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Court pulls plug on online gambling

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 25 Aug 2010

Online gambling has been declared illegal by a ruling in the North Gauteng High Court, putting an end to years of arguments around where technically the gambling takes place and whether it would be considered legal if hosted outside of SA.

The ruling, handed down in Johannesburg by Judge Neil Tuchten last Friday, ends years of debate about whether online gambling is legal, as the act of gambling is now deemed to take place at the punter's computer, and not where the server is located.

As a result, it is an offence for Internet service providers (ISPs) to facilitate online gambling, and for the media to run advertisements promoting interactive gaming. In addition, banks cannot aid people in gambling online.

The overall gaming industry is worth about R16 billion in revenue each year, and South Africans bet about R212 billion in legal gambling annually, according to the National Gambling Board. About 7% of global gambling revenue is spent on the Internet.

However, online gambling in SA is illegal, because the National Gambling Act of 2004 does not make provision for it. Arguments around the question of where the gambling takes place, if a gambling Web site is hosted outside of the country's borders, have been winding their way through the legal system for some time.

Casino Enterprises, in Swaziland, took the Gauteng Gambling Board to court in 2006, after the board put a stop to it advertising its online gambling service in the province. The Gauteng Gambling Board argued that gambling did not take place outside of SA, but rather where the person doing the gambling was situated.

The gaming house, which owns Piggs Peak Internet Bingo, Piggs Peak Internet Casino and Volcanic Gold Online Casino, argued that the online gambling takes place legally in Swaziland and did not contravene the Gauteng Gambling Act.

Clarity

Friday's ruling, in which Casino Enterprises sought to overturn the Gauteng Gambling Board's decision, determined that gambling happens in SA, and not in Swaziland where the casino server is located.

Tuchten ruled that gambling is determined to take place at a “real world” location, and people gambling online are doing so illegally, because they are not gaming at a physical licensed casino or betting outlet.

The Gauteng Gambling Board issued a statement in which it says it is unlawful for Internet operators to offer online gambling to South African residents. Moreover, says the board, it is illegal for people to bet online.

The board adds that people, entities or organisations that facilitate online gambling, including ISPs or financial services providers, such as banks, and media that either advertise or facilitate advertising around online gambling, could be prosecuted.

“The Gauteng Gambling Board will pursue any person or organisation, which contravenes the gambling legislation,” says the statement. The board says offenders could face a R10 million fine, or a jail term of not more than 10 years.

In addition, companies that breach the ruling could find themselves unable to apply for a licence if SA invites applications for online gambling licences.

Piggs Peak has issued a statement in which it indicates that it will appeal the finding. Operations director Lew Saul Koor says: “Until the appeal has been heard and the outcome determined, our business will continue as usual, as agreed with the Gambling Boards.”

Still hope?

Alicia Gibson, member of AG Consulting and a lawyer specialising in gambling law, says the court ruling will apply to all online gambling in SA. As a consequence, she explains, all advertising in SA, relating to online gambling on any medium, is illegal.

Gibson adds that any organisation that facilitates online gambling, such as an ISP or financial institution, would also be acting in contravention of the law. However, government is currently reviewing gambling legislation, which could make provision for interactive gambling, she says.

Online - or interactive - gambling was set to be legislated by the National Gambling Amendment Bill. However, the Bill's promulgation was delayed last August when the Parliamentary Portfolio Committee on Trade and Industry requested that current legislation be reviewed.

As a result, the department set up a commission to review the entire industry. The Gambling Review Commission is currently wrapping up its report after looking into all aspects of gambling in SA, including casinos, online gambling and horse racing.

Nomfundo Maseti, chief director of policy and legislation at the Department of Trade and Industry, says the commission should wrap up its findings at the end of this month and present its report in September.

However, says Maseti, she cannot pre-empt what the commission will report, and it could recommend that online gambling in SA be made legal, which would require a change in legislation.

If government decides in favour of online gambling, the National Gambling Board will only issue 10 licences. Gambling operators will be required to prove they have a physical presence in SA and their financial transactions will have to be located within South African borders.

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