On 25 March 2021, the Parliamentary Joint Committee on Corporations and Financial Services opened an inquiry into the regulation of the use of financial services such as credit cards for online gambling in Australia. The terms of reference extended to the impact on consumers, existing consumer protections, existing voluntary bans, a potential mandatory industry code and approaches in other jurisdictions. Further, the inquiry would also evaluate the viability of the Interactive Gambling Amendment (Prohibition on Credit Card Use) Bill 2020.
The Final Report makes two recommendations. First, that the Government prioritise increased data collection with respect to online gambling, the use of credit, and associated harms. Second, that the Government legislates to ban certain online gambling providers from accepting payment by credit cards and digital wallet. In effect, the Committee provides in-principle endorsement for the Interactive Gambling Amendment (Prohibition on Credit Card Use) Bill 2020. I respectfully dissent from the second recommendation.
Recommendation 1
I do not dispute that gambling can be a serious problem, and that targeted policy interventions are justified where the circumstances require it. Nor do I dispute the fact that some of this activity takes place online and utilises credit cards. However, the evidence submitted to the Committee and extracted in the final report is not conveyed to a standard which would require legislative intervention.
This is acknowledged in the report itself. At 2.16 the Committee states that they ‘received little direct evidence on the overall size of the online gambling industry’. Nor did the report provide evidence of a link between online gambling (as opposed to gambling generally) and problematic gambling.
On the contrary, the report notes at 2.11 that total gambling turnover in 2018-19 was $255 billion. Of this, gaming, which is illegal online, accounted for $187 billion (73 per cent).
In asserting that online gambling is a problem of sufficient gravity, the report relies on a mixture of anecdotal testimony, consumer surveys, and tangential data about the growth in revenue for online services. It is not clear that the problems which are identified warrant legislative attention, nor is it clear that these problems are linked, in any meaningful way, to the availability of credit cards for online gambling.
In principle I support the Committee’s recommendation that the Government needs more data. This recommendation implies that the data which is currently available is not sufficient to reach any certain conclusions. At 2.65, the Committee makes an admission to this effect, stating that the data is limited on links between the use of credit cards and digital wallets and gambling behaviour and gambling harm.
This view was echoed in by the Senate Committee on Environment and Communications, which found at 2.19:
There has been limited research conducted directly on the topic of credit cards in the gambling field…. Existing research ‘.... doesn’t directly talk to credit cards.
Therefore, having not established an imperative for additional legislative action, the Committee’s report fails at the first hurdle. Without an imperative for policy change, it is unclear what purpose the legislation is serving, why government resources should be directed towards that goal, or even what problem future legislation might be attempting to solve. Without precluding the possibility that evidence might, in future, establish this imperative, the evidence does not rise to a threshold which warrants policy attention.
Recommendation 2
Notwithstanding the shortcomings cited with respect to recommendation 1, the Committee does not establish that a legislated ban would be effective in resolving issues associated with online gambling. Nor does the Committee give sufficient consideration to alternative regulatory approaches which are at varying stages of implementation.
Further, a legislative ban on credit card payments for online gambling has already been rejected by the Senate Standing Committee on Environment and Communications. The report of this committee does not engage with that report, or the reasons therein.
To that end, recommendation 2, if enacted, would impose a needless overreach of government regulation upon individual consumers.
The Environment and Communications Committee recognised the imperative of affording individuals choice and autonomy. The Committee also noted the myriad of existing controls in respect of the use of credit cards for online gambling. Individuals applying for credit cards are subject to credit and background checks. Online gambling providers must comply with AML/CTF requirements and verify the identities of consumers prior to paying out. Financial institutions must comply with consumer credit protections such as those established by the National Consumer Credit Protection Act 2009.
In addition to existing protections, industry has demonstrated a willingness to work towards more effective controls for public gambling. The Buy Now Pay Later (BNPL) sector has prohibited use of BNPL for online gambling in their Code of Practice. Several major financial institutions also prohibit gambling using credit cards. Westpac, Commonwealth, NAB and ANZ also give customers the ability to restrict or block spending on gambling with credit and debit cards.
A number of new controls are also in the process of implementation. The National Consumer Protection Framework allows individuals to effectively lock themselves out of online gambling. This Framework is currently in the early stages of implementation, is comprehensive, nationally consistent, and enjoys broad support. It would be highly imprudent to override this process without having appropriately assessed its impacts.
The Committee has not assessed whether a legislated ban would be effective. It would not be appropriate to embark on a legislative ban when we are not in a position to assess the viability of these policies.
Finally, the Committee has not considered the unintended consequences of a legislated ban. This is regrettable. Any further restrictions on gambling will carry the risk of driving these activities underground. Failing to account for, or even contemplate, this risk, severely undermines the credibility of this recommendation.
$1.016 billion is spent by Australians each year on illegal overseas gambling. Overseas gambling sites have none of the aforementioned consumer protections in place. They redirect money offshore and cause significant revenue loss for governments. Further, illegal overseas gambling is often associated with other illicit organised criminal activity. The Committee report does not address this issue to any extent.
Furthermore, the proposal could also drive problem gamblers to seek alternative sources of funds that are also outside the regulatory framework.
Conclusion
In seeking a legislated ban on the use of credit cards for online gambling, the Committee is seeking to interfere with valid consumer choices, made by individuals who are, in the main, responsible and well-informed.
The onus lies on the Committee to identify a problem which is sufficiently serious to warrant legislative intervention. The majority report itself admits that evidence of this has not been submitted, acknowledging that the current data is insufficient, and that no causal link has been established between problem gambling and the ability to use online credit cards. Accordingly, the majority report fails to answer the threshold question of why such a ban might be justified.
The Committee does not establish why a ban would be effective at addressing this problem. Nor does it justify why a ban would be more effective than existing or proposed arrangements such as schemes aimed at addressing problem gambling.
Further, the Committee fails to contemplate, in any significant way, the unintended consequences of such a ban in driving this activity to an illicit and underground sphere, further outside the reach of consumer protection and law enforcement.
In short, public policy should be based on evidence, not good intentions. The nanny state is already large enough. Banning things is not the answer.
Given the enormous disruption occurring in the payments and digital asset landscape, it is futile and short sighted to propose ‘bans’.