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Date: 24/06/2000
The decision to impose a moratorium on Internet casinos may backfire on John Howard by forcing gamblers to seek unregulated sites offshore.
This is the warning from industry spokesmen as the Federal Government continues to draw flak from online casino operators and several State governments.
Sick of waiting for the States and Territories to get together and develop a regulatory regime, and after a Productivity Commission inquiry and Senate Select Committee investigation highlighted the need for consumer protection measures, the Federal Government announced on April 19 its decision to enforce the year-long moratorium.
At the time, the Communications Minister, Richard Alston, and the Family and Community Services Minister, Jocelyn Newman, said the States "seemed more interested in preserving their gambling revenues than in addressing their social responsibilities". They claimed Australia was turning into the Las Vegas of the south, quickly becoming the gambling mecca of the world. And with the advent of digital TV, potentially there could be a casino in every home. Being able to access the Internet via mobile phones could mean a casino in every back pocket. A more sensible approach, they said, would be for all concerned parties to pause, take a deep breath and reassess the situation.
Newman wonders whether in hindsight States such as NSW and Victoria, which with their high concentration of poker machines are now having to deal with the social cost of problem gamblers, would have preferred a moratorium on poker machines before they became commonplace in pubs and hotels. "Once poker machines were installed in pubs, access became that much easier," she said yesterday.
"The poker machine is now perhaps our greatest home-wrecker, not only for the 200,000 problem gamblers, but for their families, friends, creditors and those who patch up their lives and pay the social costs.
"The Commonwealth is not about restricting gambling - but it's the readiness of access that's the problem. The States realise now they did a dreadful thing regarding the expansion of poker machines and with the increasing penetration of PCs and the take-up of digital TV, we eventually could have a casino in every home." Newman said Internet gambling could also have a detrimental effect on industries such as tourism and hospitality because dollars were diverted away from real-world casinos and into cyberspace.
A spokesman for Alston said the 12-month moratorium was being used to assess the technical possibility of banning online gambling.
If the CSIRO, which is conducting an investigation, finds it is possible to ban Internet gambling without affecting access to the Internet for other reasons, the Federal Government will move to draft legislation to that effect.
The spokesman said: "This moratorium is to give us time to examine Net gambling. While some States say revenue from Internet gambling is a necessary income source, I'm terribly sorry but there are certain things which are more important, like a social responsibility."
The Federal Government's approach has met with serious opposition, however. While States such as NSW and Western Australia have moved to support the moratorium, others, including Queensland, the Northern Territory and Tasmania, together with Norfolk Island, claim it's business as usual.
Internet casino operators say a moratorium will only work to stymie any constructive dialogue on the issue.
Internet casino operators also argue it is much better that people gamble on a regulated site, where they have a guarantee of getting winnings, rather than on one of the estimated 800 unregulated casino sites, many of which are located in tax-free havens such as Vanuatu and the Caribbean.
Peter Bridge, managing director of the Northern Territory-based Lasseters Online, Australia's first online casino, said: "I think Mr Howard is correct when he says there are too many problem gamblers, but if he was serious about restricting Internet gambling I think he would focus on restricting access to unregulated overseas sites."
The risk of gambling on unregulated offshore sites was illustrated earlier this month after an Internet casino company operating in eastern Europe and the Caribbean was charged by US regulators with defrauding investors of millions of dollars by offering worthless investments in so-called "virtual companies".
The US Securities and Exchange Commission alleged that StockGeneration, a company owned by a 23-year-old Russian woman and based on the Caribbean island of Dominica, had offered investors guaranteed returns of 10 per cent a month, but instead was operating a so-called Ponzi scheme that cost thousands of US investors most of their deposits. In a Ponzi scheme, early investors are paid with deposits of later investors.
Bridge said regulated Internet casinos often offered higher levels of player protection than many physical counterparts.
"In my 25 years in the gaming industry I've never seen a poker machine with an 'exclude me' button or a machine which limits the amount of money a player can gamble," he said. "Lasseters' sites have a counsellor referral service and a button that players can click on to ban themselves from the site."
Paul Appleby, chief executive of Gocorp, whose Ausvegas site opened for business three days before the moratorium was announced, said by moving to ban Internet gambling the Federal Government was stopping the creation of a "fantastic export industry".
"We're talking about a multimillion-dollar e-commerce opportunity here, and by allowing regulated online casinos the Australian Government would be providing a service to the world," he said.
Many State gaming ministers agree. The Tasmanian minister, Paul Lennon, said that while revenue for the State from Internet gaming would be "modest", Tasmania could reap $200 million worth of investment and hundreds of jobs from it.
Tasmania has issued six Internet gaming licences including ones to Kerry Packer's Publishing and Broadcasting Ltd, TabCorp and Tattersalls - and its gaming commission is considering another four.
Lennon accused the Federal Government of having double standards on the issue. "Here we have a prime minister exhorting regional Australia to embrace new information technologies to attract investment and yet, at the same time, the Federal Government is prepared to ban the technology that would allow for that to happen.
"John Howard needs to carefully consider the sovereign risk issues which will no doubt be triggered by any moratorium or ban on the activities of what are legitimate, licensed businesses."
Norfolk Island's Gaming Minister, Geoff Gardner, said the Federal Government was "going about Internet gambling the wrong way. They simply haven't given regulation a chance."
Gardner, who found himself in hot water last week after being accused of secretly issuing an Internet gaming licence to the US operator uBET.com, said that while Norfolk Island was trying to cultivate an Internet gaming industry to supplement tourism revenue, the ensuring that people were protected from unregulated sites was just as important. "Norfolk Island is about challenging those unregulated Internet businesses and ensuring players don't get ripped off," he said.
