Don't bet on online gambling

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It could take at least two years before SA has a properly licensed online gambling industry. Meanwhile, the country is losing out on millions in tax revenue and the opportunity to create jobs.

A year-and-a-half after the country was set to legalise online gambling, there is still no clarity as to when a policy-level decision may be taken, or even if the sector will be legalised.

Online gambling is illegal in SA, after a North Gauteng High Court ruling last August, which put to an end to years of arguments around where the technical act of 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, determined that the act of gambling takes place at the punter's computer, and not where the server is located. Casino Enterprises, which lost its bid, is set to appeal the decision.

Gambling is a multibillion-rand industry locally; punters waged R215.8 billion in the year to March 2010 and government earned R1.6 billion in taxes from the official sector, according to the latest figures from the National Gambling Board.

Online gambling internationally is worth about 7% of the physical industry. If this figure is taken as an industry standard, legal online gambling in SA could rake in R110 million in taxes for government, and as much as R15 billion might be wagered every year.

In the pipeline?

Current legislation in SA - the National Gambling Act of 2004 - does not provide for online gambling. However, a government-level decision could see interactive gambling legalised and 10 licences issued in SA.

Yet, there is no clarity as to when this policy-level decision may be taken, or even if the sector will be legalised.

Online - or interactive - gambling was set to be made legal by an amendment to the Act. However, the Bill stalled in August 2009 when the Parliamentary Portfolio Committee on Trade and Industry decided that the gambling sector in SA should be reviewed.

This led to the Gambling Review Commission being set up to review the entire sector: casinos, online gambling and horse racing.

Sidwell Medupe, director of media and public relations at the Department of Trade and Industry, says the commission has wrapped up its review, and its report has been sent to the minister.

However, because gambling matters are a subject of concurrent jurisdiction, the report will be discussed with provincial ministers and then detailed information will be released, says Medupe. He did not say when these discussions would take place, or when South African punters and the industry will have any clarity.

Much to do

Alicia Gibson, member of AG Consulting and a lawyer specialising in gambling law, says it could take up to two years before SA has a properly licensed online gambling industry.

Gibson says, at the moment, it is still illegal to gamble online in SA in the aftermath of the judgement banning the activity. While Casino Enterprises is set to appeal, it is not known when this will happen.

In the meantime, says Gibson, SA is losing out on a variety of potential benefits that a new interactive gambling industry could create, such as taxes, jobs and empowerment opportunities. In addition, the longer the process takes, the more the cost to the economy grows, she notes.

Gibson explains decision-makers at a policy level must first reach agreement on the principle of allowing online gambling. The commission's report is anticipated to play a material role in the policy-level decision on the future of interactive gambling as a regulated sector, says Gibson. Current indications are that this report is likely to be tabled in March, she adds.

Assuming government decides on the principle of allowing online gambling, the process of regulating the new sector can get going. However, this will be a long process.

The first step, she says, is that regulations will need to be drafted, and then the National Gambling Board will have to formulate a “requests for proposal” (RFP) document. Applications can then be invited.

Gibson says there must be enough time set aside to allow prospective applicants to study the RFP and formulate their proposals. She says, once these have been submitted, they will have to be processed and evaluated.

“This process is expected to take some time, given that most recent indications have been to the effect that 10 licences will be granted,” says Gibson. Applications will then have to be evaluated and then the winning bidders can be selected.

Confused punters

However, while government ponders whether to legalise the sector, and Casino Enterprises waits for its appeal to be heard, the online gaming industry seems to be confused as to whether it can offer services to local punters.

Swaziland-based Casino Enterprises owns Piggs Peak Internet Bingo, Piggs Peak Internet Casino and Volcanic Gold Online Casino.

Piggs Peak is up and running in SA. After the judgment, Piggs Peak operations director Lew Saul Koor said: “Until the appeal has been heard and the outcome determined, our business will continue as usual, as agreed with the gambling boards.”

African Palace Casino, however, has a message up on its site telling punters that it has suspended online gambling until the highest court in SA has made a ruling.

“In addition to all casino activities being suspended, this means that we no longer accept registrations and wagers from players with South African IP addresses. As you are entering this Web site from a South African IP address, our system has automatically displayed this message,” says the notice.

Neither company responded to an e-mailed request for comment sent on Friday. Piggs Peak indicated it could not respond in time, and the mail to African Palace Casino was not answered.

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