Introduction to the problem addressed in the inquiry
2.1
This inquiry aims to address two related problems. First, the substantial harm suffered by a cohort of citizens arising from the ability to access credit when engaging in online gambling. Second, the striking disjuncture in the current regulatory landscape where the use of credit cards is allowed for online gambling even though states and territories have banned the use of credit to pay for in-venue gambling services.
2.2
Ms Anna Bligh, Chief Executive Officer of the Australian Banking Association, described the Association’s view of how this anomalous situation arose:
As the rise in online gambling accelerates so too does our understanding of the considerable harm that it does to some Australians. Today in Australia if you are at a racetrack, in a TAB or at a casino, you cannot use a credit card to gamble. This ban was put in place by state and territory governments in the early 2000s. But if you are at the same racetrack or the same TAB or the same casino and you have your mobile phone with you, there is nothing to stop you from logging into your favourite app and placing a bet using your credit card. This anomaly poses, I think, a very simple question for this committee to consider: why are citizens prohibited from doing something in the physical world which they can do with impunity in the virtual world? In the view of the Australian Banking Association, that answer's simple: it's because when the use of credit cards for gambling was banned by state and territory governments of all political persuasions, some two decades ago, online gambling didn't exist.
2.3
The cost-benefit trade-off of addressing this regulatory anomaly by banning the use of credit cards to pay for online gambling services has changed significantly over the last two decades because of:
an increase in the use of online gambling services;
an increase in harm from the regulatory gap that allows the use of credit cards for online gambling; and
significant reductions in the impacts of implementing a ban on the use of credit for online gambling because:
customers can make online cash transfers into their accounts with gambling service providers using BPAY;
the use of credit cards in online gambling is declining relative to debit cards; and
digital wallets, such as Apple Pay, can distinguish between debit and credit cards.
2.4
Further, there are likely to be less gamblers moving to illegal offshore online gambling sites as those sites are now subject to:
successful blocking of hundreds of illegal offshore online gambling sites by the regulator, the Australian Communications and Media Authority (the ACMA); and
card network rules which prohibit acquirers from submitting illegal transactions into the card network payment system (as acquirers must ensure that their merchants’ transaction activity is legal in both the buyer’s and seller’s jurisdiction).
2.5
To provide some context for the committee’s consideration of the problems outlined above, the remainder of this chapter provides background on the following:
gambling industry structure;
the prevalence of online gambling;
the role of the regulator; and
the harm caused by online gambling with credit.
Gambling industry structure
2.6
Gambling refers to a range of activities that involve staking money on chance events. The Productivity Commission used the following definition of gambling in its 2010 inquiry:
Entertainment based on staking money on uncertain events driven by chance, with the potential to win more than staked but with the ultimate certainty that gamblers will lose over time.
2.7
Gambling takes multiple forms, with sports and racing betting and wagering among the gambling offerings shown in Figure 2.1 below.
2.8
Section 4 of the Interactive Gambling Act 2001 (Interactive Gambling Act) defines online gambling services as wagering services (4(a & b)), gaming services (4e), lotteries (4(c & d)), and other gambling services (4f).
2.9
The distinction between wagering and gaming is:
Wagering or betting involves staking something (usually money) on the outcome of a contest or any uncertain event. The principal types of wagering are racing and sports betting.
Gaming includes all other forms of gambling such as Electronic Gaming Machines (EGMs), lotteries, keno, table games (such as blackjack) and minor gaming such as raffles.
2.10
Several types of gambling are available online. Interactive gambling (also known as online gambling or remote gambling) refers to gambling conducted using an internet carriage service, any other listed carriage service, a broadcasting service, a datacasting service, or any other content service.
2.11
In 2018–19, total gambling turnover in Australia was $225 billion. Racing accounted for approximately $27 billion, gaming $187 billion and sports betting $11 billion. Total customer losses in 2018–19 were approximately $25 billion. The size and growth of online gambling is discussed in the section below on interactive (online) gambling.
For-profit lotteries
2.12
There are over 4000 lottery retailers and newsagents in Australia. Lottery sales are the primary traffic driver in many Australian Lottery and Newsagents Association (ALNA) members' stores, and retail face-to-face lottery sales account for approximately two-thirds of domestic lottery sales.
2.13
Up to 40 per cent of ALNA customers purchase lottery tickets with a credit card and 43 per cent buy other non-lottery products in the same sale.
2.14
Tabcorp indicated that 32.8 per cent of its lotteries business (by turnover) is conducted through online channels. Tabcorp estimates that around 30 per cent of not-for-profit lottery sales are now conducted online.