The decision to impose a moratorium on Internet casinos may backfire on John Howard by forcing gamblers to seek unregulated sites offshore.
This is the warning from industry spokesmen as the Federal Government continues to draw flak from online casino operators and several State governments.
Sick of waiting for the States and Territories to get together and develop a regulatory regime, and after a Productivity Commission inquiry and Senate Select Committee investigation highlighted the need for consumer protection measures, the Federal Government announced on April 19 its decision to enforce the year-long moratorium.
At the time, the Communications Minister, Richard Alston, and the Family and Community Services Minister, Jocelyn Newman, said the States "seemed more interested in preserving their gambling revenues than in addressing their social responsibilities". They claimed Australia was turning into the Las Vegas of the south, quickly becoming the gambling mecca of the world. And with the advent of digital TV, potentially there could be a casino in every home. Being able to access the Internet via mobile phones could mean a casino in every back pocket. A more sensible approach, they said, would be for all concerned parties to pause, take a deep breath and reassess the situation.
Newman wonders whether in hindsight States such as NSW and Victoria, which with their high concentration of poker machines are now having to deal with the social cost of problem gamblers, would have preferred a moratorium on poker machines before they became commonplace in pubs and hotels. "Once poker machines were installed in pubs, access became that much easier," she said yesterday.
"The poker machine is now perhaps our greatest home-wrecker, not only for the 200,000 problem gamblers, but for their families, friends, creditors and those who patch up their lives and pay the social costs.
"The Commonwealth is not about restricting gambling - but it's the readiness of access that's the problem. The States realise now they did a dreadful thing regarding the expansion of poker machines and with the increasing penetration of PCs and the take-up of digital TV, we eventually could have a casino in every home." Newman said Internet gambling could also have a detrimental effect on industries such as tourism and hospitality because dollars were diverted away from real-world casinos and into cyberspace.
A spokesman for Alston said the 12-month moratorium was being used to assess the technical possibility of banning online gambling.
If the CSIRO, which is conducting an investigation, finds it is possible to ban Internet gambling without affecting access to the Internet for other reasons, the Federal Government will move to draft legislation to that effect.
The spokesman said: "This moratorium is to give us time to examine Net gambling. While some States say revenue from Internet gambling is a necessary income source, I'm terribly sorry but there are certain things which are more important, like a social responsibility."
The Federal Government's approach has met with serious opposition, however. While States such as NSW and Western Australia have moved to support the moratorium, others, including Queensland, the Northern Territory and Tasmania, together with Norfolk Island, claim it's business as usual.
Internet casino operators say a moratorium will only work to stymie any constructive dialogue on the issue.
Internet casino operators also argue it is much better that people gamble on a regulated site, where they have a guarantee of getting winnings, rather than on one of the estimated 800 unregulated casino sites, many of which are located in tax-free havens such as Vanuatu and the Caribbean.
Peter Bridge, managing director of the Northern Territory-based Lasseters Online, Australia's first online casino, said: "I think Mr Howard is correct when he says there are too many problem gamblers, but if he was serious about restricting Internet gambling I think he would focus on restricting access to unregulated overseas sites."
The risk of gambling on unregulated offshore sites was illustrated earlier this month after an Internet casino company operating in eastern Europe and the Caribbean was charged by US regulators with defrauding investors of millions of dollars by offering worthless investments in so-called "virtual companies".
The US Securities and Exchange Commission alleged that StockGeneration, a company owned by a 23-year-old Russian woman and based on the Caribbean island of Dominica, had offered investors guaranteed returns of 10 per cent a month, but instead was operating a so-called Ponzi scheme that cost thousands of US investors most of their deposits. In a Ponzi scheme, early investors are paid with deposits of later investors.
Bridge said regulated Internet casinos often offered higher levels of player protection than many physical counterparts.
"In my 25 years in the gaming industry I've never seen a poker machine with an 'exclude me' button or a machine which limits the amount of money a player can gamble," he said. "Lasseters' sites have a counsellor referral service and a button that players can click on to ban themselves from the site."
Paul Appleby, chief executive of Gocorp, whose Ausvegas site opened for business three days before the moratorium was announced, said by moving to ban Internet gambling the Federal Government was stopping the creation of a "fantastic export industry".
"We're talking about a multimillion-dollar e-commerce opportunity here, and by allowing regulated online casinos the Australian Government would be providing a service to the world," he said.
Many State gaming ministers agree. The Tasmanian minister, Paul Lennon, said that while revenue for the State from Internet gaming would be "modest", Tasmania could reap $200 million worth of investment and hundreds of jobs from it.
Tasmania has issued six Internet gaming licences including ones to Kerry Packer's Publishing and Broadcasting Ltd, TabCorp and Tattersalls - and its gaming commission is considering another four.
Lennon accused the Federal Government of having double standards on the issue. "Here we have a prime minister exhorting regional Australia to embrace new information technologies to attract investment and yet, at the same time, the Federal Government is prepared to ban the technology that would allow for that to happen.
"John Howard needs to carefully consider the sovereign risk issues which will no doubt be triggered by any moratorium or ban on the activities of what are legitimate, licensed businesses."
Norfolk Island's Gaming Minister, Geoff Gardner, said the Federal Government was "going about Internet gambling the wrong way. They simply haven't given regulation a chance."
Gardner, who found himself in hot water last week after being accused of secretly issuing an Internet gaming licence to the US operator uBET.com, said that while Norfolk Island was trying to cultivate an Internet gaming industry to supplement tourism revenue, the ensuring that people were protected from unregulated sites was just as important. "Norfolk Island is about challenging those unregulated Internet businesses and ensuring players don't get ripped off," he said.