Navigation: Previous Page | Contents | Next Page
Key issues in wagering and sports betting
This chapter covers the key issues raised with the committee arising
from wagering and sports betting activity. These are: the exclusion of wagering
from the Interactive Gambling Act 2001 (IGA); whether the current ban on
online 'in-play' betting should remain in place; the risk of underage gambling;
the merits of betting on losing outcomes; calls for nationally consistent
regulation of wagering providers across states and territories; the practice of
credit betting; and the practice of paying commissions to third parties to
introduce new clients to betting agencies.
Exemption of online wagering from the Interactive Gambling Act
As noted in the previous chapter, online wagering prior to the commencement
of an event is not restricted by the IGA. The Australian Internet Bookmakers
Association (AIBA) noted that the exemption of wagering (and lotteries) from
the IGA had been in recognition of 'a different risk profile for each form of
No submitters to the inquiry called for online wagering on racing,
sporting and other events to be banned. Of those who mentioned the IGA
exemption, all emphasised that it should be maintained. As noted in the
previous chapter, Tabcorp supported retaining the exemption.
The Australian Racing Board noted that wagering had been exempted from the IGA
'on the basis of the lower relative risk of problem gambling from wagering'.
Greyhounds Australasia also argued that:
...race wagering is one form of gambling that is less likely
to involve addiction...[E]vidence...has shown that the predominance of problem
gambling occurs not with wagering products but with gaming products which are
games of pure chance, are repetitive in nature, and do not involve social
and Harness Racing Australia supported the continuing exemption of wagering but
only on the basis that it:
...cannot be exploited by internationally “footloose” wagering providers. This term was used by the
Productivity Commission in its 2010 report to describe the practice of
bookmakers relocating their businesses away from established jurisdictions to
avoid paying tax or contributing to the controlling body on whose product they
The Australian Racing Board also argued that the UK experience pointed
to a potential 'weakness' in the current IGA exemption:
The experience in the UK is that the major bookmaking
companies and betting exchange operators have relocated their online businesses
to tax havens such as Gibraltar and Malta.
Ensuring payment of industry fees and taxation amongst
internationally footloose wagering providers is one of the fundamental
challenges thrown up by online gambling.
Accordingly, the IGA should be amended so that compliance
with Australian legal requirements (including access to betting records for
integrity purposes, compliance with harm minimisation measures and payment of
industry fees) are a condition precedent of the IGA wagering exemption.
The current ban on 'in-play' betting online
The IGA's restriction on 'in-play' (also known as 'in the run') wagering
means that online bets can be placed on a sporting event up until the start of
play but that no bets can be placed once the match commences. However, betting
'in-play' on the telephone or in person is permitted.
Betting online 'in the run' on racing events is permitted under the IGA.
However, this service is not offered on all racing events by all online
bookmakers. For example, Tabcorp only offers live online betting on the
Live betting on racing is difficult in Australia because the
majority of our races are sprint races and over in 60 to 90 seconds...That does
not make it conducive to live betting, unlike an AFL or NRL game, which plays
out over 80-plus minutes.
A number of wagering providers commented that the restriction on
'in-play' betting on sport was obsolete in light of new developments in
technology (see also the discussion of smartphones and other emerging
interactive technologies in chapter eight). For example, Betfair's submission
...restrictions on in-play betting have extended beyond their
intended scope, which was to prevent "micro-betting" (or exotic
betting) (i.e. discrete contingencies within a broader event, such as whether
the next call of a... cricket match would be a wide). The practicality of
banning punters from betting in-play using the internet has effectively been
rendered obsolete due to the convergence over the last decade (since the
Interactive Gambling Act was enacted) of telephone and internet technologies.
Similarly, the AIBA argued that:
An Australian punter is able to bet “in the run” with an
Australian betting provider if he or she uses 19th
Century technology – the telephone —
but is able to bet
with anyone else in the world using 21st Century
technology – the internet. Restricting “in the run” betting on a technological
basis is not sound. The artificiality is becoming more apparent as new generations
of smart phones blur the distinction between “telephones” and other forms of
The AIBA commented on the reasons why 'in the run' online betting had
originally been restricted during the development of the IGA:
This approach reflected an inability to distinguish between “betting in the run” and “micro-event
wagering” when the Act was developed. “Betting in the run” refers to betting on
approved bet types (eg, who will win) after the event has commenced. “Micro-event wagering” is the
much publicised notion of whether the next ball bowled in a cricket match will
be a Googly, or whether a tennis player will serve an ace on the next point.
Although the restriction was imposed in the light of concerns with “micro-event wagering”,
“betting in the run” was caught up in the process. The amendment allowed
“betting in the run” by Australians with Australian betting providers only when
it was undertaken by means of the telephone. The internet could not be used.
Betchoice stated that 'in-play' betting was no riskier than other bet
First, there is no evidence of which Betchoice is aware
indicating that in-play betting products carry greater risks than other types
of betting (no evidence was submitted as the basis for the distinction at the
time that the IGA was passed). The argument is particularly weak when in-play
betting is permitted in terrestrial betting outlets.
Secondly, as noted above, online operators have mechanisms
available which can be used to detect and prevent those customers that are at
risk of problem gambling behaviour. Ironically, such mechanisms are not
necessarily available to terrestrial operators that are permitted to offer
these bet types.
Finally, the prohibition of these bet types does not protect
individuals. Instead, it results in those wanting such bet types to look
outside Australia. There is no shortage of overseas operators offering this
type of product. The effect of the IGA in respect of in-play betting is to
cause and require Australians to use overseas operators which do not
necessarily have the same standards of probity, care or interest in the welfare
of the customer as Australian operators and which are beyond the regulatory
reach of Australian authorities.
For these three reasons, Betchoice submits that the
prohibition on in-play betting is not appropriate and should be removed from
According to Betfair, 'in-play' betting is 'crucial for hedging bets to
minimise [a punter's] exposure or enable a guaranteed return from an event'.
Mr Paul Aalto also supported a lifting of the current restriction on 'in-play'
betting online as it would have advantages for consumers:
Being able to bet in-play has the major advantage for the
punter (especially on a betting exchange), of being able to trade out of a
market and either lock in a profit or minimise a loss.
Share traders have the ability to do just that - they can
take a position and if they reach an acceptable level of profit, trade out and
lock in that profit. Vitally, they can do the opposite as well - i.e. if the
market moves the wrong way, they can trade out and lock in a smaller loss and
save their capital for another investment.
Why shouldn’t punters be able to do the same?
Availability of online 'in-play' betting
through offshore providers
A number of betting providers pointed out the 'anomaly' that Australian
wagering operators are permitted to accept online bets from overseas customers,
but that Australian customers could not do the same:
Australia is the only jurisdiction in the world that allows
online wagering on sport but at the same time prevents punters from using the
internet to place in-play bets. To put it another way, except in Australia,
wherever it is legal to place a wager over the internet, it is also legal to do
so in-play on a racing or sporting event.
Telephone betting was said to be 'impractical for Australian customers
trying to limit risk, particularly in circumstances where an event hangs in the
By the time an Australian customer telephones to make an
in-play transaction, the odds will often have changed (through weight of money
coming from overseas customers who are betting online). The opportunity to
trade out of an existing "position" has thus been missed.
The Australian Racing Board observed that 'Northern Territory corporate
bookmakers and Betfair both promote 'in-play' betting heavily and Australian
residents can still place 'in-play' internet bets through UK bookmakers.'