Not-for-profit and charitable organisations
2.15
Operators of many charitable organisations use lotteries, art unions and raffles as fundraising activities. These activities rely on electronic ticket sales with over 90 per cent (on average) being paid by credit card in Australia. Debit cards are not seen as a viable payment alternative by not-for-profit and charitable organisations.
Interactive (online) gambling
2.16
The committee received little direct evidence on the overall size of the online gambling industry. However, the Tabcorp annual report for 2021 reported:
digital wagering turnover grew 27 per cent to $9.5 billion;
active digital customers grew 9.7 per cent to 784 000; and
the digital share of wagering turnover was 57.7 per cent, up 27 per cent.
2.17
Financial Counselling Australia, the Consumer Action Law Centre and the Financial Rights Legal Centre submitted that online gambling has changed the way people in Australia gamble. The COVID-19 pandemic accelerated those changes as public health measures, such as lockdowns, closed physical gambling venues. Their joint submission noted the following online gambling industry data for Australia:
A joint study by credit bureau Illion and analytics firm AlphaBeta reported a 67 per cent rise in online gambling in Australia during the first week of April 2020.
Entain which owns Australian brands Ladbrokes and Neds reported Australian online revenue growth of 55 per cent in 2020, compared to 27 per cent in the UK.
2.18
In June 2019, the National Consumer Protection Framework for Online Wagering—Baseline Study Final Report found that, while less prevalent than other forms of gambling, online wagering was the fastest growing segment of the Australian gambling market.
2.19
Based on an online survey of 5076 people aged 18 and over who wagered online in Australia over a 12-month period, the report found:
around one third (34 per cent) of people who placed a bet on sports, racing or other events in 2017–18 did so via the internet, double the 16 per cent reported six years earlier (in 2011–12); and
the majority (80–90 per cent for each activity) reported having placed bets online using mobiles/smartphones, followed by computers (40–50 per cent), with around one-quarter each also betting via self-service terminals or
in-person.
2.20
Finally, the report noted that the accessibility of online—and especially smartphone—wagering facilitated the placing of bets via various locations. These included home (80–90 per cent), licenced venues (30 per cent), work (25 per cent), friend/family home (23 per cent), and sporting event/racetrack (23 per cent).
2.21
The Australian Gambling Research Centre and Australian Institute of Family Studies surveyed over 2000 people who gambled from across Australia during June‑July 2020. This research found that even though access to physical venues was limited, ‘overall, participants gambled more often during COVID-19’, and that the proportion who gambled four or more times a week increased from 23 per cent to 32 per cent.
2.22
The research found young men aged 18–34 years were the group most likely to sign up for new online accounts and had increased their spending on gambling from $687 to $1075 a month.
Which gambling services are regulated in Australia?
2.23
Most of the gambling services provided in Australia are regulated, including sports and race wagering, in-venue casinos, lotteries, and the gambling activities provided by charitable organisations offered from within Australia.
2.24
Some of the regulations are within the jurisdiction of states and territories, such as the regulation of in-venue gambling services. Others, such as the regulation of online gambling services are covered by Commonwealth legislation (the Interactive Gambling Act).
2.25
Some gambling services offered from overseas, including online casinos and online poker, are currently illegal under the Interactive Gambling Act.
The role of the Australian Communications and Media Authority
2.26
The ACMA is the regulator for the Interactive Gambling Act and publishes a register of Australian-licensed interactive wagering service providers.
2.27
In 2017, the Interactive Gambling Act was amended with the aim of combatting groups outside Australia that provide illegal gambling services over the internet. The ACMA disrupts illegal gambling services through:
targeted investigations, including into affiliate services that promote illegal gambling services;
engaging with payment processors to identify transactions to illegal providers;
engaging with other third-party providers, such as software companies, that provide their services to illegal sites; and
requesting internet service providers to block the websites of services found to be in breach of the Interactive Gambling Act.
2.28
The ACMA noted illegal offshore gambling services often allow consumers to use Australian credit cards to deposit money into their accounts. The providers of illegal offshore services are typically located in jurisdictions with limited regulatory oversight and minimal or no consumer protections. Complaints received, and investigations undertaken by the ACMA to date, indicate that consumers face heightened risks due to offshore activity because of lack of regulation and oversight. These risks include:
unauthorised use of credit cards;
refusal to pay all or part of winnings; and
lack of responses to customer enquiries.
2.29
Since the 2017 reforms, over 140 online gambling services have withdrawn from the Australian market. Since the blocking of illegal online gambling websites began in 2019, 295 such sites have been blocked.
2.30
The ACMA also has a role in minimising harm from online wagering and is responsible for two key measures under the National Consumer Protection Framework for online wagering. These measures prohibit some licenced interactive wagering services from providing credit betting via:
facilitating credit by third parties (such as payday lenders).
