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Australia update: Review into “illegal” offshore wagering

| By iGB Editorial Team | Reading Time: 4 minutes
The O'Farrell review into offshore wagering is expected to play an important role in how the Australian government responds to the online industry's demands that online in-play betting be regulated. Tony Rein and Alistair Green of Thomson Geer update explain what is at stake.

The O'Farrell review into “illegal” offshore wagering (Review) delivered its report to the Australian government on 18 December 2015. It is expected to play an important role in how the Australian government responds to the online industry's demands that online in-play betting be regulated.

Australian gaming experts Tony Rein and Alistair Green of Thomson Geer update explain what is at stake and how the different stakeholders have been responding.

The Review was led by former New South Wales Premier, Barry O'Farrell and received 51 submissions from wagering operators, stakeholders and community groups.

The report has not been made publicly available but will be when the government responds at some stage this year. The Review aimed to address the issue of offshore wagering operators who, although not licensed in Australia, provide services to Australians via online mediums (offshore operators). 

Currently, at a Federal level, the Interactive Gambling Act 2001 (IGA) prohibits the provision of a number of online gambling and wagering services to Australian residents; however, online wagering (save for 'in-play' betting) is exempt.

Australian states and territories each have legislative regimes requiring wagering operators providing or promoting wagering services to residents of that jurisdiction to be licensed by the local gambling regulator.

However, there are questions as to whether offshore operators actually breach the state/territory laws and, even if so, significant enforcement difficulties can arise. To date, state and territory governments have taken the view that, by and large, the regulation of offshore operators is a matter for the Federal Government.

Why is there Federal Government concern?
Concern from the Federal government stems from the fact that offshore operators avoid Australian regulatory regimes, including:

  • Taxation: Offshore operators are not subject to Australia's taxation regimes;
  • Industry product fees and integrity measures: Offshore operators do not pay the product fees that assist in funding Australian racing and sporting industries nor do they comply with various industry integrity measures;
  • Consumer protection: Australian consumers do not have recourse against offshore operators under Australian consumer law; and
  • Anti-money laundering: Offshore operators do not have to comply with requirements to monitor and report suspicious activity.

The concerns above were reflected in a number of the submissions received by the Review. In addition, the following three issues were a common feature in submissions, with divergent views taken by various stakeholders, reflecting their respective vested interests in the outcome.

i. In-play betting
In-play betting was a particular focus of submissions from Australian wagering operators. This is unsurprising given how topical the issue has been here over the last few years.

As it stands, under Australian law, in-play betting is not permitted when betting online, but is permitted when betting in person (retail) or over the telephone. It is therefore unsurprising that the submissions of the Australian Wagering Council, Sportsbet, Crownbet, TopSport and Bet365 called for the removal of the online prohibition in the IGA.

Such a move would, as put by Sportsbet, result in a “platform-neutral approach to in-play betting”.  It would also level the playing field with various offshore operators who currently offer in-play products to Australian consumers.

It is worth noting that the National Integrity of Sport Unit (Federal government Department of Health) also supports a 'platform neutral' approach, arguing it would bring a number of Australian residents currently using offshore operators back within the regulated Australian wagering market.

Conversely, Tabcorp, Australia's largest wagering operator, supports the banning of online in-play betting. It argues that “expanding live betting into sport… would harm the racing industry, local hotels and community clubs.” 

This again is not a surprising stance for Tabcorp to take given its exclusive retail (in-person) wagering licences in hotels and clubs, particularly in the populous states of New South Wales and Victoria (again noting that in-play retail betting is permitted).

HoweverTabcorp did note that should online in-play betting be permitted, it would consider adding it to its online betting services.

ii. Wagering to be offered in Australia only by licensed providers
It was a common suggestion, particularly from existing Australian wagering operators, that the IGA be amended to prohibit any operator from providing wagering services to Australians unless that operator holds a wagering licence issued by an Australian state or territory.

This measure would subject all wagering operators to Australia's consumer protection and integrity regimes.

Whilst this was also supported by Racing Australia, it argued for an additional proviso: if the operator holds a race fields approval from the relevant Australian racing authority.

Again, this is unsurprising given that it would allow the Australian racing authorities to approve overseas operators. Predictably, this extra limb was not supported by the Australian Hotels Association (AHA) and Tabcorp.

In the AHA's view, “it is doubted that a sport control body would have the power to enforce the necessary harm-minimisation measures for overseas operators taking bets from Australian residents”. 

iii. Deterrence and enforcement mechanisms
The lack of effective enforcement against offshore operators under the IGA was a focus of several submissions.

Any amendments to the IGA, including online in-play betting or requiring licences/approvals before wagering products can be offered to Australians, would need to be considered in conjunction with enforcement effectiveness.

A number of possible enforcement measures were suggested, including:

  • Increasing powers of existing regulators/police – in particular, giving the Australian Communications and Media Authority the power to issue civil infringement notices to offshore operators.  The creation within the Australian Federal Police of a dedicated sports integrity unit was also suggested.
  • Website/ISP blocking/filtering – measures to block or filter online access by Australians to offshore operators were suggested, whilst acknowledging that it is difficult to enforce and the cost of blocks/filters would be significant. Indeed, both the Communications Alliance Ltd and the Digital Industry Group Incorporated considered that because of such limitations, this measure should not be introduced at all.
  • Blocking monetary transfers between Australian financial institutions and offshore operators – allowing injunctions to be sought to stop the financial transactions associated with betting and making it an offence for Australian financial institutions to facilitate these transactions were also suggested. However, the Australian Banker's Association Inc. argued that this would be costly, administratively burdensome, and ineffective given difficulties experienced in the United States of America.

What next?
Whilst the Australian government has stated its intention to respond to the Report in 2016, no timeframe has been provided. The government is currently playing its cards close to its chest.

What little is known is that the government will release the Report and its response at the same time. This is not the first review into the IGA, and previous reviews have failed to result in any amendments to the IGA itself, or other regulatory change.

However, given the continued pressure from various sectors of the Australian wagering industry, particularly in relation to online in-play betting, the Review may be the catalyst for change on this front. We will continue to monitor developments.

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