Sportsbet also noted that 'in-play' betting was offered by a majority of
offshore wagering providers to Australian consumers and argued that the
prohibition should not be maintained for a number of reasons:
This form of betting is legalised in Australia when conducted
over the telephone and in retail outlets operated by the TAB’s but ironically
is specifically prohibited online. Sportsbet believes this inconsistency should
be addressed as a priority to allow online Australian wagering service
providers to compete on a level playing field, both with its domestic retail
and unregulated international counterparts.
Prohibition of online is not working, exposing domestic
consumers to offshore gambling services, along with a number of inherent risks
and dangers. In addition, it is more difficult for sporting bodies and
authorities to monitor for and detect match fixing when bets are placed with
unregulated offshore gambling service providers.
To illustrate the point further, Sportsbet listed a number of offshore
providers that offered 'in-play' betting to Australian customers
As noted previously, technology advancements, the
proliferation of the internet and the thousands of online gambling websites
available to Australians has meant that prohibition of these types of gambling
has become less effective over time.
Betfair cited a recent UK Gambling Commission review of 'in-play'
betting across Europe which found that 'in-play' betting did not require
special regulatory treatment, nor did it pose a specific risk to problem
Betfair also advocated a liberalisation of online 'in-play' betting, rather
than a prohibition:
...in order to prevent Australians from wagering with illegal
offshore operators who have no practically enforceable obligations to promote
and action responsible gambling nor provide adequate player protection (e.g.
identity and funds) measures.
The 2011 Review of Victorian Sports Betting Regulation recently
recommended that a removal of the ban on 'in-play' betting be placed on the
agenda of the COAG Select Council for Gambling Reform:
There was widespread agreement amongst all stakeholders that
the ban on internet betting ‘in the run’ contained in the Interactive
Gambling Act 2001 (Cwlth) serves no useful purpose.
If betting consumers wish to bet in the run, they are still
able to do this over the telephone or over the counter at TAB outlets and, if
they prefer to do so online, they are able to do so with overseas sports
betting providers. The net result of this is that Australian bookmakers lose customers
and, consequently, sports controlling bodies lose both revenue and access to betting
It was also put to the review that, in some cases, in the run
betting was to be preferred. Certain betting markets may be better served from
an integrity perspective if they can only be bet on during the game, as this
would avoid the possibility of pre-game collusion.
The Coalition of Major Professional and Participation Sports (COMPPS)
supported lifting the ban to ensure online 'in-play' betting is subject to
Australian regulatory controls:
Rather than the current system, which has the potential to
and probably will drive some gamblers offshore, the sports' preference is that
online in-play betting in Australia be legalised under the Interactive Gambling
Act so that the betting takes place in Australia and is subject to the
regulatory controls that occur in Australia.
Support for maintaining the ban
Other submitters, however, argued that the current restrictions on
wagering via the online platform should be maintained given the potential for
more rapid betting over the internet (i.e. at the touch of a button or key).
For example, FamilyVoice Australia stated that in-play betting was likely to 'induce
problem gamblers caught up in the excitement of a match [to bet] inappropriate
amounts on the spur of the moment'.
Regis Controls advised against a relaxation of the ban on 'in-play' online
sports betting, stating that the practice was targeted at 'younger age groups and
provides a real incentive for match and live incident fixing (penalties, cricket
no balls, goals missed etc.)'.
Dr Jeffrey Derevensky gave evidence to the committee on young people's
preference for immediate gratification in relation to gambling activity,
suggesting that the availability of 'in-play' betting may be more risky for
that age group:
We do know that young people in particular are very much
interested in immediate reinforcement. They want to know what the outcome of
the event is going to be. So when you look at political races and you can actually
bet on the internet who the next Pope is going to be, many adolescents are not
really interested in those types of activities. They are interested in knowing
in the next quarter on the football game or who is going to win the reality
show today as opposed to looking at who is going to be [the] ultimate winner a
month from now. Young people are very interested in the immediacy of their
gambling and the outcomes of their gambling wagers.
Concerns were also raised about the opportunities that the interactive
TV platform may provide for gambling 'in-play'. For example, Regis Controls
...many will argue that [gambling via pay TV] is a logical
extension of telephone betting but the technology convergence allows the scope
for many other forms of gambling, particularly in conjunction with new and
overseas based channels.
Further discussion of the merits of 'in-play' betting forms part of chapter
16 on the Interactive Gambling and Broadcasting Amendment (Online Transactions
and Other Measures) Bill 2011. The bill proposes to ban the provision of 'in-play'
betting services in all formats.
The committee considers that the current prohibition on the provision of
online 'in-play' betting should remain in place. When the IGA was introduced,
'in-play' betting online was restricted due to concerns about new technology
providing a platform for excessive betting 'in the heat of the moment' during a
sporting match. While some would argue that today's smartphone technology
renders the current prohibition obsolete and inconsistent, the risks associated
with rapid 'in-play' betting at the touch of a button and its attraction to
young people remain a concern to the committee. 'In-play' betting is still
permitted via the telephone and in person, so the committee sees the current
restriction on the online format as striking the right balance.
An alternative to the current ban that could be investigated in the
context of research in this area might be to relax the ban on 'in-play' betting
online by allowing 'simple' bet types such as which team will win a match or
which horse will win a race, but continuing to restrict 'in-play' betting
online on micro-events or discrete contingencies within an event (i.e. exotic
bets, which are discussed in greater detail in chapter 14).
Given that the effects of the convergence of new technologies in this
area are not yet well understood, the committee would support the government
commissioning research on the risks and effects of online 'in-play' betting. Until
such time as a national independent research institute on gambling (as
recommended in chapter two and in the committee's previous report) can
undertake this work, the committee recommends that research on the risks of
online 'in-play' betting in the Australian context be commissioned as part of
the current IGA review.
11.30 The committee recommends that the current prohibition on online
'in-play' betting should remain in place.
11.31 The committee recommends that the attractions, risks and potential harms
of online 'in-play' betting be the subject of appropriate research commissioned
by the current IGA review being undertaken by the Department of Broadband,
Communications and the Digital Economy.
The risk of underage gambling
During the inquiry, the issue of young people under 18 being able to
gamble on betting websites was raised. Gambling providers assured the committee
that appropriate preventive measures were in place to address the risk of
Sports betting agencies told the committee that there was a 90-day
identity verification period from when a customer set up a new betting account.
Sportsbet's Chief Executive Officer, Mr Cormac Barry, admitted that it could be
possible for minors to bet and lose money on the website during that 90-day
Mr Barry: It is possible. In order for someone to
deposit on the site they have to have a credit card or they have to have access
to those facilities. Typically those facilities would not be provided to minors.
We make every possible effort to ensure that we verify those individuals as
quickly as possible.
Senator XENOPHON: Within 90 days?
Mr Barry: Yes.
Senator XENOPHON: So in 90 days there is the potential
for that. Have you identified any minors in terms of the verification period
after the 90-day period?
Mr Barry: There will be people who fail to provide
identification. When you register you provide details and you provide your date
of birth. You cannot provide a date of birth that is less than 18. If people
are unable to provide identity, it would not necessarily be the case that we
identified someone—that person would choose not to engage further in the
Betfair's submission also stated that 'strict controls around customer
identity and verification also minimise the risk of minors accessing and using
Sportsbet explained to the committee what proof was required to verify
identity and argued that the current 90-day verification window struck the
right balance between convenience for consumers who wish to register and a duty
of care to minors:
Mr Barry: Those details are the 100 points. It is the
same thing that you would use to open a bank account. You have to provide, as
you said, a passport or a drivers licence and a Medicare card or credit card to
get up to 100 points.
