4.1
In contrast to online pornography, an identity verification regime, which provides for age verification, has been introduced for online wagering in Australia, as part of measures to combat money laundering and terrorist financing. The evidence received by the Committee about online gambling focused mainly on issues relating to this existing legal framework.
4.2
This chapter discusses recent research on the prevalence and risks of online gambling by young people. It examines Australia’s current verification process for access to online wagering services, and the upcoming review of the requirements, as well as international comparisons. This chapter also notes evidence received on some related issues, including other proposed measures for protecting minors from online wagering.
Access to online wagering by children and young people
4.3
With the prevailing use of digital and smart technology, the availability of online products - such as gambling - has become more readily accessible to everyone, including children and young people. The Victorian Responsible Gambling Foundation (VRGF) states that:
Adolescents today are increasingly exposed to gambling marketing through social media, online advertising and sports coverage, alongside increased accessibility and opportunities to gamble with the rise of internet and smart phone access.
4.4
The New South Wales Responsible Gambling Fund (RGF) also identified accessibility as an issue, noting the link between accessibility and the potential for young people to experience problem gambling later in life. Specifically, the RGF cited recent research which indicates:
…that increased availability of, and access to, gambling products for young people is associated with greater gambling participation; and as a result, a higher chance the users will experience gambling problems and gambling harm in later years.
4.5
These problems are said to be compounded by a young person’s limited capacity to assess risk. In particular, it has been found that ‘compared to adults, adolescents may be even more vulnerable to the harmful effects of gambling as their ability to assess risks is still developing’.
Estimates of gambling by children and young people
4.6
The Australian Institute of Family Studies (AIFS) has identified online gambling as the fastest growing segment of the Australian gambling market:
The proportion of people who placed a bet on sports, racing or other events via the internet is estimated to have almost doubled between 2012 and 2018 – from 16% to 34%.
4.7
There is little available research on the prevalence of online gambling by young people or the impact of this behaviour. However, research undertaken by the VRGF, which was cited in several submissions to the inquiry, does provide some insights into gambling by young people.
4.8
In a recently published study of Victorian secondary school students, the VRGF found that:
almost one in three students (31 per cent) reported that they had gambled at some time in the past;
among students who had gambled at some time in the past, nearly one quarter (21 per cent) reported having gambled in the last 30 days. The median amount of money spent by those who had gambled in the last month was $9.30; and
among students who had ever gambled, the most frequently reported modality was ‘at home or at a friend’s home’ (52 per cent), followed by a parent or guardian purchasing or playing for them (51 per cent).
4.9
Most relevant to this inquiry was the finding that online gambling by students (18 per cent) was reported to be relatively more common than gambling at a pub or club (10 per cent) or casino (1 per cent).
4.10
The AIFS has also conducted research on gambling by young people aged 16-17 years. In its longitudinal study, it found that 16 per cent of 16–17 year olds reported spending money on at least one gambling activity in the past 12 months. In addition, just under five per cent (one in 20), or around 9,000 17 year old children reported spending money on gambling activities that are illegal due to age restrictions such as poker machines, poker, and casino table games.
Social impacts
4.11
The negative impact of gambling by young people was succinctly described by the VRGF:
Adolescent gambling has been associated with negative impacts on school performance and family and peer relationships, depression, and is also correlated with engagement in other risk behaviours such as alcohol and other drug use.
4.12
In its submission, the Australian Christian Churches (ACC) listed some of the negative outcomes associated with gambling more generally. In addition to financial loss, these outcomes include:
harm to the problem gambler and their family;
mental and physical health problems;
difficulty in maintaining employment, and struggling to maintain personal relationships; and
loss of quality family time together.
4.13
The ACC also noted that gamblers are six times more likely than non-gamblers to divorce, and four times more likely to suffer from alcohol abuse.
4.14
While these latter impacts are not specific to children and young people, the ACC advocated for the protection of young people from the ‘dangers of online addiction while they are still vulnerable’. It was a sentiment shared by other submitters; that young people need to be prevented from accessing online wagering to minimise the potential harm associated with gambling products – now and in the future.
Regulation of online wagering in Australia
4.15
Wagering services, as defined in Section 4 of the Interactive Gambling Act 2001 (Cth), are services for directly or indirectly placing, making, receiving or accepting bets. Wagering is a sub-set of gambling, generally relating to betting on sports or races—as distinct from ‘gaming’, which covers gambling in forms such as lotteries and video games.
4.16
To participate in online wagering in Australia, licensed operators must verify the identity of every customer who opens a wagering account. This regime is governed by the Commonwealth Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (AML-CFT Rules), made under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML-CFT Act).