2.31
Since the credit betting provisions commenced in 2018, the ACMA has undertaken seven investigations into potential breaches of these prohibitions. In six of those investigations, no breaches were found, while in the other case, the provider was found to have been non-compliant in 33 instances.
Harms from gambling
2.32
The harms from gambling can extend far beyond those persons termed ‘problem’ gamblers. As the Productivity Commission noted in its 2010 report, the term problem gambler is problematic and needs careful interpretation. For example, the term ‘can lead to an excessive focus on the individual traits—such as prior mental health conditions—that may precipitate gambling problems’. However, the Productivity Commission noted that gambling technologies, venue behaviours and other aspects of the gambling environment are all factors that can lead to harmful outcomes for gamblers.
2.33
The Productivity Commission also observed that the term implies that problems are exclusive to problem gamblers. Yet:
…ostensibly ‘non-problem’ gamblers sometimes account for more than half of those affected by some specific harms. For instance, around 60 per cent of those who admit they are experiencing health problems arising from their gambling are not categorised as problem gamblers.
2.34
The 2010 Productivity Commission inquiry found:
Total recorded expenditure (losses) in Australia reached just over $19 billion in 2008-09 or an average of $1500 per adult who gambled.
Various state surveys suggested the number of Australians categorised as problem gamblers was around 115 000.
The risks of problem gambling were low for people who only play lotteries and scratchies but rose steeply with the frequency of gambling on table games, wagering and, especially, gaming machines.
The social cost of problem gambling—estimated to be at least $4.7 billion a year—meant even policy measures with modest efficacy in reducing harm would often be worthwhile.
Moderate risk and problem gamblers were much more likely to use credit cards and access credit accounts than other gamblers. These gamblers were at risk of accumulating losses and being placed in a position where they cannot manage their financial affairs appropriately.
Harms from online gambling
2.35
With the growth in the availability of online gambling, more recent studies have considered the harms arising from online gambling. The 2018 National Framework baseline study found:
compared to non-interactive gamblers, people who gamble online are more likely to experience higher rates of gambling-related harm; and
around half of the study’s 5076 participants were classified as at risk of, or already experiencing, gambling-related harm. Over 7 per cent of participants (393) reported they had suffered increased credit card debt because of online gambling.
2.36
The ACT Council of Social Service argued that certain factors in the online gambling environment can magnify the potential for harm:
Online gambling creates an environment in which people can gamble at any time, in any place, and in a ‘cashless’ way which can distance the person gambling from the money which is being spent. For those who experience problem gambling this can be a particularly dangerous set of circumstances.
2.37
The Australian Government has recognised the higher rates of harm from online gambling. In 2018, the Australian Government expressed concern that the rate of online problem gambling in Australia is three times higher than all other gambling platforms. On 30 November 2018, the Hon Paul Fletcher MP, Minister for Families and Social Services, stated that more than 240 000 Australians already experience significant harm from online wagering.
Harms from the use of credit for online gambling
2.38
The Gambling Treatment and Research Clinic argued that the use of credit cards to pay for gambling is a risk factor because it extends the pool of money able to be gambled beyond a person’s savings:
Borrowing money for gambling, including through use of credit cards, constitutes a significant risk factor for the development and/or exacerbation of gambling problems.
2.39
Dr Charles Livingstone of the Public Health Association of Australia observed that the use of credit for gambling poses a serious risk of increased harm:
…someone who's in the moderate-risk category has a very high risk of transitioning rapidly into the serious gambling harm category, particularly if they, for example, start gambling on credit cards.
2.40
Dr Livingstone pointed out the available data ‘suggests that well over 40 per cent or 50 per cent of those who use credit cards regularly for their gambling are experiencing severe harm’.
2.41
Importantly, the combination of online gambling and credit exacerbates problem gambling and its associated financial and social harms. This can lead to extreme financial hardship, loss of employment, bankruptcy, and broader harms including relationship breakdown, mental illness and homelessness.
2.42
Financial hardship appears to be the most common harm experienced by those who gamble online. A survey in 2012 of 3199 Australians who gamble online found reduced savings and low-level debt are the most common harms experienced by individuals.
2.43
There appear to be two key reasons for the speed and severity of the harm from combining online gambling and credit. First, it is quicker and easier to lose large sums of money when gambling online in comparison to other forms of gambling:
The speed of losses with online gambling is different to the pokies. The online cohort are losing so much more in a very short period. Some clients tell us that it doesn’t seem like real money until it has all gone.