Senator XENOPHON: Sure. So you provide all those cards
but no-one actually verifies that the person providing it is the person who is
the cardholder, though. By virtue of the online transaction, you cannot, can
Mr Barry: I think you can. They have to be able to
provide that. They are supplying their passport, they are supplying their
drivers licence. It has to match up with the address. We are verifying those
details against third-party databases through services like Veda. We verify
that information with third parties that that information is accurate.
Senator XENOPHON: And that takes 90 days effectively?
Mr Barry: It actually can be done almost instantly
when the customer supplies relevant information.
Senator XENOPHON: Do [you] think it would be
appropriate for there to be a much shorter window or in fact require the 100
points before someone sets up an account so that you actually have that
Mr Barry: I think a barrier of that level would be
very onerous. It would only serve to drive customers to use offshore sites that
do not have that level of regulation. The key thing when we are looking at
regulation here is to strike a balance between allowing the business to operate
and to put in processes that protect the customers, whether they are minors or
responsible gamblers. It has to be proven that those processes would actually
improve those procedures for minors or responsible gamblers. But there is a
balance to be struck, because if we have very onerous obligations and very
strong barriers to entry to our product it would only serve to drive consumers
to offshore operators who operate with much less rigorous regulatory standards.
You are exposing the customers to much greater risk...
Sportsbet argued that it made 'every practical effort that can be made'
to verify that account-holders were not minors and that it was not in the
company's business interests to allow this to happen:
We are investing a significant amount of money. That
verification process is not free; that costs us a couple of dollars per
customer, and when you have hundreds of thousands of customers that adds up to
a significant sum of money. I do accept that, as with any process, individuals
can find a way to get around it, but we are making every effort possible to
ensure that people under 18 do not use the site. We have no economic interest
in that occurring, and the same applies to problem gamblers. We are in the
business of creating a sustainable, growing business and providing a facility
to recreational gamblers, so there is no upside for us in taking money from
under-age individuals or problem gamblers.
The AIBA argued that the concern over the risk of minors being able to
gamble online was 'misplaced'. Its submission quoted the 2004 review of the
IGA, which found that:
...minors have little motivation to engage in regular,
unsupervised Internet gambling because they cannot make any financial gain
(unless a parent endorses the gambling) and because parents can easily detect
gambling by a minor. Further, methods are available to exclude minors from
participating in interactive gambling that are not available to onsite
gambling, such as age verification software.
The AIBA also pointed out that all Australian online betting providers
are obliged to:
...obtain and verify the identity of the account holder. The
Federal Anti-Money Laundering and Counter Terrorist Financing Act 2006 requires
internet gambling providers to verify a players identity (including age) within
90 days of the account being opened or they must freeze the account.
Chapter four noted that in the UK, in the event that a customer's age is
not verified within 72 hours, the betting account must be frozen. If the user
is found to be underage, the provider must return any money played and provide
The committee notes that while online gambling providers are required to
verify a player's identity within 90 days, there remains a risk that underage
persons could still open accounts and gamble on such websites for potentially
90 days, having used the identity documents of adults. The committee
understands that a proper balance should be struck between customer convenience
and a duty of care towards minors. It notes the licensing conditions and codes
of practice set out by the UK which require age verification in 72 hours. Given
this example and discussion at hearings, it would appear that identity/age
verification in a much shorter timeframe is quite achievable.
As gambling is a risky product, the committee believes that to further minimise
the risk to minors, the 90-day timeframe to verify identity (including age) should
be reduced to 72 hours.
11.41 The committee recommends that through the COAG Select Council on Gambling
Reform, governments, in consultation with industry, review the 90-day timeframe
to verify identity when opening a betting account, with a view to reducing it
to 72 hours, in order to diminish the risk of minors using the current
timeframe to gamble illegally.
Betting on losing outcomes
The ability to bet on losing outcomes is the main purpose of the betting
exchange model, which was explained in the previous chapter. Most submitters
who addressed this point supported the concept of the betting exchange, with
some advocating the need for greater caution in regulating such a service.
Betfair, Australia's only licensed betting exchange, explained the
rationale for consumers to be able to bet on losing outcomes:
Betting exchanges offer an efficient, cost-effective
mechanism for gambling on sports and racing events. The exchange’s similarity
with a stock market lends itself particularly well to punters seeking to trade
during the course of an event by ‘backing’ one outcome (buying) at a high price
and ‘laying’ it at a lower price (selling). The exchange model allows gamblers
to set their own prices and seek better value odds, helping to further extend
their gambling dollar.
It is not immediately apparent to some people that laying
generally involves risking a larger sum of money for the potential return of a
smaller sum of money (e.g. a lay bet of $10 at odds of 11.0 means risking $100
for the chance to win just $10). Backing is the reverse in that it is risking a
smaller sum of money for the potential return of a larger sum of money (e.g. a
back bet of $10 at odds of 11.0 means risking just $10 for the chance to win
$100). A punter places a lay bet when he or she thinks that the odds are too
short – it’s the same as an investor selling shares when he or she think[s] the
price has peaked.
When a customer places a bet on a winning outcome with any
betting operator, they are betting that the other outcomes will lose. This is
clearly illustrated in head to head sporting contests when a bet to win on one
team is the equivalent of a bet for the opposing team to lose. In respect of
contests with more than two runners (for example horse racing), a betting
exchange provides an efficient platform for customers to lay a horse.
As a worldwide operation, Betfair's Australian arm is regulated by the
Tasmanian Gaming Commission in accordance with the Gaming Control Act 1993.
Under this Act, Betfair must adhere to:
- the prevention of wagering on illegal events;
- allowing the Tasmanian Gaming Commission to override any betting
exchange rules if it deems they are oppressive or unfair;
- allowing the betting exchange to freeze player funds immediately
where inappropriate activity is suspected; and
- preventing wagering on an event the Commission considers unfit
for betting exchange wagering.
Betchoice, a Northern Territory online bookmaker, praised the Tasmanian
regulatory approach to Betfair's operations:
The Tasmanian legislation under which [Betfair] operates
include strict provisions that aim to prevent the corruption of integrity and
which have worked well. Betchoice submits that this should be a model for
regulation of the wagering sector generally, namely that regulation developed
with all stakeholders is preferable to prohibition that only drives the market
Mr Andrew Twaits, Betfair's Chief Executive Officer, explained why a
betting exchange service was not significantly different to more traditional
Mr CIOBO: I know you made some comments earlier on about
your concern with respect to the proposed prohibition on placing loss bets. I
would just ask you to expand on why you think it is not a bad idea and not a
Mr Twaits: The starting point is that you can bet on a
losing outcome through a bookmaker or a TAB. History has shown that people who
have set out to profit from either inside knowledge or intentional conduct—for
instance, rigging a race—have used bookmakers and/or TABs. So in a sense we are
no different. I guess what I would say is that I think we have shown over the
last 5½ years here, and beyond that globally, that transparency is the key to
protecting the integrity of racing and sporting events. As I said, we think we
are the high-water mark in dealing with integrity issues in sport. We provide a
power of veto to sports in terms of saying what markets we can offer and, if
they are unreasonably risky or they take too many resources to deal with, we
will not offer them.
COMPPS also affirmed that the establishment of Betfair in Australia has
had a positive effect on sport:
Six of the COMPPS members have information and revenue
sharing arrangements with Betfair, the major betting exchange operating in
Australia. The information sharing arrangements have worked well and sports
have received valuable, timely and detailed information that has greatly
It is in the interests of the betting agencies to work with
sports so as to ensure that the integrity of sporting contests is maintained.
