On 29 May 2012, the Department of Broadband, Communications and the Digital Economy (DBCDE or the Department) released its Interim Report1 (Interim Report) as part of its review of the Interactive Gambling Act 2001 (Cth) (IGA).
The Interim Report makes a number of recommendations, some of which deviate from the position taken by the Joint Select Committee on Gambling Reform (JSCOGR) in its December 2011 report.2 The JSCOGR had concluded that a cautious approach should be adopted in respect of the licensing of online poker operators in Australia and did not support the exclusion of online poker from the IGA.
The recommendations of the Interim Report have potential significant implications for the online gambling sector, especially in connection with its recommendations concerning:
- in-play betting3; and
- the possible liberalisation of online gaming.
Significantly for online gaming, which is currently prohibited under the IGA, the Interim Report recommends a five year pilot be conducted to allow the licensing of operators to provide online poker tournaments to Australian-based consumers, subject to strict harm minimisation controls.
The Interim Report also provides some comfort to the providers of:
- virtual currency games, where the virtual currency cannot be exchanged for real currency; and
- simulator-type games;
both of which are widely available in social media, through its findings that such games do not necessarily breach the IGA.
Interim Report – Next Steps
When considering the Interim Report, it is important to note that it is interim only. There has been significant opposition to the Interim Report, both from the Federal Opposition and from Senator Xenophon. Submissions to the Interim Report have been requested by 25 June 2012. These submissions will then be considered by the Department and consideration will then be given to whether the recommendations should be confirmed and appropriate legislation drafted.
The Interim Report recognises the increasing number of Australians engaging in gaming online for money. The Department’s rationale for conducting the pilot to allow for the licensing of online poker tournament operators for a period of 5 years is that, by providing an Australian licensing framework with strict harm minimisation requirements, Australian players will shift from high risk offshore sites to Australian-regulated sites which involve lower risk. Also, offshore operators would be attracted by the opportunity to obtain an Australian licence and would, as a offset, cease to provide prohibited games to Australian residents.
In this regard, the Interim Report comments favourably on recent regulatory changes in France (which it views as a precedent) where online poker operators are licensed. Approximately 95% of French online poker players now use the services of French-licensed poker sites.4
The Interim Report makes a number of recommendations in respect of online poker services.
- The IGA should be amended to allow the licensing of online tournament poker5
Rather than providing a regulatory framework for the licensing of online poker, the Report recommends that the IGA be amended (subject to a sunset clause discussed below) to allow for the Australian licensing of online gaming sites on the basis that:
- existing sites stop offering high-risk online gaming services to Australians (if they are already doing so);
- these sites come onshore and be licensed so that they only offer online tournament poker; and
- all Australian licensed operators adopt harm minimisation and consumer protection measures to be set out in the proposed national standard that should be developed.
On this basis, well-known overseas online gaming operators should be entitled to apply for an Australian licence as could existing Australian-licensed wagering operators.
In the Department’s view, online tournament poker is the least risky form of online gaming based on research conducted to date.6 The Department considers that, for participants in online poker tournaments “the objective is as much to win the tournament as it is to win the money” and the money which a player stakes at the tournament’s start is set and players are unable to add to that amount.7
- Five Year Pilot – Sunset Clause
In order to test that this approach (i.e. the licensing of online tournament poker services) is effective in reducing problem gambling, the Report recommends that the IGA be amended to allow a five year pilot in which:
- players can only play in one tournament at a time with any one licensed operator;
- player returns are transparent to players before they enter tournaments; and
- television advertising of the services is not permitted except during the broadcast of poker tournaments. Other forms of advertising would be subject to general controls on the promotion of online gambling services.
Further, the provision of online tournament poker would only continue after the end of the five year period if a committee of eminent Australians recommend its continuation and its continuation is approved by Parliament.8
- Minimum Standards a Prerequisite
The Pilot would not commence until the proposed national harm minimisation and consumer protection standard is in place.
Among the measures which must be contained in this standard are:
- the requirement for prominent responsible gambling messages to be displayed;
- significant restrictions on the provision of credit;
- limits on offering betting inducements, particularly in connection with the opening of accounts;
- pre-commitment measures to be made available for players;
- controls relating to protection of player funds;
- measures to protect customer information consistent with Australian privacy requirements;
- requirement to make available information relating to use of harm minimisation measures for research purposes;
- mandatory identity verification requirements on sign-up;
- self-exclusion measures for players;
- implementation of spend tracking facilities;
- requirement to alert players to gambling behaviour that is indicative of problem gambling;
- provision of gambling helpline messages/links; and
- complaints facilities to be made available.
