Review of Illegal Offshore Wagering Report to the Ministers for Social Services and the Minister for Communication and the Arts by Lead Reviewer, the Hon. Barry O’Farrell 18 December 2015 ISBN: 978-1-925318-27-2 Copyright notice — 2015 This document Review of Illegal Offshore Wagering Report is licensed under the Creative Commons Attribution 4.0 International Licence Licence URL: https://creativecommons.org/licenses/by/4.0/legalcode Please attribute: © Commonwealth of Australia (Department of Social Services) 2015 Notice: 1. If you create a derivative of this document, the Department of Social Services requests the following notice be placed on your derivative: Based on Commonwealth of Australia (Department of Social Services) data. 2. Inquiries regarding this licence or any other use of this document are welcome. Please contact: Branch Manager, Communication and Media Branch, Department of Social Services. Phone: 1300 653 227. Email: [email protected] Disclaimer The opinions, comments or analysis expressed in this document are those of the author or authors and do not necessarily represent the views of the Department or the Minister for Social Services, and cannot be taken in any way as expressions of government policy. Contents Review of Illegal Offshore Wagering ............................................................................................. 1 Glossary and Definition of Terms .................................................................................................. 3 List of Acronyms and Abbreviations ........................................................................................... 14 Executive Summary ................................................................................................................... 16 1 Introduc tion ............................................................................................................................ 25 1.1 Background .......................................................................................................................... 25 1.2 Purpose ................................................................................................................................ 28 1.3 Scope ................................................................................................................................... 29 1.4 Limitations of the Review ...................................................................................................... 31 1.5 Approach to the Review........................................................................................................ 32 2 Market Structure ..................................................................................................................... 34 2.1 Gambling in Australia ............................................................................................................ 34 2.2 Online wagering .................................................................................................................... 45 2.3 Structure of the illegal offshore wagering market ................................................................... 52 2.4 Potential impacts of illegal wagering in Australia .................................................................... 55 3 Current Policy and Regulatory Framework .............................................................................. 60 3.1 Online gambling regulation in Australia .................................................................................. 60 3.2 Regulation of online wagering in other jurisdictions ............................................................... 73 3.3 Harm minimisation and responsible wagering ....................................................................... 89 4 Drivers of Change ................................................................................................................... 94 4.1 Impacts of the offshore wagering market .............................................................................. 94 4.2 Magnitude of these impacts .................................................................................................. 95 4.3 Competitiveness of the domestic industry ............................................................................. 98 4.4 Consumer protection .......................................................................................................... 100 5 Policy and Regulatory Options .............................................................................................. 104 5.1 Establishing an evidence base for decision making ............................................................. 104 5.2 Reducing the size of the illegal offshore wagering market ................................................... 106 5.3 Reducing barriers to competition for the domestic industry ................................................ 119 5.4 Improving consumer protection .......................................................................................... 124 5.5 Other policy and regulatory options .................................................................................... 146 6 Key Findings and Recommendations .................................................................................... 149 6.1 General principles ............................................................................................................... 149 6.2 Consumer protection and harm minimisation ...................................................................... 152 6.3 Regulatory response framework ......................................................................................... 158 Appendix A : Terms of Reference .................................................................................................... 161 Appendix B : Stakeholder Consultations Strategy ........................................................................... 163 Appendix C : Submissions to the Review ........................................................................................ 165 Appendix D : Literature Review ....................................................................................................... 170 Appendix E : Productivity Commission 2010 Gambling Report No.50 Recommendations .............. 177 Appendix F : DBCDE 2012 Review of the Interactive Gambling Act Recommendations .................. 179 2 Glossary and Definition of Terms Key terms Definition Accidental or Accidental or incidental advertising refers to advertising for illegal online incidental services that is permitted under the Interactive Gambling Act 2001 (the advertising Act). Broadly, the Act permits an interactive gambling service advertisement to be broadcast, datacast or published if: the advertisement is broadcast, datacast or published as an accidental or incidental accompaniment to the broadcasting, datacasting or publication of other matter; or no direct or indirect benefit (whether financial or not) is received for broadcasting, datacasting or publishing the advertisement (in addition to any direct or indirect benefit received for broadcasting, datacasting or publishing the other matter). Associates With respect to this Review, associates of online gambling operators refer to any person(s) advocating or assisting in the provision of online gambling services, whether these services are provided legally or illegally. Examples of associates may include: agents of the operator seeking to encourage or facilitate use of the service, through contact with clients or through the provision of inducements; third parties assisting the operator through the placement of advertisements in local media or through endorsement of the operator’s services; gambling software providers who provide specialist services and support to gambling operators; and any other person(s) supporting the provision of these services through the use of call centre or back office functions. At-risk gamblers At-risk gamblers are defined as those people identified by the Problem Gambling Severity Index (PGSI) as being either ‘moderate risk’ or ‘high risk’ of experiencing gambling problems. The PGSI is a self-reporting assessment tool used to gauge the degree to which a person’s gambling is problematic. Betting limits Betting limits refer to limits on the size of bets. Limits may refer to maximum betting limits where a cap is placed on bet size, typically as a harm minimisation measure and/or as a risk management measure for bookmakers, or minimum limits that refer to a minimum bet size that bookmakers must accept. 3 Key terms Definition Bonus bets Bonus bets are free betting credits provided to gamblers as an inducement to commence betting or continue betting with a specific operator. The defining feature of bonus bets is that they are often required to be bet or ‘played through’ before they can be withdrawn; in other words the bettor must make additional bets in order to take advantage of the financial incentive. These play through requirements may apply to the bonus amount itself, to the bonus amount plus the stake required to attract the bonus, to the winnings obtained through using the bonus amount, or to a combination of these amounts. Bookmaker Bookmakers are persons or organisations who take bets, calculate odds and pay out winnings. Bookmakers are licensed in each jurisdiction. Traditionally, bookmakers have referred to individuals operating at event venues. More recently, corporate bookmakers operating online have been established. Casino