South African punters and online casinos stand to have millions of rands confiscated by the state, if the Gauteng Gambling Board wins an appeal in Bloemfontein to have online gambling banned once and for all.
Last month, online gambling was declared illegal by the North Gauteng High Court, when judge Neil Tuchten ruled the gambling activity takes place in SA, and not offshore, regardless of where an online gambling site is hosted.
The verdict followed years of legal arguments that started in 2006 when Casino Enterprises, in Swaziland, took the Gauteng Gambling Board to court, after the board put a stop to it advertising its online gambling service in the province.
The board argued that gambling did not take place outside of SA, but rather where the person doing the gambling was situated. However, the gambling house contested this position, arguing that online gambling takes place legally in Swaziland and did not contravene the Gauteng Gambling Act.
Casino Enterprises, which owns Piggs Peak Internet Bingo, Piggs Peak Internet Casino and Volcanic Gold Online Casino, has since won the right to appeal the decision, although a court date has yet to be set by the Bloemfontein appellate division.
Stand and deliver
The gambling house says it has resumed operations after winning the right to appeal. However, if it loses in Bloemfontein, any revenue it makes from 20 August may be confiscated by government.
The Gauteng Gambling Board says it wants to seize any proceeds from online gambling if the appeal court rules in its favour. The board's head of legal services, Lucky Lukhwareni, says it is taking legal advice to determine if it can seize the proceeds of online gambling.
The board is waiting for a date to be set for the appeal to be heard, which would settle the matter once and for all, says Lukhwareni. He is confident the appeal will rule in the board's favour, which would then allow online gambling proceeds to be seized under SA's asset forfeiture legislation.
Nomfundo Maseti, chief director of policy and legislation at the Department of Trade and Industry, was not immediately available to comment this morning. However, she has previously warned that punters faced the risk of forfeiting their winnings, because there is no provision for online gambling in South African law.
Alicia Gibson, member of AG Consulting and a lawyer specialising in gambling law, explains that the board would be legally able to request that proceeds from online gambling are forfeited, because South African law makes provision for this. She adds that the board can go after all the role players in the business.
Multimillion-rand industry
The online gambling industry is worth millions each year. However, there is no definitive research that can put a value on the total industry. Peter Collins, executive director of the National Responsible Gambling Programme in SA, estimates punters lose about R700 million to online casinos annually.
In SA, the entire gambling industry was worth about R17.5 billion last year. Collins bases his estimate on the fact that, globally, about 4% of gambling is done online. However, this figure does not include related aspects, such as advertising and other money made by banks or Internet service providers that facilitate online gambling, he notes.
According to information from Nielson Media Research (Adex), R81 million was spent on advertising online gambling last year. In the first half of this year, R34 million has been spent by gambling houses to promote online gambling.
The research house says R98 million was spent last year on advertising all other forms of gambling, excluding online gambling. So far this year, about R48 million has been spent on offline gambling advertisements. The entire advertising industry was worth R24.4 billion last year.
Risky business
However, it would be exceptionally hard to enforce asset forfeiture as the gambling takes place online, making it difficult to trace, says World Wide Worx MD Arthur Goldstuck. He says the board would need sophisticated IT systems to trace the winnings.
“To correlate what was spent and what was won is a mammoth task,” says Goldstuck. He expects people who have won substantial amounts through online gambling to challenge the board's attempts to confiscate their winnings.
Collins adds that it would also be exceptionally difficult to confiscate money made by casinos, as they are generally outside of SA and do not fall under the country's jurisdiction. He adds that SA would have to try and extradite the winnings.
In addition, Collins does not think it is plausible for the board to chase down winnings, as punters would be difficult to identify. He points out, as an example, that government agencies around the world only recover a percent of all illegal drug trade.
However, a final ruling making online gambling illegal would stop about R700 million moving outside SA's economy each year, says Collins. He points out that the entire gambling industry is still being reviewed by the Department of Trade and Industry's Gambling Review Commission.
The commission could recommend that government allow online gambling. If this happens, 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. The commission's report is expected to be released this month.
Collins says this would keep online gambling revenue inside SA, which would allow it to be taxed and the industry to be regulated, which would benefit the economy.
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