4.17
The eSafety Commissioner told the Committee that verifying the identify of a customer means wagering operators need to verify a customer’s full legal name, date of birth and current residential address within 14 days of depositing funds.
4.18
Online wagering providers undertake identity verification by cross checking the information provided by customers with various government and non-government data sources. This includes, but is not limited to:
Australian Electoral Roll;
4.19
Generally, online wagering providers will outsource these verification checks to third party providers. The options and methods used for such verification are discussed in Chapter 2 above.
4.20
The Department of Social Services noted that under the Rules, there is no exemption for online wagering providers to meet the customer verification time frame of 14 days. If there is a breach of the 14-day timeframe, a maximum penalty of $21 million may be applied.
National Consumer Protection Framework
4.21
The National Consumer Protection Framework for Online Wagering (the National Framework) was developed by the Commonwealth and State and Territory governments to provide ‘a set of standard minimum protections for online gamblers, which must be adhered to by all online wagering providers’. The National Framework commenced on 26 November 2018, and consists of ten ‘consumer protection measures which aim to minimise the harms to Australians gambling online’.
4.22
A key element of the National Framework was the introduction of the 14 day customer verification period, which represented a significant reduction from the previous 90 day period. The 14 day verification period came into effect on 26 February 2019 under an amendment to the Rules.
4.23
The Department of Social Services explained that this reduction was critical because:
quicker age and identity verification processes were needed to better identify and reduce the potential harms associated with underage online wagering and any customers who may have self-excluded from online wagering activities;
it better assisted online wagering providers to address any fraudulent activities, money laundering, and guard against reputational, operational and legal risks; and
the 90 day timeframe did not reflect the current environment of advancing technology, or account for the speed and ease of completing a verification process online.
4.24
While the 14 day customer verification period does not prevent an individual from opening a wagering account and gambling within this period, it does prevent a customer from being paid his or her winnings. In other words, a customer’s age and identity must be verified before any money can be paid out. In addition, should a person be found to be under 18 years of age, online wagering providers must return all deposited funds and close the account immediately.
Review of customer verification period.
4.25
The National Framework provided for the Commonwealth to commence a review of the 14-day customer verification period in February 2020, with a view to reducing it to 72 hours. In its submission to the inquiry, the Department of Social Services advised the Committee that the review would involve consultation with industry and other critical stakeholders to ensure that any changes reflect current technological solutions and social changes.
Customer verification and/or age verification for online wagering in other jurisdictions
4.26
Limited evidence was provided on the customer verification processes used in overseas jurisdictions. The Committee was advised that ‘Australia now has one of the shorter maximum verification periods’ for online wagering accounts compared to other countries. For example, in Gibraltar, Denmark, Italy and Nevada verification periods range from 72 hours to 30 days.
4.27
Many submissions to the inquiry highlighted the United Kingdom as an example of best practice in customer verification for online gambling.
4.28
In May 2019, the UK Gambling Commission moved from a 72 hour age verification period to a mandatory verification rule. This change, which followed a lengthy consultation process, requires online wagering licensees to verify the age and personal details (name and address) of any customer before the customer can:
deposit funds into an account;
access any free-to-play games the licensee may make available; or
gamble with the licensee with either their own money or a free bet or bonus.
Video games
4.29
Gambling or simulated gambling in video games does not fall within the definition of wagering under the Interactive Gambling Act 2001, as outlined in paragraph 4.15. These matters therefore fall outside the scope of the present inquiry.
4.30
Nevertheless, the Committee noted that in the UK there have been calls for the regulation of betting features known as ‘loot boxes’ and ‘skins’ that feature in some video games. In particular, there is concern:
…at how firmly embedded gambling-type features are in many of these games. The rise of loot boxes and skin betting have seen young people introduced to the same mechanisms that underpin gambling, through an industry that operates unchecked and unregulated on the back alleys of the internet, which young people can access from their bedrooms.
4.32
The AIFS pointed out to the Committee that this issue was raised by its Australian Gambling Research Centre in its submission to a 2018 Senate Environment and Communications References Committee Inquiry into Gaming Micro-Transactions for Chance Based Items. The Centre recommended prohibiting micro-transactions for chance-based items in online games available in Australia.
4.33
In its inquiry report, the Senate Committee recommended that the Australian Government undertake a comprehensive review of loot boxes in video games including further research into the potential for gambling-related harms, any regulatory or policy gaps, the adequacy of the classification scheme and existing customer protection frameworks, and consistency with international counterparts.
4.34
The recommendations were noted by the Government. In its response to the inquiry, the Government referred to research carried out in 2018 by the Department of Communications and the Arts on community views on loot boxes and simulated gambling in games. The research identified concern among parents and gamers about loot boxes that resemble gambling, such as those that can be purchased with ‘real world’ money and those where items of substantial value to players are at stake.
