The Department of Broadband, Communications and the Digital Economy (DBCDE or Department) released its interim report in respect of its inquiry into the Interactive Gambling Act 2001 (Cth) (IGA) on 29 May 2012 (Interim Report).
 

The Interim Report includes recommendations that, if adopted, will alter significantly the landscape for wagering operators licensed in Australia¹. Whilst these recommendations include the liberalisation of in-play betting (and the possible expansion of their activities to include online tournament poker), other recommendations, if implemented fully, are likely to result in wagering operators having increased regulatory burdens, particularly in respect of the harm minimisation measures that operators will be required to adopt.

Submissions in respect of the recommendations are requested by 25 June 2012.

The Interim Report recommends that online in play betting be permitted (save in respect of microbets). Currently, in-play bets can be made only:

• in person (for example, at a TAB outlet);
• over the phone; and
• over the Internet in respect of racing events.
   

Under the IGA, betting operators are prohibited from offering in-play bets online on sporting events.
 

Three main principles are considered by the Department to be essential in connection with the regulation of online wagering, namely platform neutrality, sports integrity and problem gambling.  In recommending that the IGA be amended to remove the prohibition on in-play bets being offered online (save for microbets), the Interim Report addresses the first objective by liberalising in-play betting, so that it is legal to place in-play bets across all platforms. The Department addresses the second and third principles by recommending two key qualifications to the first principle. 

The principle of platform neutrality means that, where a category of bets² is permitted to be provided by any category of Australian licensed wagering operator, other categories of licensed wagering operator should have the same rights.

Implicitly, this recommendation means that Australian wagering operators will be permitted to do what their offshore licensed competitors have been doing for years and offer online in-play betting to Australian residents. 
However, this recommendation also means that some bets which are currently allowed – even though they are not currently allowed to be provided online – will be prohibited. For example, some wagering operators are permitted to offer “microbets”³ provided that these bets are offered only in person (in the case of a totalisator) or over the phone. However, if the recommendation is adopted, no wagering operator can offer microbets (unless a particular microbet has been approved by the Minister⁴).

This may be considered a favourable outcome for those Australian wagering operators which operate businesses online. However, it is probable that Australian wagering operators will not be able to provide certain betting services that offshore operators, who do not operate subject to Australian law, will offer Australian residents.

 
Also, elements of uncertainty will exist. For example, what bets will fall within the category of a microbet (bets on the outcome at the end of the next over, the outcome of the next game) and how will the Minister’s discretion be exercised?⁵
 

To address the sports integrity principle, the Interim Report recommends that each bet type relating to a sports event (including exotic bets), for example, the winner or the score at half time, must have the prior approval of the relevant sports governing body.

The Department’s deference to sports’ governing bodies is a reflection, to some extent, of the ongoing discussions between the Federal and State/Territory Attorneys General and Ministers for Sport, as well as the sports governing bodies themselves, with respect to nationally consistent match fixing laws and the formation of a National Sports Integrity Unit. However, it remains unclear whether these arrangements will be implemented following a legislated approach in each State/Territory or whether they will result from discussions between wagering operators and sports’ governing bodies and, in essence, be entered into voluntarily.

One issue raised by the Interim Report relates to the control given to sports control bodies concerning bets taken in respect of events not strictly within their control. For example, the Interim Report appears to suggest that Australian sporting bodies should have a veto right and a right to receive product fees in respect of events involving that sport that take place overseas. This represents a material extension of the current (voluntary) practice.
 

Given that the governing bodies of the most popular Australian sports commonly enter into product fee and integrity agreements with Australian wagering operators and authorise bet types pursuant to these agreements, this recommendation crystallizes current practice to an extent.
 

However, many bets which raise sports integrity concerns also appear to fall within the Department’s proposed “microbets” definition, for example, ball-by-ball betting in cricket and point-by-point betting in tennis. It is therefore arguable that the sports bodies’ roles with respect to these bet types has been somewhat reduced.

As a result, it is probable that overlap will exist. For example, the Minister’s response to an application to permit these bets may correspond with the response of a sport’s governing body towards these same bets – albeit that each of these parties has different concerns. 
 

It remains unclear whether there will be any interaction between the Minister, sports’ governing bodies and the respective sports and racing ministers in each State/Territory with respect to microbets.   The involvement of the latter group raises a particularly important question given the Department’s view that the States/Territories should retain responsibility for the treatment of problem gambling issues.

Also, the extension of the rights of sports control bodies to control betting by Australian licensed operators in respect of overseas events raises complex legal issues, for example, as to the extent of the legislative power of the various Australian governments and also the manner in which conflicts will be dealt with, particularly where an overseas sporting body considers that it has a right to receive product fees in respect of those events.
 

Additionally, a question also arises in respect of smaller Australian sports controlling bodies, which may not even have agreements in place in respect of Australian events. For example, if this recommendation were adopted, Basketball Australia (as the controlling body of Australian basketball) could control bets offered by Australian wagering operators in respect of NBA games.

The Interim Report recommends that the IGA should be amended to grant the Minister discretion over the ability of wagering operators to offer a particular microbet. 

The Interim Report proposes the following procedure to determine whether wagering operators should be permitted to offer a particular microbet:

1. a wagering operator may make an application to the Minister for approval to provide a betting service that falls within the “microbet” category;
2. the Minister is to consider all the risks associated with that particular bet type; and
3. the Minister is to determine whether or not to approve the bet type.