2.44
Second, the scale of financial hardship can be magnified when credit cards are used. This occurs because of the detrimental compounding effects when problem gamblers quickly spend their own savings and begin using credit to continue funding their gambling.
2.45
Financial Counselling Australia, the Consumer Action Law Centre and the Financial Rights Legal Centre noted that when a gambler has used their own wages or savings:
…they turn to credit and this is where the harm is compounded. Clients commonly present having multiple credit cards, with some having as many as 10 or even 15. Others have been able to easily increase their credit limits, despite it being evident they are borrowing for debt financed gambling.
2.46
The Alliance for Gambling Reform noted this makes it easier to quickly fall into financial hardship than in other forms of gambling. This financial hardship is compounded by the high interest rates charged on credit card debt. This increases the risk that people gambling with credit lose all their assets.
2.47
Ms Levin of Financial Counselling Australia told the committee of Carl’s struggle with debt from gambling online with credit (see Box 2.1).
Box 2.1: Carl
Carl was in a car accident, where he suffered traumatic brain injury. Following this, he was unable to work and his only asset was his home. Soon after his accident he started gambling uncontrollably, using his savings and then his two bank credit cards from one of the big four banks. On one of the credit cards, he spent over $90 000 in gambling transactions over a period of two months. Carl could not afford to keep up with the payments, and pretty soon after the bank sold those credit card debts to two different debt collectors. Four years later the debt collectors obtained two court judgements against him for a total of $106 000…These were his only debts. One of the debt collectors then obtained a writ of levy against his home. Carl reached out to the Financial Rights Legal Centre for help and told us he was suicidal. He was afraid the debt collectors were going to take his home. Financial Rights very quickly took action. We made contact with the debt collectors and the original bank, whose credit cards he gambled on. We were able to negotiate a good outcome for Carl, but had he not reached out for assistance from us he would have lost his home and possibly his life. The only debts he had were the credit card debts that had come from his uncontrollable gambling surge.
Harmful mental health impacts from gambling with credit
2.48
The financial and social harm from problem gambling can be detrimental to an individual’s mental health, with potentially severe effects including suicide.
2.49
Dr Livingstone highlighted a link between gambling debt and suicide:
…if you're gambling with money you don't have, you are already in serious trouble. The problem with credit card gambling is it's very easy for those people who are already starting to get into difficulties to extend those difficulties through the phenomenon known as chasing losses. I'm sure that you're familiar with that concept, but the sense is that, once people get into a bit of trouble, they think, 'I'll just borrow a bit of money, put it on whatever and I'll be right and can pay off my debts.' Unfortunately, that's not usually how it works. This begins a spiral that can become in some cases terminal for people, certainly in terms of their relationships, lifestyle and everything else. Sadly, we do know that there's a great association between gambling indebtedness and suicide. This has been demonstrated now by multiple studies in overseas countries, particularly in Sweden and the United Kingdom.
2.50
Suicide Prevention Australia submitted that 1 in 5 individuals presenting with suicidality, that is those who are having suicidal thoughts, are experiencing issues with gambling. While Suicide Prevention Australia noted that the evidence on the relationship between gambling and suicide is not comprehensive, they pointed out that:
…gambling leads to financial distress, unemployment, and relationship breakdown: all established risk factors for distress and, sadly, suicide.
2.51
Suicide Prevention Australia submitted the example in Box 2.2.
Box 2.2: Paul
Paul* was a 32-year-old tradie, who prior to losing his job he was a responsible gambler. Once he lost his job, he spent his entire Newstart payments on gambling. He asked for financial counselling services. The bank repossessed his home without notifying his financial counsellor, and he suicided. People in trouble can’t always get out of deep depression.
Reported by frontline worker at Suicide Prevention Australia’s Policy Roundtable on Problem Gambling & Suicide held 20 October 2020.
*Name changed to protect privacy
2.52
Problem gamblers are also at risk of homelessness. Suicide Prevention Australia also submitted that between 15 and 20 per cent of those experiencing homelessness are homeless due to a gambling addiction.
Harmful impacts on family and friends
2.53
Gambling online with a credit card may not only be detrimental to the individual gambler, but also to their family, friends, colleagues, and employers. Dr Kathryn da Costa likened it to second-hand smoke:
…the harm caused by various types of gambling is experienced by a whole lot of people, including…people who don't actually gamble themselves but are like passive smokers, in a relationship with someone who smokes.
2.54
Ms Levin of Financial Counselling Australia recounted a case of gambling with credit involved family deceit (Box 2.3).