The AIBA agreed that Betfair's management of integrity concerns was of a
very high standard:
Through a combination of strict regulation and high standard
business practices, integrity concerns have been addressed. Betfair has
recognised the potential for corrupt betting arising from the use of its
facility, and has in response implemented state-of-the-art monitoring and
review mechanisms to detect unusual or suspicious betting activity. Indeed,
Betfair must be credited with providing early warning of corrupt activity.
The Tasmanian Department of Treasury and Finance noted that there had
been no complaints regarding Betfair's operations since its inception:
There have been no incidences in Tasmania requiring
proceedings to be taken against Betfair. The Tasmanian Gaming Commission has had
no instances of prosecutions arising from serious corruption or match-fixing
since Betfair began their Tasmanian operations in 2006.
In conclusion, if a betting operator has in place a highly
transparent wagering platform with traceable audit trails, and
information-sharing agreements with racing and sports industry bodies, then
along with strong probity requirements in legislation the risks to the
integrity of sport from being able to lay bet are minimised and there is no
case to prohibit this type of betting activity.
The UK Gambling Commission outlined its experience of betting exchanges,
The introduction of betting exchanges created a business
opportunity for many due to the low overhead operations of an exchange.
Initially, this had an impact on traditional bookmakers and their profit
margins, but with the impact now settled throughout the market many bookmakers
find the exchanges as a useful tool for their business and some elect to lay
off their liabilities on the exchange. It has also had a large impact on the
way starting prices are calculated, in many cases the betting exchange odds are
the default starting prices used by bookmakers now as it provides a fair and
accurate estimate of the market.
The ability to back the loser is and will continue to be
under the spotlight particularly in relation to horse racing yet we have found
little evidence to suggest that it has led to an increase in betting
corruption. A properly regulated betting exchange with built in market
integrity checks can provide valuable intelligence and help detect activity
that may have otherwise been missed. While the...report ‘Risks to the integrity
of sport from betting corruption’ explored whether exchanges might in principle
provide more opportunities to those wishing to fix events, particularly
in-running events, in practi[c]e the deterrent benefits of better scrutiny and
identification of who is betting appear to outweigh the potential risks.
Mr Paul Aalto also argued that that betting exchanges posed no harm:
Every sporting event has winners and losers - betting on Team
A to win a match automatically means that you are betting on Team B to lose it.
This equation becomes a little more complicated in events with multiple
entrants but the principle remains the same. There will only ever be one winner
(other than in a dead-heat) and the other participants will lose. If you back
all but one entrant to win, you are effectively backing that final entrant to
lose. This has been happening for years and long before betting exchanges came
Overall, I see the entry of Betfair, the only betting
exchange currently licensed in Australia, into the market as a positive for the
- As a punter, better prices on average;
- Additional revenue streams for sports/racing through
distributions, sponsorship and most importantly the introduction of overseas
clients to our market - i.e. they have grown the pie;
- Their audit trail and willingness to share information with
enhanced, rather than detracted, from the ability of the regulators/stewards to
do their job - i.e. they make it easier to detect cheating.
Some submitters, however, were more cautious about the betting exchange
model, highlighting the potential for integrity breaches.
The NSW Bookmakers' Co-operative Ltd acknowledged that while betting
exchanges were 'a legitimate component' of the wagering industry, enhanced
vigilance over their activities was required:
As with other technological advances within the industry, our
main concern is that bookmakers are legally allowed to access these options
whilst conducting their businesses, and that there are no regulatory-imposed
commercial disadvantages for our members in terms of this access and related
The Co-op is aware that persons ‘betting to lose’ via betting
exchanges are often closely following the business practices of licensed
bookmakers who accept bets ‘against’ racing and sporting contestants as their
main business trade.
Whilst we would not advocate the prohibition of unlicensed
persons ‘laying’ contestants in this manner, we would suggest that the enhanced
focus of racing and sports regulatory bodies is warranted in respect of these
transactions, given the potential for inappropriate betting activities.
The Australian Athletes Alliance submitted that betting exchanges
'should not be permitted a free ride on the efforts of [sport] governing
bodies, clubs and athletes':
Accordingly betting exchanges should not be permitted to:
1) place bets on any sport, including racing, unless the
governing body of the sport provides its consent; and
2) use the likeness, statistics, and/or name of any athlete
without the athlete’s specific consent.
A sport should only be permitted to provide its consent if it
has collectively bargained the minimum levels of risk management described
Regis Controls also called for better regulation of the ability to bet
on losing outcomes, warning that:
...this type of betting allows significant betting on credit
and betting on "losing" outcomes increases the risk of fraudulent
activity. Regulation relies too heavily on post-bet evaluation of suspicious
activities which some State and Territory Government regulators are currently
insufficiently equipped to monitor effectively.
Further discussion of how integrity concerns are managed by racing and
sporting bodies in light of 'lay' bet types is contained in the following
chapters on match-fixing and corruption in sport.
Committee majority view
The committee majority acknowledges that Australia's only licensed
betting exchange, Betfair, has been operating in the Australian market since
2006, and that no significant concerns about its operation have come to light. However,
the committee majority notes the risks inherent in being able to bet on losing
outcomes and supports betting exchange providers working closely with governing
bodies, as Betfair has done, to mitigate the risk to the integrity of the
sporting or racing product on which lay bets are placed.
Regulation of online wagering by state and territory governments
With the exception of the provisions in the IGA regarding 'in-play'
betting online, states and territories are each responsible for regulating and
licensing wagering operators. One of the key issues raised during the inquiry
was that regulatory approaches differed considerably between jurisdictions. These
inconsistencies have resulted in corporate bookmakers gravitating to more
'progressive' jurisdictions to establish and grow their operations. The distinct
business advantage held by these online wagering operators has caused
considerable tension and 'market distortion' between the newer players and the
traditional wagering operators on a range of issues such as wagering taxation,
revenue to the racing and sporting industries and regulatory approval
Harness Racing Australia provided an overview of the race wagering
regulation environment and the significant changes that have recently taken
The regulation of wagering on racing has traditionally been
the domain of the states and territories. For over one hundred years, this
proved successful, particularly when each State Government owned and controlled
its own TAB, bookmakers were permitted to operate only when situated on a
racecourse and arrangements existed between states regarding betting on each
other’s racing product.
The privatisation of TABs, the emergence of telephone and
online betting and the changes associated with globalisation, has irrevocably
altered the wagering landscape.
No longer are state and territory borders relevant and the
protectionist policies of past decades have gone, replaced with an emphasis on
competition and free trade. The result is inconsistent regulation being imposed
by states and territories, including different taxation rates. For the racing
controlling bodies, the prevalence of ‘free-riding’ bookmakers, located in
small jurisdictions, paying little or no tax to the local government and
providing minimal or no return to the racing controlling bodies, has had a
According to Tabcorp, the regulation of online wagering across different
states and territories has not kept pace with the growth of the online
industry, and has created significant market distortions:
Whilst the Australian online wagering market has evolved to a
national one, state and territory governments and racing industry authorities
continue to regulate the industries as if they were still state/territory based
markets. Each jurisdiction has its own approach to:
- Racing industry funding, including race field fees
- Wagering taxation
- Integrity management
- Products approved
- Regulatory approval processes
- Harm minimisation/responsible gambling requirements.
Wagering customers will seek out wagering opportunities that
provide the best price, product offering and suite of complementary services.
Wagering operators will seek out a business environment that enables them to
maximise returns. Where a non-level playing field exists, customers and
wagering operators will "jurisdiction shop" to find the environment
that best suits them.
Tabcorp also stated that a range of different taxation regimes across
jurisdictions led to a distortionary 'non-level playing field':
The impacts of a non-level playing field in the areas of
taxes, racing industry fees and regulation leads to leakage of wagering revenue
to jurisdictions in which wagering operators pay little or no contribution to
the racing industry.