4.35
The Committee is also aware of the Australian Government’s review of classification regulation, which is considering whether the criteria for classifying content, including video games, is appropriate and reflects community concerns.
Views on further changes in Australia
4.36
The most consistent view put to the Committee was the need to reduce the customer verification period from the current 14 days to a mandatory verification system. This would prevent any online gambling from occurring until a person’s identity was verified, and also introduce consistency between on-line and on-premises gambling products.
4.37
For example, AIFS recommended that:
…age (>=18 years) should be verified prior to any engagement in online wagering activity. This would bring online age verification in line with immediate age verification requirement for land-based gambling venues in Australia.
4.38
Similar to the UK’s age verification requirements, the AIFS proposed that age should be verified before a customer can access an online wagering account; deposit funds into an account; gamble either with their own money or a free bet or promotion; and access any free-to-air games hosted by online wagering providers.
4.39
While acknowledging the intention of the National Framework review to reduce the customer verification timeframe from 14 days to 72 hours, some, such as the Responsible Gambling Fund, considered that the proposed change does not go far enough. This is because people are still able to gamble while waiting for their verification.
4.40
The Alliance for Gambling Reform submitted that:
the current 14 day requirement is an unreasonable delay that poses unnecessary dangers to children online. This window allows 14 days for a child to experiment with an adult product before their account is forcibly closed.
4.41
In pressing its case for verification-first, the Alliance for Gambling Reform used the example of purchasing a mobile phone SIM card:
Just as an individual is required to submit 100 points of identification upon purchasing a mobile phone SIM card in Australia, so too should they be required to be verified as over 18 years of age before depositing any money into an online wagering account, or placing a bet.
4.42
Not all submissions to the inquiry supported further reductions in customer verification periods. For example, Responsible Wagering Australia (RWA) drew attention to the already-strong measures in place within the wagering industry:
The Australian-licensed online wagering industry has the absolute strongest protections in place of any age-restricted product available in Australia to protect access by minors.
4.43
Furthermore, the RWA stated that it is ‘virtually impossible for a minor to operate an account with an Australian-licensed [wagering service provider] without concerted fraud’.
4.44
The RWA did not support further changes to the time period. It noted that under the current arrangements, even if a minor managed to access an account, the account would be closed and any funds deposited would have to be returned after the 14 day period, because they would not be able to verify the account.
4.45
Instead, the RWA called for the existing identify verification requirements for online wagering to be extended to Electronic Betting Terminals (EBTs) in retail venues. According to the RWA, EBTs provide the ‘single greatest opportunity for a minor to gamble in Australia’:
These devices are essentially completely unmonitored and do not require any verification of age prior to a bet being placed…there is very little stopping a minor from walking into a retail venue with cash and gambling at an EBT.
Unintended consequences
4.46
In its submission, the RWA outlined a number of unintended consequences that may follow further changes to customer verification requirements. Specifically it submitted that ‘reducing the age verification period beyond what current technology and processes can effectively support’ would:
lead to a higher percentage of prospective customers failing to pass the verification process and having their accounts closed because they cannot have their identify verified in time;
create a significant ‘push factor’ where Australians will opt for anonymous cash-based wagering; and
drive otherwise law-abiding citizens to illegal off-shore operators.
4.47
The Department of Social Services noted that concerns about the same unintended consequences had been raised by stakeholders during the National Framework consultation process. In addition, stakeholders raised concern about ‘possible significant commercial impacts’ on licensed online wagering operators.
4.48
While acknowledging the potential for unintended consequences of reducing the customer verification period, the Department of Social Services highlighted measures already taken to mitigate these potential outcomes. For example, the Department noted ‘a withdrawal of prominent offshore operators from Australia and [that] statistics point to a downward trend in offshore gambling expenditure’ as a result of targeting by the Australian Communications and Media Authority. Furthermore, the Department relayed that most of the large online wagering providers confirmed they had already implemented a reduced verification timeframe ahead of the expected change to the Rules.
Cost of changing the timeframe
4.49
The Government has estimated that reducing the customer verification timeframe will cost the online wagering industry approximately $900,000 annually or $9 million over 10 years. These costs relate to the need to reconfigure internal systems to accommodate the reduced time frame.
4.50
The Department of Social Services also identified three further possible regulatory impacts of reducing the customer verification timeframe (to a period between 72 hours and 14 days). These include:
smaller online wagering operators may be competitively disadvantaged by lacking the technological capability to complete the verification process in a shorter time period;
online wagering providers may require greater access to government systems and databases to verify documents more quickly; and
additional subscription costs may be incurred to access third party verification systems.