- Consultation on Regulatory Framework
The Report recommends that the Department, the Treasury and the Department of Families, Housing, Community Services and Indigenous Affairs consult with the States, Territories, industry and gambling researchers concerning the manner in which the pilot should be designed.9
While the Report clearly recognises the growth in popularity of online poker, the pilot’s restriction to online poker tournaments will leave the way open for Australian consumers to continue to utilise the services of offshore gaming operators until such time as those services (including cash play poker) is permitted under an Australian licensing framework. There is a real risk, which is difficult to estimate, that a number of consumers will continue to use the services of operators which can meet all of their online gaming needs.
Also, considerable uncertainty exists relating to the confirmation of the ability of licensed operators to provide online poker services after the end of the 5 year period. This is unlikely to deter existing Australian licensed wagering operators from pursuing this licensing option, but it will be interesting to see if overseas licensed operators seek a licence to conduct online tournament poker.
Advertising of Free-Play Poker Sites
While recommending that an online tournament poker pilot be conducted, the Department has made a separate recommendation that the IGA should be amended so that advertisements for free-play poker websites which are associated with play-for-money websites are prohibited. In this regard, the Department refers to an ACMA determination that advertisements for a free-play website breached the IGA because, in effect, the advertisements were for the related (and prohibited) play-for-money website.10
To the extent that free-play services relate to a licensed operator, they will be permitted to be advertised, but subject to similar restrictions.
Provision of Paid Gaming Services Via Social Media and Content Providers
The Report recognises that paid gambling-type activities which are available via social media are either games which are played with:
- virtual currency; or
real money and cash winnings.
The Report recognises that, broadly speaking, games which utilise virtual currency are not prohibited under the IGA because the definition of “gambling service” under the IGA is not satisfied since the virtual currency is not able to be exchanged for real currency.
The Department also consider that online “simulator”-type games, which involve the payment of an entry-type fee and which do not award cash winnings, for example, online gambling simulators, are analogous to traditional arcade-type games and multiplayer games such as World of Warcraft. Given that no cash prizes based on the outcome are awarded, nor is any cash at risk, the Department considers that such services should not be treated as prohibited gambling services under the IGA. However, if these sites “have close links” to gambling sites, the advertising of simulator-type games should be prohibited.11
A number of other recommendations relating to online gaming are set out in the Interim Report.
- the introduction of a civil penalty regime;
- the reversal of the burden of proof in connection with the establishment of a criminal offence;
- the recommendation that steps be taken to highlight consumer awareness of the dangers associated with prohibited online gambling services; and
- clarification that an offence will not be committed in connection with the broadcast of events where the broadcast includes the inadvertent display of indicia associated with prohibited online gambling services.
Information about the recommendations relating to online wagering are set out in our separate Focus Paper entitled DBCDE Inquiry into Interactive Gambling Act – Interim Report – What Does it Mean for Wagering Operators in Australia? – Potential for Change in Australian Online Gambling Regulatory Landscape.
The Department is holding a consultation period until 25 June 2012. Interested parties are able to provide submissions in response to any of the recommendations contained in the Interim Report.
The assistance of Jessica Azzi, Solicitor, of Addisons in the preparation of this article is noted and greatly appreciated
1 Department of Broadband, Communications & the Digital Economy, Interim Report: Review of the Interactive Gambling Act 2001(2012) at http://www.dbcde.gov.au/__data/assets/pdf_file/0009/148779/Interim_Report-Review_of-the_Interactive_Gambling_Act_2001.pdf.
2 http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=gamblingreform_ctte/interactive_online_gambling_advertising/report/index.htm at 7.81.
3 For further information, see our separate Focus Paper entitled DBCDE Inquiry into Interactive Gambling Act – Interim Report – What Does it Mean for Wagering Operators in Australia? – Potential for Change in Australian Online Gambling Regulatory Landscape
4 KPMG “Estimating the Potential Size of an Online Gaming Market in Australia” (2012), page 45-46.
5 Recommendation 21 of the Report at page 16.
6 The Department’s recommendations differ from those set out by the Productivity Commission in its 2010 Report on Gambling. In that report at http://www.pc.gov.au/projects/inquiry/gambling-2009/report, the Productivity Commission differentiated online poker from other forms of online gaming on the basis that it was partly a game of skill, there was no evidence that players experienced trance-like states, there was a social aspect to the game as it is played in a peer-to-peer context and players losses are more limited as they compete for a pot of money to which they contribute. Interestingly (and unlike the Interim Report), the Productivity Commission did not distinguish between tournament poker and cash game poker.
7 Report at page 102.
8 Recommendation 23 of the Report at page 16.
9 Recommendation 24 of the Report at page 16.
10 Recommendation 19 of the Report at page 91 to 92.
11 Report at page 124.