In 2008, the loss of income for the NSW and Victorian racing
industries as a results of these distortions was $58 million and $45 million
respectively. As online wagering continues to grow, this leakage will continue.
Betfair also referred to 'forum shopping', which resulted in disparities
between states and territories and 'an entrenched protection of the state-based
Submitters argued that the regulatory discrepancies between
jurisdictions had led to online based businesses being able to take advantage
of what are seen as more flexible licensing arrangements in smaller
The Australian Racing Board noted three characteristics of the current
system of state-based regulation:
Inconsistency. New technologies which can be applied to
gambling purposes present the same issues for all States and Territories and a
consistent national framework should exist. Instead we have a patchwork series
of responses to changes.
Regulatory arbitrage. Lack of a consistent national framework
means that operators are able to pick [from] States and Territories willing to
trade off regulatory or tax standards in order to secure local investment or
other economic activity. The result is a “race to the bottom”.
Regulatory capture. Some operators in particular
jurisdictions may have significant sway over the relevant regulators and/or
legislators because of their size in the particular State or Territory market.
According to the NSW Bookmakers' Co-operative Ltd, the Australian Capital
Territory and the Northern Territory are considered to be 'corporate bookmaking
strongholds', having put in place 'progressive regulatory reforms' when
compared to the major states.
Its submission argued that:
...non-online regulatory inconsistency across the nation has
resulted in poor outcomes for bookmakers who – at least at an on course level – do not have the ready ability to 'relocate' their licenses to more 'favourable'
jurisdictions. Whilst we understand the challenges in doing so, jurisdictions
should wherever possible provide for nationally consistent State and Territory
non-online gambling regulations (and taxes) to avoid competitive bias and the
negative commercial and public policy impacts that this brings.
The Northern Territory's 'flexible regulatory structure', according to
Tabcorp, enables corporate bookmakers to:
- offer better prices to customers because of the relatively low
tax and racing industry contributions required; and
- offer a broader product suit[e] to customers, including the
ability to bet on novelty events and on credit.
Regarding the detrimental impact on traditional wagering providers, the
Australian Bookmakers' Association stated:
Unfortunately these progressive arrangements that allowed
7-day trade via the internet and the broadest possible range of betting
products were not readily adopted for bookmaking in the other States. This
fragmented approach to regulation continues to this day. As a result many
jurisdictions still confine bookmakers to their traditional racecourse
locations, traditional operational limitations and limited product range. (For
example Queensland bookmakers are still to this day unable to accept bets via
The Association emphasised that traditional on-course bookmakers were
heavily disadvantaged by the 'patchwork' regulation approaches across the
The vast majority of on-course bookmakers remain ‘sole
traders’ in the sense that they own and operate small businesses with few
employees - mainly race day staff such as ledger recorders (‘pencillers’) and
cash handlers (‘bagmen’) – and minimal administrative support. Although some
jurisdictions now allow limited types of partnerships or simple corporate
entities to be formed, most on-course bookmakers continue to individually manage
and finance their business activities.
These limitations, as well as other operational restrictions,
are in most cases the result of longstanding government and/or industry
regulatory policy. In essence, the regulatory arrangements that apply to on-course
bookmakers have in many cases failed to keep up with changes in the national
market, and especially for the newer “corporate bookmaking” businesses.
The call for a national approach
Sports wagering operators, even those located in more 'favourable'
jurisdictions, overwhelmingly called for a nationally consistent regulatory
framework to replace the currently fragmented state and territory regimes.
Tabcorp's submission argued for 'a single national approach to taxation
and funding of the racing industry, possibly administered by the Commonwealth'.
The NSW Bookmakers' Co-operative Ltd also observed that inconsistent
regulations across states and territories were problematic and that:
...a single national set of regulations – if only in the area
of harm minimisation and related advertising and promotions, would be of
significant advantage and would negate the attraction of 'border hopping' by
Betfair, licensed in Tasmania, suggested that the current system was too
protectionist towards the monopoly TAB providers:
Betfair believes the current state-based system of gambling
regulation in Australia is inconsistent and there’s a need for a more
co-operative framework. There are too many disparities between the various
jurisdictions and an entrenched protection of the state-based monopoly TABs
(mostly now in private sector ownership). While Betfair believes it's crucial
that states be able to offer tax incentives for new business, it is strongly of
the view that a nationally consistent approach be taken in regard to
Taking things a step further, Betchoice, licensed in the Northern
Territory, argued there is a need for a single Commonwealth department and
minister to oversee gambling and wagering regulation:
In the case of Betchoice, we compete with other operators at
a national level and serve customers across Australia. It is costly and time
consuming to have separate and, at times, inconsistent regulation in different
States and Territories. It makes advertising and marketing expenses greater
than they should be and runs the risk that operators may operate in breach of
the law due to the complexity of the issues involved.
If the Federal Government intends to play a greater role in
gambling issues, we submit that a single minister should be made responsible
and that a department be given responsibility over the portfolio. The Federal
Minister should then work with State and Territory Governments to harmonise
existing laws so that regulation is clearer and serves the public interest.
Race field fees
Another issue that was not specifically included in the inquiry's terms
of reference, but was nevertheless raised by numerous submitters, is that of
race field fees. Arising out of inconsistent regulatory arrangements, the
multiple fees and authorisations required by states and territories is a source
of consternation for many wagering operators.
The NSW Bookmakers' Co-operative Ltd drew attention to the complexity of
current race field fees models in operation across states and territories:
Our on-course bookmaking members are at present disadvantaged
by the complexity of the various State and Territory based fee models. Put
simply, the fees charged by each racing code in each jurisdiction are too
inconsistent to allow holders of bookmaking licenses to operate under level
competitive arrangements. As with inconsistent regulatory standards, this
results in commercial disadvantage for those operators who are located in
higher fee paying jurisdictions.
In addition, our members are now burdened with the
unprecedented requirement to obtain ‘multiple’ regulatory (race fields)
approvals from each racing authorisation body within each Australian
jurisdiction that he or she operates betting [on]. This exponential increase in
required regulatory approvals provides a huge additional administrative burden
on bookmakers, the majority of whom operate as small businesses / sole traders.
A single national licensing process, or at minimum a system
of mutual recognition of State / Territory approvals, must be a more logical
Similarly, the Australian Bookmakers' Association argued there was a
completely fragmented approach to race fields authorisations and fee collection
Mutual recognition of interstate licensing is often ignored
by relevant authorities.
...The ABA strongly recommends that there be established,
either, a single national licensing and financial contributions process or a
system of ‘mutual recognition’ by all jurisdiction of ‘home state’ licensing
and fees payments.
Betfair outlined the original 'product fee' arrangements that operators
paid to the states in which they were licensed, as well as the newly introduced
'race field fees' arrangements:
Licensed wagering operators in Australia have traditionally
paid all product fees and taxes to the states where they are licensed. For
example, a bookmaker licensed in New South Wales paid taxes and product fees to
the NSW Government and/or NSW racing industry. The fees were paid irrespective
of an event’s location.
The funding model originated with the advent of the
state–based (and owned) TABs. It was widely referred to as the ‘Gentleman’s
Agreement’. In effect, each jurisdiction permitted TABs and bookmakers to
accept bets on each other’s racing without the requirement to pay product fees.
Throughout Australia, this funding model has now been
replaced by the introduction of race fields legislation. Wagering operators pay
licence fees and taxes in the state in which they are licensed, but the race
fields legislation means they now have to contribute product fees directly to
the racing bodies that control the product from which they are sourcing
revenue. Betfair supports this new funding model. It’s an arrangement that
allows the racing industries in each state to properly reap the rewards of
their own products and gives racing bodies a strong incentive to provide a
better quality product.