Other changes
4.51
In its evidence, the Department of Social Services told the Committee that customer verification ‘cannot possibly stop all young people gambling online’, particularly where fraud is involved. Rather, it must be part of a range of strategies. In particular, Deputy Secretary, Ms Elizabeth Hefren-Webb stated:
Customer verification needs to be part of a multifaceted approach that encompasses further education of children and parents sitting alongside other government policies recently implemented, such as restrictions on advertising during children’s viewing hours.
4.52
The Alliance for Gambling Reform made a similar point, noting that age verification ‘is not the only safeguard to protecting children online’. The Alliance highlighted the role of some parents and guardians in providing access for their children to gambling, and suggested greater education and further research into this issue. In particular, it suggested that further research be conducted into the extent to which children are circumventing age verification, and how this is occurring.
4.53
Other suggestions put to the Committee for minimising the risks of children and young people engaging in online gambling included:
requiring licensed online gambling businesses to register a customer in person at a physical location or by live webcam in Australia;
applying age and identity verification to all types of interactive wagering including telephone betting; and
introducing tighter restrictions and warnings on video games that include micro-transactions (such as ‘loot boxes’ and ‘skins’).
4.54
The RGF suggested that the Committee consider whether a reliance on online verification actually increases the risk of young people gaining access to gambling services. In this respect the RGF noted some concern over young people using another person’s identification to obtain verification online through third party providers, rather than being verified by the wagering provider in person. The RGF suggested that consideration be given to alternate verification processes.
Committee comment
4.55
The clear and consistent message received by the Committee is that strong identity and age verification processes are necessary to prevent young people potentially developing problem gambling behaviours and addiction.
4.56
The Committee recognises the distinction between young people who gain access to online gambling sites because their age is not screened and/or verified, and young people who gain access to online gambling sites because they have engaged in fraud and are purporting to be someone else. Age verification processes are unlikely to deter the latter.
4.57
As discussed in Chapter 2, the Committee is confident that technological advances are able to support quicker and more robust verification processes to provide a balance between allowing legitimate online customers to engage in legal wagering activities, and protecting children and young people from the potential harm associated with these activities.
4.58
The Committee notes that the National Consumer Protection Framework for Online Wagering is currently under review with a view to reducing the timeframe for customers’ identity verification from 14 days to 72 hours.
4.59
While the Committee would support such a stricter requirement for a customer’s identity to be verified prior to them opening an online wagering account, at a minimum the Committee recommends that a customer’s age must be verified prior to engaging in online wagering.
4.60
Consistent with the Committee’s view in relation to online pornography, the Committee considers that it is reasonable to expect that customers wishing to open an online wagering account be required to verify that they are 18 years or over, and that this happen before they can engage in online wagering.
4.61
The Committee recommends that the Australian Government, through the National Consumer Protection Framework for Online Wagering, introduce a requirement that customers are not able to use an online wagering service prior to verification of their age as 18 years or over.
4.62
The Committee notes the potential for duplication in having different age- and identity verification systems and/or timeframes, but leaves this as a matter for the Government to consider as part of the review.
4.63
While gaming is not captured by the definition of wagering under the Interactive Gambling Act 2001 and was therefore outside the scope of the inquiry, in the course of the inquiry it came to the Committee’s attention that there is concern in the community about children and young people being exposed to simulated gambling through ‘loot boxes’ in video games.
4.64
The Committee shares this concern, and notes the potential for loot boxes to act as a gateway to problem gambling and associated harms later in life.
4.65
Given their resemblance to gambling, the Committee considers that loot boxes and other simulated gambling elements in video games should be subject to appropriate age restrictions, including through the use of mandatory age verification.
4.66
The Committee recommends that the Office of the eSafety Commissioner or other relevant government department report to the Australian Government on options for restricting access to loot boxes and other simulated gambling elements in computer and video games to adults aged 18 years or over, including through the use of mandatory age verification.
4.67
Lastly, the Committee notes with concern evidence that indicates that young people are often exposed to online gambling by their parents or guardians. The Committee would like to see more resources made available to inform parents about the risks and harms associated with online gambling, and to assist parents to create safer online environments for their children.
4.68
The Committee recommends that the Office of the eSafety Commissioner develop educational resources to inform parents of the risks and harms associated with online gambling and assist parents to reduce children and young people’s exposure to online gambling.
4.69
The Committee expects that these educational resources would also seek to raise awareness among parents of the potential for children and young people to be exposed to simulated gambling through video games.
Mr Andrew Wallace MP
Chair
25 February 2020