet
Service Providers from doing business with known internet gambling sites.
This, however, fell foul of European law and the Italian Government backed
down when Malta
– also an EU member and a jurisdiction keen to attract internet gambling
businesses – complained. As with other forms of prohibition, measures such
as these may diminish, but are most unlikely to eliminate remote gambling
at offshore sites since there are many ways round the banking and ISP
restrictions and, in general, the consequence of prohibition is to ensure
that the prohibited goods and services are provided illegally, often by
organised crime.
- Prohibition, however, is usually favoured, despite this, by a
somewhat unholy alliance between those who believe, on moral or religious
grounds, that all gambling should be banned or as severely restricted as
possible and those who wish to protect their existing businesses from
unwelcome competition – often, as in many European jurisdictions and in
Canada, governments who own and operate land-based gambling businesses.
- The alternatives to prohibition are to have a free market or to
have a regulated industry. I will discuss a free market only briefly since
no government anywhere in the world subscribes to the view that there
should be a free market in gambling. Even in Las Vegas, electronic gambling machines
may not be located in homes for the elderly and infirm. It should,
however, be noted that a free market is pretty much what results when any
form of e-commerce, including gambling, is left unregulated and something
close to a free market in gambling services is what we currently have on
the internet.
- The principal jurisdictions which have so far authorised internet
gambling are small self-governing territories such as Antigua,
Costa Rica, Vanauta, Gibraltar, Alderney, the Isle of Man and Malta. For
a while internet gambling was authorised by individual Australian States,
starting with Queensland
but these initiatives were subsequently outlawed by the Federal Government.
Otherwise, the only large jurisdiction in the developed world so far to
have legalised and devised regulations for remote gambling is the UK, which
incorporated them into its 2005 Gambling Act whose provisions come full
into force on September 1st this year. Here, however, they have
decided to tax remote gambling at the same rate as other forms of gambling
and because European law prevents them from restricting the right to
advertise gambling to companies regulated and taxed in the UK, the expectation is that no significant
internet gambling companies will opt to be regulated in the UK
- Most other European jurisdictions are seeking to prohibit
“foreigners” from supplying internet gambling services to their citizens
even though, as noted, this has been found to contravene EU law.
- If the SA Government rejects, as is proposed in the current bill,
both prohibition and a free market, then the principles which ought to
govern the legalisation and regulation of remote gambling are essentially
the same as those which should (and do) govern the legalisation of
land-based gambling. These are:
-
the questions of whether to permit
any commercial gambling, and, if how much and of what type, should be decided
through normal democratic processes in which government both leads ands
responds to public opinion
-
governments should ensure, in
respect to whatever forms of gambling it does authorise, that the potential
negative social impacts, especially in terms of crime and problem gambling, are
minimised
-
in particular, government should
protect minors, ensure that consumer choices are adequately informed choices
and require the industry to do all that it reasonably can do to minimise the
incidence of, and harm caused by excessive gambling
-
governments
should additionally seek to secure some benefits for the general public over
and above the benefits which are secured for those who enjoy gambling and those
who profit from providing the opportunity to gamble on a commercial basis. This
is typically achieved by raising abnormally high taxes from gamblers or
enhancing exports by encouraging more expenditure by visitors to the
jurisdiction (or both)
-
governments should respect the
religious and other convictions of those who believe that gambling is immoral
but also insist that in a free society individuals must be free to decide for
themselves how to live their own lives, including how to spend their own time
and their own money in pursuit of entertainment, even if others think their
choices are foolish or dangerous or wicked
-
governments
should not disturb legitimate existing interests save for good cause shown.
-
Governments should not place or
retain on the Statute book laws which are unenforced
and unenforceable because this undermines respect for the law in general.
Recommendations from the South African National Responsible Gambling
Programme to address problem gambling by those who engage in remote gambling
13. The NRGP
is gambling-neutral: we take no view on whether or not it is a good thing that
people enjoy buying the products which commercial gambling businesses sell. In
general, we believe this is a matter which should be left to individual choice
unless there are very compelling reasons for using the law to restrict people’s
freedom of choice.
14. We think
that, although remote gambling is not yet a serious source of gambling problems
in SA, it may well become one, and this is more likely to happen if internet
gambling remains prohibited than if it is well regulated with operators are
required to put in place the safety measures described in para
9 above
15. We
believe that, in relation to remote gambling, it will be possible to use
technology to tame technology. Specifically, we think it imperative that the
legislation:
-
include a requirement that would-be
suppliers demonstrate that they have effective player-identification
procedures, especially for ensuring that children cannot gamble at their sites
-
requires operators to conforms to a
code of practice which the South African Responsible Gambling Trust will draw
up
-
specifies that links to a source of
web-based information about the dangers of gambling be prominently advertised
on, and easily accessed from all gambling websites
-
requires sites to provide easy
access to a self-test for problem gambling
-
requires operators to publish the
fact prominently that the prominent display of, and easy access to the NRGP’s free,
confidential and expert counselling for problem gambling can be obtained by
calling the helpline number and/or by accessing the counselling services
web-page. For this purpose gambling sites must contain a link to the relavat part of the NRGP site
-
makes specific mention of the
illegal gambling which currently occurs via cell phones (which are readily
available to minors), especially illegal lotteries using premium telephone
lines
-
makes
specific mention of legal gambling available on interactive tv,
again using premium telephone lines or pay-tv payment methods.
-
requires operators to keep records
of customer transactions for a period sufficient to enable identification of
patterns of excessive play
-
requires operators, as a condition
of licence, to demonstrate social responsibility and to conform to a code of
practice to be drawn up under the auspices of the South African Responsible
Gambling Trust (a joint committee of four regulators and four gambling industry
representatives, chaired by an individual who is independent of both government
and the gambling industry, which is responsible, ultimately to Government, for
the operation of the National Responsible Gambling Programme).
- The NRGP, however, favours the legalisation and regulation of
remote gambling proposed in the Bill precisely because it will make
possible the imposition and enforcement of these provisions for the
avoidance of problem gambling.
Other Considerations
- In order to persuade suppliers of remote gambling services to
submit to regulations laid down by the SA government and thus minimise the
risks associated with problem gambling (and at the same time secure tax
revenues), it is necessary to provide operators with incentives. The
strongest incentive will be the right to advertise which will be
restricted – to companies which are headquartered in South Africa
for regulatory and taxation purposes. They could also be required to have
a “.za” suffix to their web address. Being regulated by the South African
Government would also entitle them to advertise this fact on their sites
and this could be expected to increase consumer confidence, especially
amongst South Africans.
- It is also necessary that any equipment they use which is required
to conform to specifications set by the SA regulatory authorities be inspectable. This does not necessarily mean that it
has to be located in SA. It requires only that the companies
licences enable SA inspectors to satisfy themselves that the equipment
meets the requirements of the Government, particularly in terms of
preventing criminal activity, including defrauding customers and ensuring
adequate consumer protection.
- It is not possible to protect land-based operations from cheaper
competition from the internet. However, such competition is likely to be
more damaging if such competition comes from unregulated sites abroad than
from well-regulated South African sites which, of course many existing SA
gambling companies may be expected to operate successfully themselves and
where they will enjoy distinct advantages in respect of marketing and
reputation.
- For what it’s worth, my own view remains that remote gambling – at
least in the medium term – is more likely to supplement rather than to
supplant land-based gambling in the same way that video rentals supplement
rather than supplant cinema visits.
Prof Peter Collins
August 12th. 2007