Betfair supports the concept of product fees provided that
the fee being imposed is fair and equitable to all wagering operators.
Betchoice also highlighted the waste and duplication associated with different
The issue of duplication extends beyond governments, however.
For wagering operators, the worst example concerns product fees. Product fees
are generally statutorily imposed requirements on wagering operators to pay an
amount to a sport or racing code in order to offer bets on the event. The
product fee acts as a mechanism, particularly in the case of racing, to provide
an ongoing source of funding.
Most wagering operators, including Betchoice, are not opposed
to product fees in general. As was noted above in respect of integrity issues,
without sport and racing, there is no wagering. Betchoice does not want to see
events that could bring in customer dollars disappear. However, the complexity
and duplication is a waste of money and time.
The committee notes that the race field fees matter is currently the
subject of legal proceedings in the High Court of Australia, with corporate
bookmakers Sportsbet and Betfair appealing against the NSW Government's bid to
charge them fees on the basis of 1.5 per cent of turnover. Sportsbet contends
that it should not pay any fee to operate in NSW, whereas Betfair contends that
the NSW fee model is discriminatory.
At its last meeting in September 2011, the Australasian Racing Ministers'
Conference discussed these matters:
The Ministers discussed the absolute need for a national
approach to product fee legislation driven by the Commonwealth to ensure the
racing industry continues to be a major contributor to Australia’s economy and
proposed a further approach to the Federal Government on this issue.
However, in July 2011, a spokesman for the Assistant Treasurer, the Hon
Bill Shorten MP, noted that racing was a state issue and that any proposed
Commonwealth intervention was likely to be 'costly and complex and involve a
significant impost on business.' The Commonwealth would prefer to see a
harmonised approach arrived at by states and territories.
The committee notes the legal proceedings currently underway in the High
Court of Australia on the matter of race field fees. It acknowledges the
frustration of wagering providers in what appears to be a fragmented and
complex system. The committee notes the level of concern raised during the
inquiry on this issue and welcomes the work being undertaken by the Australasian
Racing Ministers' Conference to achieve national consistency in this area. The
committee supports the Commonwealth Government's view that a harmonised
approach by jurisdictions should be pursued over federal intervention.
Consumer protection issues
Recent media reports have highlighted examples of consumer protection
concerns in relation to gambling and sports betting services.
In August 2011, Sports Alive, an online bookmaker based in Melbourne but
licensed in the ACT, went into liquidation. Almost 13,000 customers are likely
to lose up to $3.2 million, including $2.6 million in payouts not made to
winners and $600,000 in 'wagered open bets'. Staff of the betting agency
confirmed that company managers were falsely marking customers' betting
accounts as 'paid' and it is claimed that this was being done to mislead the
regulator, the ACT Gambling and Racing Commission.
Liquidators said that it was unlikely that Sports Alive had complied with the
ACT Race and Sports Bookmaking Act 2001, requiring bookmakers to keep a
separate bank account for all betting monies and to not withdraw money from
this account until a bet's outcome is determined. Inquiries are being conducted
into whether the company had been trading while insolvent.
Another case relates to three gambling-related schemes being operated in
Victoria which promise financial returns to clients by using computer software
to predict the outcome of racing and sporting events. Media reported that the
schemes, operating under the names of Pro-Trader Technologies, Advanced Trading
Strategies and Queenbury Investments, offer potential investors profits of up
to 70 per cent by predicting the winners of horse racing and other sporting
events. Some investors have found that the promised returns did not materialise
and have had difficulty recovering their money. The Victorian Consumer Affairs
Minister has warned against investing in such schemes, suggesting they may well
The Australian Competition and Consumer Commission (ACCC) warns
consumers against buying into gambling schemes which are camouflaged as
Until recently such schemes have been operating out of Queensland. The ACCC has
been working with the Queensland Office of Fair Trading, Queensland Police, the
Australian Securities and Investment Commission and the Australian Taxation
Office 'to develop coordinated enforcement and consumer education strategies to
tackle these types of sports betting products'.
The committee notes with concern the emerging consumer protection issues
around sports betting and wagering and gambling-related schemes being marketed
as 'investments'. The committee urges regulators to continue to be vigilant in
monitoring for and addressing such practices, as well as providing appropriate
consumer education. Additional consumer protection issues that arose during the
inquiry are discussed below.
Credit betting refers to the practice of placing bets on credit and settling
the account at a later date. The practice of wagering providers offering
clients 'free' credit will be dealt with in the next chapter under the topic of
The Productivity Commission's (PC) 2010 report into gambling addressed
the practice of credit betting and ultimately recommended that there were
insufficient grounds to recommend a prohibition on current credit betting
...bookmakers have a commercial interest in the prudent
provision of credit facilities as they bear the cost of the collection of
outstanding debts, as well as the risk of default. As credit seems to be
offered to well known and established clients, bookmakers’ commercial interests
may be reinforced by a personal interest arising from the ongoing relationship
they have with their clients. Such relationships are likely to be stronger in
the face-to-face environment on-course, than they are over the internet.
The NSW Bookmakers' Co-operative Ltd noted that credit betting was 'an
important part of bookmaking practices in the modern era' and it supported the
PC view that there would not be a net benefit in a ban on the use of credit
betting in either the online wagering or online gaming environment. The
...strongly advocates the retention of credit betting as an
essential tool in doing business established clients who have demonstrated a
capacity to bet (and settle any debts) at a level appropriate to their personal
Betfair advised that it does not allow customers to bet on credit and
that an account-based betting model has particular advantages for regulation:
Unlike traditional wagering platforms such as bookmakers and
the TABs, Betfair does not accept cash, nor does it allow customers to obtain
credit. Betfair only permits customers to place bets if they have opened an
account. There are a number of advantages in offering only account-based
betting, the key one being that Betfair is always aware of who has placed a
The account-based model removes the traditional anonymity of
punters. It provides significant advantages in controlling and detecting
attempts to launder money or to engage in deceptive conduct...
Tabcorp pointed to the inconsistency across jurisdictions on the
practice of credit betting:
The approach of states and territories to harm minimisation
in online wagering differ markedly. For example, while totalisators in general
cannot provide credit to their customers, bookmakers are free to offer credit
betting services. Between jurisdictions, differences also apply to restrictions
on bet types, wagering advertising and the capacity of operators to offer
account opening inducements to wagering customers.
Customers who wish to take advantage of credit betting,
account opening inducements and a broad product offering are taking their
business to jurisdictions with regulatory environments that allow wagering
operators to provide these services.
The AIBA supported further research into the merits of credit betting to
consider whether further controls would be appropriate:
The genesis of credit betting is betting on a racecourse. To
avoid the inconvenience and risks associated with handling large amounts of
cash on course, bookmakers would allow certain clients to “bet on the nod",
or on credit, on the understanding that they would settle up at a later time.
The facility is also used by larger professional gamblers who
seek to arbitrage differences in prices between various operators. In this
case, the punter will outlay large sums for a more probable small win.
The practice of credit betting is limited to wagering, and
the extent and terms of any “trading account” that an operator allows a client
to use, is agreed between the two of them. Any commercial default is borne by
the operator, although there have been instances of bankruptcies where the
outstanding debts included debts owed to bookmakers...
This Association supports the recommendation for further
research. It appears sensible to maintain the benefits to clients of credit
betting, but look to the development of appropriate controls to mitigate the
risks. It is proposed the Committee recommend the immediate issue of a
reference to a national research body to consider appropriate parameters
governing the issue of credit.
