Although the Gambling Review Commission recommends online wagering be made legal, and more than 10 licences issued, the current framework is unlikely to be changed for at least another two years.
In the meantime, although interactive gambling is illegal, this is a “grey” area that must be addressed urgently before the state faces legal action from punters who have been duped into playing, and then lost their winnings.
Physical gambling was legalised in SA in 1996 and has since skyrocketed into a multibillion-rand industry. Revenue earned by brick-and-mortar outlets doubled between 2001 and 2009. In the year to March 2010, the latest available figures, punters waged R215.8 billion, which earned the state R1.6 billion in taxes.
However, those are only the figures from the official, legal sector and do not include money waged online, which is currently illegal, after a High Court judgement last year.
Online gambling has the potential to add R110 million to the fiscus every year, as international figures show that Internet-based gaming accounts for about 7% of the bricks-and-mortar industry. As much as R15 billion could be bet in the virtual realm annually.
The Gambling Review Commission, in a report released yesterday, says there is already demand for online gambling, including online poker, online casino games and online betting and wagering. “The exact extent of the demand has not been accurately established.”
Yet, despite the clear demand and burgeoning nature of online gaming, as well as the sector's potential earning power, it is unlikely to be decriminalised for at least another two years, as the legislative process takes its course.
Trade and industry minister Rob Davies says, despite the release of the report 18 months after the review was commissioned, changing the framework would take time. He says public hearings must be held and then Parliament needs to apply its mind to the matter.
“It's not tomorrow or the next day, it is going to take a period of time, but it's essential to do this.”
False impressions
Online gambling was set to be legalised after legislation was passed by Parliament in 2007. However, no licences were ever issued and the regulations, published for comment in 2009, were not supported by Parliament's Trade and Industry Portfolio Committee. As a result, interactive gambling is illegal.
This position was affirmed in a North Gauteng High Court ruling last August, which put an end to years of arguments of where the technical act of gambling takes place, and whether it would be considered legal if gambling sites were hosted outside of SA.
The ruling, handed down in Johannesburg by judge Neil Tuchten, determined that the act of gambling takes place at the punter's computer, and not where the server is located. The ruling was handed down when Swaziland-based Casino Enterprises, operator of the popular Pigg's Peak Internet Casino, lost its fight against the Gauteng Gambling Board. The board sought to stop the online gaming house from advertising within the borders of SA.
Casino Enterprises appealed the ruling and its case will be heard on 23 August. Meanwhile, the company has continued to operate pending its appeal.
However, the Gambling Review Commission notes there is a “fragmented approach to dealing with interactive gambling”, as some licensed operators can offer betting over the Internet, under the current law, such as totes.
But other, unlicensed, operators have continued to offer and advertise their “unscrupulous” gambling products, creating the impression online gaming is legal, says the commission.
The commission's report says this “grey” status of interactive gambling requires “immediate attention”. If government does not take immediate action, it opens itself up to legal challenges from members of the public “for allowing the illegal interactive gambling operators to dupe the public into believing that they are legal,” says the report.
Can't be avoided
Because of the “borderless nature” of the Internet, it is difficult to “effectively prohibit online gambling”, says the report. “In a world driven by technology, online gambling is unlikely to disappear,” it adds.
Internationally, it is difficult to prohibit virtual gaming, while jurisdictions such as the US and Australia that have banned interactive gaming, are reviewing their positions, says the commission.
“Prohibition does not extinguish demand, but simply creates the platform for illegal operators to thrive and establish themselves and their brands,” says the commission. However, it cautions that uncontrolled legislation could stimulate “latent” demand on a “large scale”.
As a result, the commission recommends that online gambling be legalised, but says more than 10 virtual gaming licences should be issued, as recommended in the 2007 legal review. This would cater for legal tote and bookmakers already in existence.
However, getting legal virtual casinos off the ground will take at least 18 months to two years, says Alicia Gibson, member of AG Consulting and a lawyer specialising in gambling law.
Assuming policy-makers decide to allow online gambling, the legal framework will have to be amended, and then the National Gambling Board will have to formulate a “requests for proposal” document and invite applications, she explains.
However, there are many issues that must be taken into account, such as shareholding, job creation opportunities, and empowerment, notes Gibson. “Like marriage, it's not embarked on lightly.”
The commission's report also points to challenges in licensing online operators, such as the difficulty in encouraging them to go legal because the tax implications are usually “substantial” and it is difficult to stop local punters going onto illegal sites.
“One of the incentives is the ability of licensed operators to advertise their services. This implies that there needs to be strict enforcement of illegal advertising by unlicensed operators,” the report states.
Gibson says interactive gambling in SA is a reality and, if punters are not allowed to wage bets locally, they will just go somewhere else. “It's a worldwide phenomena.”