First, the Interim Report recommendation that microbets are subject to Ministerial discretion appears to be based on a number of assumptions in respect of the connection between the characteristics of a “microbet” and problem gambling. These are assumptions which wagering operators may contest. For example:

• Although one of the concerns behind the Department’s recommendations relating to the treatment of microbets is that the “betting opportunity is repetitive and high frequency”, the connection between high frequency sports bets and problem gambling remains unclear. In the context of poker machines (where the time between placing a bet and knowing the outcome is about 1 – 2.5 seconds), the high frequency of bets, along with other factors such as the use of colour and sound, has been the subject of findings by researchers as contributions to problem gambling. However, this connection has not been made clearly in the context of sports betting.
• The Department considers that a “very short” timeframe between placing a bet and knowing the outcome is any period less than five minutes. However, the basis for this determination is unclear.  Five minutes is, for example, roughly the median duration of an over in cricket. It is therefore unclear whether the Department’s adoption of this five minute benchmark will have the effect that a wide range of bet types, for example, bets relating to the entirety of an over (as opposed to, for example, ball-by-ball bets) will require Ministerial approval.

Whilst the procedure set out in the Interim Report suggests applications to offer microbets are to be made by an individual wagering operator who wishes to offer such bets, it follows that all other wagering operators will be permitted to offer approved bets. There may be benefit in the industry taking a co-ordinated approach, for example, through an Australian remote gambling association to make such applications. However, a co-ordinated approach of this nature may eliminate the possibility (and associated commercial advantages) of any one wagering operator being the first to offer a particular market for a separate specified bet type.
 

One of the major recommendations of the Interim Report is that consideration be given to the liberalisation of online gaming. This proposition is to be tested in practice through the implementation of a 5 year pilot study with the introduction of a licensing regime to allow Australian licensed operators to provide online tournament poker services to persons present in Australia. (This recommendation has been made to encourage offshore gambling operators to become licensed in Australia and to cease to provide other types of online gambling services which will remain prohibited.)
 

Any Australian licensee must comply with strict harm minimisation requirements and other controls.

Although the Interim Report sets out a considerable number of detailed recommendations relating to these controls, the ramifications of some of those recommendations are not set out fully. Of particular concern are statements made that some of the controls that should be implemented should apply equally to all licensed online gambling operators. For example, some of the recommendations that require further consideration are the following:

• the requirement for all online gambling operators to implement harm minimisation controls.  If the recommended framework is implemented fully, online gambling operators will be required to, for example, provide more prominent responsible gambling messages, incorporate highly accessible spend tracking facilities that show losses/profits and warning messages which will be displayed to customers if their gambling patterns are indicative of problem gambling;
• strict controls over affiliates; and
• the prohibition on offering credit, save (possibly) to professional players.

Some of these measures may be more appropriate in an online wagering context, but of limited use in an online gaming context (particularly in respect of online tournament poker), and vice versa. Also, in some cases, they will represent a commercial disincentive to offshore operators becoming licensed in Australia because they constitute a significant hurdle to enabling that operator to provide services in a manner consistent with the operation of its business in overseas licensed jurisdictions.

Another recommendation made is that television advertisements for poker tournament operators should be permitted only in connection with televised poker tournaments. No suggestion has been made that television advertising for wagering operators should be restricted to the same extent. Irrespective of the recommendations made to restrict television advertising for online wagering announced previously by the Government, the recommendation raises interesting issues, including:
 

• What is television?
• Does the same restriction apply to the promotion of a free play site (probably)?
• To what extent should other advertising be limited?

In the absence of research indicating that there are benefits in regulating online wagering and online gaming in the same manner, particularly in respect of harm minimisation requirements, it may be worthwhile for regulators to keep in mind the differences between the services offered and to consider a more targeted approach.
 

The impact of the Interim Report remains to be seen, particularly since the government is yet to respond to it. Further, and given the lack of clarity and direction in the Interim Report around the implementation of its recommendations, the Interim Report leaves many unanswered questions about the future of online gambling regulation in Australia.

Interested parties should consider making submissions concerning the recommendations made in the Interim Report by 25 June 2012.
 

The assistance of Jessica Azzi, Solicitor, of Addisons in the preparation of this article is noted and greatly appreciated
 

1  A summary of the recommendations is set out in our Focus Paper of 29 May 2012 entitled Australia – Review of the Interactive Gambling Act by the Department of Broadband, Communications and the Digital Economy – Interim Report Released - What does it mean for the Online Gambling Sector? 

2  The Interim Report notes four categories of bets: horse racing; sports events; exotic bets; and microbets.

3  The Department recommends the following definition of a “microbet”:

Micro betting involves the placement of bets having the following characteristics and circumstances: 

• the placing, making, receiving or the acceptance of bets on particular events occurs during a session of a match or game
• the betting opportunity is repetitive, of a high frequency and is part of a structured component of the match or game (for example, ball-by-ball betting in a game of cricket; point-by-point betting in tennis);
• a bet is placed on one of a limited number of outcomes, although the number of possible outcomes may be more then two (for example, whether the next serve will be a fault; whether the next ball will be a no ball); and
• the time between placing a bet and knowing the outcome is very short (usually less then five minutes, excepting appeals, intervals and interruptions).

4  Minister for the DBCDE.

5  Although the Minister has various discretions conferred under the IGA, we understand that no decision requiring exercise of that discretion has been made since the IGA came into force in 2001.