During a public hearing, the committee questioned Sportsbet about a case
in which a Melbourne man with a mental illness ran up $80,000 in debts with
According to media reports, the man claimed he was lured in to open a betting
account by the offer of $5,000 in free bets. He then accepted thousands of
dollars worth of credit to continue betting. After joining in May 2010, he said
he accepted an offer of $10,000 credit, then a further $30,000 within the next
week. He also successfully applied for a further $40,000 in credit. Sportsbet
took the man to court to force him to pay but eventually agreed to cancel his
This case raised a number of concerns for the committee. Despite this,
the committee thanks Sportsbet for being very open about its business practices
during this inquiry and also for its openness about this case. The committee
commends Sportsbet's compassionate approach for the individual involved and
understands that the case is well on the way to being resolved.
The 'free bets' aspect of this case is discussed in more detail in chapter
12 under a section covering inducements to bet. The final section of this
chapter also deals with another aspect of the case – i.e. the introduction of
the man to Sportsbet by a third party and the payment of commissions.
Sportsbet's Chief Executive Officer, Mr Cormac Barry, and the Chief
Financial Officer, Mr Ben Sleep, explained Sportsbet's policy in relation to
Mr Barry:...of the people who have credit accounts
with Sportsbet, 80 per cent have a facility of $200 or less and 90 per cent
have a facility of $1,000 or less. Of the 15,000 active credit accounts we had
in the last financial year, 21 of them went to legal action pursuant in the
recovery of funds and there were two cases of bankruptcy. We would typically
treat these matters with compassion and it is very much a last resort. We would
only pursue individuals if we believed they had the ability to pay ... [A]s it
has come to light through the proceedings within the court that this individual
does not have the ability to pay, there are now currently unprejudiced
discussions underway to waive that debt. In the vast majority of cases, we will
come to an arrangement where we make a partial settlement to paying on plan or
we write off the amount. In the last financial year, we wrote off close to $1 million.
Senator XENOPHON:...But how on earth did we get to the
stage where an individual who, if you scratch below the surface you could tell,
was quite a vulnerable individual and got to the stage of getting that amount
of credit so quickly and lost that money so quickly?...
Mr Sleep: If you look at the transactional history of
the particular customer, he bet with us for a number of months and, in fact,
was very successful. In his operation he certainly looked to us like he was a
professional punter, as in the information provided. Initially, the credit
facility provided was $10,000, which was in existence for a reasonable period
of time. The particular customer in question then, on repeated occasions, was
requesting high levels of credit—in fact, higher than where he ended up.
Statements were made to us about his ability to pay, about certain assets that
the individual had and about a history of having similar types of facilities
and repaying them accordingly. Over a series of many conversations, this was
the basis of extending the credit that we did. As Cormac pointed out,
proceeding to this level of legal proceedings is an absolute last resort for
us. To the extent that we go legal in the 20-odd cases, typically that is
dropped, but in this instance it was based on what the particular customer was
saying. It was our belief, based on his statements, that he in fact had the
ability to pay. It was not until we got further into the proceedings and saw
the reports from the trustee that those statements were baseless.
The committee wrote to state and territory regulators asking them to
outline their rules around credit betting. Responses were received from all
jurisdictions except the Northern Territory where it appears this practice is
Senator XENOPHON: Are you familiar that in other
jurisdictions, for instance in South Australia, under the Gaming Machines Act
it is an offence to provide credit to someone for the purpose of gambling?
Mr Barry: I am familiar with the fact that there are
different regulations in the different states. It is not illegal in Darwin to
provide those services.
New South Wales, Victoria and Queensland appeared to have the strictest
rules against credit betting while other jurisdictions permitted the practice
to differing degrees, depending on the licensees in question.
As the case referred to above involves a betting agency registered and licensed
in the Northern Territory, the committee is disappointed that the Northern
Territory has not responded to its inquiries around rules in place for credit
expressed its view in relation to this practice at the hearing during this exchange:
Senator XENOPHON: I appreciate you are operating
within the laws of the Northern Territory. But do you understand the policy
rationale between not providing credit to someone to gamble, in the sense that
it may help fuel problem gambling or exacerbate existing problem gambling?
Mr Barry: I do not believe that the provision of
credit has the effect that you outlined. There is a broad number of credit
facilities available to consumers, whether it be retailers or banks et cetera,
so I do not believe the fact that we provide credit in any way increases the
likelihood that a problem gambler would have an issue.
Senator XENOPHON: Sportsbet is not a charity. You are
not giving credit because you are philanthropists. You are giving credit to get
Mr Barry: We are giving credit to provide a convenient facility for
customers to bet. We do not charge for credit. Obviously we are not a charity,
but nor are the other people who provide credit in society.
11.101 The committee
notes that under the Privacy Act 1988, gambling providers such as
Sportsbet do not fall under the current definition of a credit provider as they
do not charge interest or fees.
While the definition of a credit provider is being broadened under the
government's privacy reforms, gambling providers such as Sportsbet will still
not fall within the new definition. The committee's view and recommendation on
credit betting is incorporated into this chapter's conclusion below.
Payment of commissions to third parties
11.102 In relation to the
case mentioned above, in which a Melbourne man ran up $80,000 in debts with
the committee heard about the practice of third parties being paid commissions
by Sportsbet to introduce new clients.
11.103 While explaining
the case to the committee, Mr Barry, Chief Executive Officer of Sportsbet,
stated that third parties could refer potential clients to Sportsbet and
receive an 'affiliate share' of the gambler's losses. The exchange took place
Mr Barry: In this case, the client was referred to us
by a third party. There are a number of third-party agents who would network
within racing clubs and professional gambling circles. He was referred to us on
Senator XENOPHON: Sorry—let's go back a step. When you
get a referral from a third party, and you have your Facebook page where people
share tips and things like that, do you provide any credits, any inducements or
any reward for third parties introducing customers to you?
Mr Barry: Yes. Those third parties can be on a finders
fee or they could gain a share of the revenue from the customer—an affiliate
Senator XENOPHON: If the punter loses $10,000 and they
were introduced by a third party, that third party could be getting a share of
Mr Barry: Absolutely.
Senator XENOPHON: Is that disclosed to the punter?
Mr Barry: Not necessarily, but it would not be in any
way deliberately hidden.
11.104 The question of
whether this practice constituted a 'secret commission' was then discussed:
Senator XENOPHON:...I know that there have been laws
in place around the country about secret commissions and disclosing
commissions. If a third party introduces someone, they can get a cut of that
Mr Barry: Yes, but it is a reasonably standard
business practice for referrals to occur. I think many businesses would operate
on the basis that people get recommended to another service if they enjoy using
a service or they believe an individual may wish to use that service.
Senator XENOPHON: But isn't this a little bit
different? The bigger the person's loss, the more the referrer gets.
Mr Barry: It is often the case that when a third party
refers someone to you they would get a share of the benefit. I do not think it
is any different.
Senator XENOPHON: But given that you are dealing with
an unusual product—you are dealing with a product that you acknowledge in your
very comprehensive submission has a risk of harm and you have items on your
website to deal with problem gambling—don't you see that offering those sorts
of inducements could fuel problem gambling? The third party that introduces the
punter to you might have an incentive to encourage that person to keep playing.
Mr Barry: Typically an affiliate would be something
like a racing forum, an information site or that type of thing and those people
would have links to our site. They refer a customer through that means. So
typically that is a reward for the affiliate and the affiliate has an ongoing
relationship with that customer.
Senator XENOPHON: How much do you pay out in
commissions each year?
