Online gambling will soon be a safer bet - Sunday 21st of September 2008

For now, though, it’s illegal in most forms offered on your PC, writes Andrew Gillingham.

The National Gambling Amendment Act is set to open the door for companies to apply for online gambling licences.

Online gambling operations based outside the country have been targeting South African punters, but anyone in South Africa who uses unauthorised, unlicensed online gambling is committing an illegal act that could leave them facing criminal prosecution.

Some forms of remote interaction are legal. For example, a gambler may place a bet on a horse by phone or even over the Internet, with a licensed bookmaker.

Further, it is also legal for people to access games via a licensed casino’s computer server while at the casino.

However, an interactive gambling game offered and played over the Internet is illegal.

Alicia Gibson, industry and legal consultant at AG Consulting, said that the Amendment Act put in place the required regulatory framework for the licensing and regulation of interactive gambling in South Africa.

She said unregulated online gambling poses a threat to local punters as they have no recourse if there is a dispute.

“Unlike the highly regulated casino gambling industry in this country, for online gambling there is often little or nothing to ensure payment or that the games are fair.

“People must be aware that in many cases they have no recourse or protection in the current online gambling environment,” said Gibson.

“These cross-border operations are either not regulated at all or they are not regulated with the rigour we would consider necessary in South Africa to ensure an honest and fair industry.

“In this country we have a very balanced, fair and rigorous regulatory regime and this gives the gambling public peace of mind and the comfort that remedies are available if disputes arise,” Gibson said.

Another issue is that South Africa’s casinos contribute to the National Responsible Gambling Programme — and cross-border online gambling operations do not as they are not subject to South African regulation.

Further, while casinos pay tax (to the tune of 43% of their value-added revenue), online gambling operations do not pay tax in South Africa even though they earn much of their income in the country.

“It is an open question as to whether any of the online gambling operations currently targeting the South African public will be able to qualify for interactive gambling licences when the time comes for them to be issued.

“If they apply, they may face questions about their probity, given that the regulatory authorities may form the view that their conduct has shown little regard for South African law in the past,” Gibson said.

It is also unlawful to advertise interactive gambling in South Africa.

Cross-border online gambling operators have argued that the gambling takes places outside South Africa and that advertising their operations is, therefore, not illegal.

However, there is a strong counter- argument to the effect that gambling takes place at the punter’s location.

“As soon as this is clarified, whether by a declaratory order or a formal piece of legislation, cross-border online gambling operators not licensed in South Africa will have a difficult time trying to advertise in South Africa,” Gibson said.

She said that stopping unlicensed cross- border online gambling was crucial to the establishment of a secure, investor-friendly regulatory regime for online gambling.

Section 11 of the act already makes it illegal for any person to engage in or make available interactive gambling except as authorised by South African law.

“This means that local gamblers are precluded, irrespective of whether cross-border online gambling operators advertise locally, from taking part in unlicensed online gambling.

“Enforcement is an issue but once mechanisms are put in place to track online gambling activity, whether through technology solutions or by monitoring payment, people who use unlicensed interactive gambling will be opening themselves up to criminal charges,” Gibson said.

Properly licensed online gambling will soon be available.

Before licences can be put up for grabs, a number of regulations and industry standards must be finalised and a tax bill must be enacted by the minister of trade and industry.

It remains to be seen whether land-based casino operators will apply for online gambling licences, which may have the effect of levelling the tax playing fields should disparities be regulated.

The process of implementing the necessary regulatory requirements is well under way and licence applications may be possible within the next year.

“Several other issues remain to be clarified, such as whether there will be a cap on the number of licences that can be issued.

“If history is anything to go by, regulatory authorities can be expected to develop a comprehensive licensing and regulatory regime for online gambling.

“This will have the benefit of attracting new investment by reputable operators while offering the gambling public in South Africa legitimate and fair online gambling options,” Gibson said.

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