Box 2.3: Gambling with credit involving family deceit
I got a call from a financial counsellor to say she just had a client, who was a woman in her late 70s, who had discovered that her husband had gambled and that they were going to lose the house. So gambling goes with a lot of deceit. People talk about a web of deceit. I think that no woman should wake up one day and find her life has been totally destroyed without having known about it.
2.55
Ms Levin recounted another case of gambling with credit that involved family fraud (Box 2.4).
Box 2.4: Gambling with credit involving family fraud
There was one case with a young guy using his grandfather's and father's card. This particular operator—it's not one of the larger operators—accepted it. They didn't ask for any proof that it was his card. When the father challenged it, he went to his bank and put in place a bank charge back. The gambling company CEO wrote and said 'If you don't remove this, I'm going to essentially dob your son in to the police.' We know that gambling and fraud go together; this is called family fraud, and I think the industry call it friendly fraud…. When you have that contact, what do you do? Who do you go to? Parents don't want their son to end up in court. There's no-one to go to.
2.56
Gambling with credit can have severe consequences not only for the individual, but also family and employees in a workplace. Dr Livingstone shared the following case which resulted in insolvency and job losses (see Box 2.5).
Box 2.5: Gambling with credit leading to company insolvency and job losses
A recent case was Jaicome Spinella who went to prison for four years just recently. He was convicted on 8 June. He jointly ran Barwon concrete with his brother. Between December 2016 and July 2017, he was able to use his company credit card and lose over $3 million to Ladbrokes through the process of 571 transactions. He lost $3 million which came out of the company. As a result of that, the company went into receivership and the 55 employees lost jobs. Creditors were owed $6.7 million as a result... During the court case the media reported that Ladbrokes staff internally talked about Mr Spinella being a high-value customer who they didn't want to let go and the judge was quoted as having accused the company of engaging in grooming-like behaviour.
Lower harm from lotteries and scratchies
2.57
As noted by the Productivity Commission in 2010, not all forms of gambling create harm and the risks of problem gambling are low for people who only play lotteries and scratchies.
2.58
Lotteries in this report refer to those exempt online lotteries under the Interactive Gambling Act, such as lotteries that are not highly repetitive or frequently drawn forms of keno-type lotteries.
2.59
Not-for-profit and charitable organisations, and Mr David Attenborough from Tabcorp, pointed out that due to the lower transaction values and delayed outcomes, lottery gambling services cause lower levels of harm than wagering, games, and other gambling services.
2.60
The Australian Lottery and Newsagents Association (ALNA) noted that the exempt lotteries (as defined in the Interactive Gambling Act):
…typically have the lowest per-customer spend when compared to other gambling forms and they are very well regulated and responsibly managed by our retailers who deal face to face with their customers, who are often very familiar to them.
2.61
The ALNA also pointed to research conducted since the Productivity Commission inquiry in 2010 that provides ongoing evidence for low levels of harm from lotteries and scratchies:
Research by the Australian Gambling Research Centre in 2017 found that the prevalence of past-year gambling problems was lowest amongst people who participated in lotteries… Additionally, a New South Wales gambling survey in 2019 concluded that lottery tickets and instant scratchies are associated with a lower rate of problem gambling and harm.
Committee view
2.62
Online gambling is currently the fastest growing section of the gambling market. Evidence to the inquiry identified substantial harm resulting from the ability to gamble online with credit. To be clear, this harm results primarily from online wagering with credit, not using credit to purchase lottery tickets and scratchies.
2.63
Indeed, the use of credit cards to pay for gambling can extend the pool of money that a person can gamble beyond their savings. This can lead to extreme financial hardship, loss of employment or business failure, bankruptcy, relationship breakdown, mental illness and homelessness.
2.64
As the Australian Government has already recognised, close to a quarter of a million Australians already experience significant harm from online wagering. This harm is not restricted to the individual gambler. The impacts spill out and affect family, friends, and the broader community.
2.65
The committee acknowledges the heartbreaking personal stories contained in several organisational submissions and witness testimony. While the data is limited on the links between the use of credit cards and digital wallets and gambling behaviour and gambling harm, it is clear that for a certain cohort of citizens (and their families), the harmful consequences can be significant and life changing.
2.66
The committee also recognises the work done by the Productivity Commission in two previous inquiries into gambling, and more recent work by the Australian Gambling Research Centre and the Australian Institute of Family Studies. Nevertheless, the committee sees this as an area in which research and data is deficient. Therefore, the committee recommends the gathering of further data on the size and growth of the online gambling market in Australia, online gambling with credit, and the extent and nature of the associated harms.
2.67
The committee recommends the Australian Government prioritise the collection of data on online gambling in Australia, including the size and growth of the online gambling market, online gambling with credit, and the extent and nature of the associated harms.