Mr Barry: Each year we would pay out approximately $3
million to $4 million.
Mr Sleep: About $3½ million.
11.105 Giving evidence
to the committee, Mr Mick Rolfe, Vice Chairman of the Australian Bookmakers'
Association, stated that he would not support such a practice:
Senator XENOPHON: As a bookmaker of good standing and
40 years experience, do you have a view about that sort of practice of a)
giving a commission to someone and b) not disclosing that commission to your
Mr Rolfe: I take the position that that would be
wrong. I think that that would be counter-productive. I think that that would
give the wrong view to any potential client that you may be looking at that you
need to have those clients to reward others for coming forward to you. I myself
would take a dim view of that policy. I have never practised it, and I do not
know any of my colleagues who have practised it.
11.106 Betfair also
told the committee it ran a 'refer-and-earn scheme', where a customer would be
introduced by an existing customer, who would get $50 credit in their account.
However, this would be disclosed, as well as the trailing revenue share, on
11.107 In response to a
question taken on notice at the hearing regarding this issue, Sportsbet
provided further information that the potential for commission arrangements to
exist is disclosed in the 'General Rules' section of its website.
After scrolling through terms and conditions, under 'General Rules', number
49. Where a Member has been referred to Sportsbet by a third
party including by a third party operated website and where that third party is
an Affiliate or agent of Sportsbet, Members acknowledge that Sportsbet may make
commission payments to that third party. Payments to agents or Affiliates are
unrelated to the odds or prize money offered to Members by Sportsbet. Details
of Sports’s Affiliate program can be located at http://www.sportsbetaffiliates.com/.
11.108 The committee
notes that the committee and Senator Xenophon have separately approached the
Northern Territory Licensing Commission to ask about regulations covering the
practice of third party commissions. However, to date the committee has not
received a response. It notes that no other jurisdiction that responded to the
committee has addressed this practice in its legislation or regulations.
11.109 The committee's
view and recommendation in relation to this practice are contained in the
11.110 It is clear that
betting on sports or racing is now a national market. The committee heard how,
for example, a customer in South Australia can bet on an event in New South
Wales through a service licensed in the Northern Territory. The online
environment facilitates this national market.
11.111 The committee
does support maintaining the exemption for online wagering in the IGA. However,
the committee remains cautious about allowing 'in-play' betting in the online
format, given that not enough is known about the effect of new technologies on
this form of gambling.
11.112 The committee
notes a growing focus on consumer issues generally in the online environment
around complaints about online shopping and that this matter is 'on the radar'
of the Australian Competition and Consumer Commission.
While these complaints concentrate on unclear refund policies and lack of
available stock, clearly concern about consumer protection in the online
environment is on the rise.
11.113 In the online
gambling environment, the committee heard about a number of emerging areas where
differences in jurisdictional regulation expose marked differences in standards
for online wagering services. While the committee supports competition between
jurisdictions, it believes that harm minimisation and consumer protection measures
for customers should be nationally consistent. However, achieving national
consistency should not be at the expense of trade-offs that result in a lowering
of current standards.
11.114 In emphasising a
consumer protection approach to credit betting and third party commissions, the
committee draws on the view of the Productivity Commission, which recognised that
a consumer protection framework, along with the public health model, 'provide
the broadest insights into the kinds of policies that promote the public good
in this area':
The consumer approach recognises that gambling is a consumer
good, and that, as for other consumption, the policy environment should seek to
maximise benefits for consumers. This includes ensuring appropriate product
safety standards; fitness for purpose; informed consent; the absence of
unconscionable behaviour and misleading or deceptive conduct by suppliers;
protection of vulnerable consumers; and markets that encourage innovation and
low prices for consumers.
11.115 The committee
notes that credit betting is a long-standing practice that has traditionally
been reserved for 'professional punters' in an on-course setting. However, the
committee has reservations about the practice now taking place in an online
bookmaking environment. The committee is concerned to hear that such vast
amounts of credit are seemingly provided to sports betting agencies' clients
with such ease. As this issue currently needs to be addressed through pursuing
consistency in state and territory legislation, the committee considers that
the COAG Select Council on Gambling Reform, in consultation with the COAG
Legislative and Governance Forum on Consumer Affairs,
should investigate nationally consistent regulations in relation to tighter
controls on credit betting (see below).
Payment of commissions to third
11.116 The committee is
concerned about what it sees as a lack of sufficient transparency regarding the
payment of third party commissions raised in Sportsbet's evidence. While third
party commissions are indeed standard business practice, in other business
contexts (e.g. mortgage brokers), the payment and disclosure of commissions is
governed by strict rules and regulations. The committee believes that a commission
for a gambling product should be treated in the same way.
11.117 While the
committee acknowledges that the inclusion of the potential for commission
arrangements to exist in the Terms and Conditions section of the Sportsbet
website goes some way to achieving a basic level of transparency, it believes
this does not go far enough. As an example, the committee notes the National
Consumer Credit Protection Act 2009 which applies to licensed credit
(2) The licensee’s credit guide must:
...(g) give information about:
(i) any commissions that the
licensee, or an employee, director or credit representative of the licensee, is
likely to receive, directly or indirectly, from credit providers in relation to
credit contracts for which the licensee has provided credit assistance; and
(ii) a reasonable estimate of
the amounts of those commissions or the range of those amounts; and
method for working out those amounts; and
(3) The regulations may prescribe:
(a) information that need not be
included in the credit guide, despite subsection (2); and
(b) for the purposes of paragraph
method for working out amounts of commissions; and
(ii) how commissions or amounts
of commissions must be described.
11.118 The committee
believes that a greater level of transparency is required; i.e. reasonable
estimates of commission amounts and how these are worked out. Therefore, the committee
believes that increasing transparency of the payment of commissions to third
parties by betting agencies should be subject to closer scrutiny by the COAG
Select Council on Gambling Reform in consultation with the COAG Legislative and
Governance Forum on Consumer Affairs. Work should be undertaken with a view to developing
nationally consistent standards in relation to tighter controls on credit
betting and greater transparency for the practice of third party commissions. This
work should include consultation with industry.
11.119 The committee
recommends that the COAG Select Council on Gambling Reform, in consultation with
the COAG Legislative and Governance Forum on Consumer Affairs, develop nationally
consistent consumer protection standards for tighter controls on the practice
of credit betting.
11.120 The committee
recommends that the COAG Select Council on Gambling Reform, in consultation
with the COAG Legislative and Governance Forum on Consumer Affairs, develop nationally
consistent consumer protection standards for greater transparency around the
practice of paying third party commissions by betting agencies.
11.121 The committee
notes that this work should feed into the work recommended in the next chapter
for a national code of conduct for wagering providers addressing a number of
business practices, including advertising. The development of appropriate standards
around the practices of credit betting and the payment of third party
commissions should be incorporated into this national code of conduct.
11.122 The committee
believes that, in the interests of harm minimisation and consumer protection, the
practices of credit betting and third party commissions in the online
environment should be addressed so that standards are nationally consistent. The
committee would prefer that this national consistency for harm minimisation and
consumer protection measures be achieved by states and territories in
consultation with industry. The committee notes comments by the NSW Sports
Minister, the Hon Graham Annesley MP, reported in the media that match-fixing
was 'an issue serious enough to reach uniformity between the states'.
The committee considers that harm minimisation and consumer protection should
also be sufficiently serious to warrant consistency.
11.123 In the event
that consensus cannot be achieved in a reasonable timeframe over 2012, the
committee believes that the Commonwealth should consider legislating in this
area in order to achieve consistent regulatory arrangements.
Navigation: Previous Page | Contents | Next Page