Why Australia Should Follow UK’s Example in Legalizing Online Gambling

Australia has started a process of re-regulating its online gambling industry in a manner that will presumably provide more clarity over what is legal and what is illegal in the country. However, many have suggested that the planned crackdown on iGaming will do more ill than good.

The Interactive Gambling Amendment Bill 2016, introduced by Australian Minister for Human Services Alan Tudge last fall and set to be discussed by the country’s government this spring, calls for all types of online gambling products, excluding sports betting, to be declared illegal. The legislative piece presents legal definitions that the country’s original iGaming law – the Interactive Gambling Act 2001 – does not contain. Under that first law, interactive sports betting is the only legal online gambling activity in the country. Online casino games and poker are neither strictly prohibited, nor explicitly allowed.

With Australia’s original Internet gaming law spanning back from 2001, the government’s decision to implement certain changes, ones that correspond to contemporary demand, should not come as a big surprise. However, the way local lawmakers have decided to approach the matter was rather surprising.

Given the lack of explicit regulations and therefore of comprehensive financial information, it is hard to determine the exact scale of Australia’s online gambling market. However, it can be said with a solid degree of certainty that it is worth billions.

Why Are Regulations Such a Big Necessity?

A market of a larger size needs stricter regulations for several important reasons. In the first place, regulations can protect customers from falling victims to predatory service providers. At present, the lack of explicit regulatory definitions puts players at various risks, including ones related to gambling addiction, lack of secure money transfer practices, and many others. In the second place, regulations are important for taxation purposes. Last but not least, regulations mean control – control over what gambling customers can and must not be offered.

However, the Australian government’s rather curious approach to prohibit online casino games and poker may eventually result in players opting for black market operators. They will thus be exposed to murky businesses with shady operations. What is more, the country will thus lose a stable tax revenue stream to those same murky businesses.

In an alternative approach, Australia could legalize online casino games, poker, and sports betting, among other gaming options, in a manner similar to the UK. The UK iGaming market is currently one of the most strictly regulated, if not the most strictly regulated, in the world. However, the measures introduced in the Gambling Act 2005 and its companion legislation – the Gambling (Licensing and Advertising) Act 2014 – have resulted in the market growing quickly and considerably over the past decade.

Important Comparisons between Australia and the UK

Data released by the UK Gambling Commission showed that iGaming has turned into UK’s largest gambling sector accounting for 33% of the gross gambling yield reported for the period between April 2015 and March 2016. The total amount of £13.6 billion was generated during the twelve months in review. iGaming gross gambling yield amounted to around £4.5 billion.

Online casino games, including poker, generated a total of £2.6 billion during the reported period. And slots were the most popular online gaming offering with gross gambling yield of £1.8 billion. Sports betting took the second largest share of the UK online gambling pie with gross gambling yield of £1.6 billion.

More comprehensive information about Australia’s regulated gambling industry can be seen in the annual editions of the Australian Gambling Statistics report. There is no official data for the 2015-2016 reporting period yet, but the amount of A$22.7 billion (£14.1 billion) was generated during the 2014-2015 financial year. In comparison, the UK Gambling Commission reported gross gambling yield of £11.3 billion (A$18.2 billion) for the corresponding period.

Here it is important to note that UK’s population is almost three times as big as Australia’s. According to World Bank data, UK’s population totaled 65.1 million as of 2015, compared to Australia’s population of 23.8 million. In other words, Australians seem to be bigger spenders when it comes to gambling than UK residents.

An industry chart prepared by H2 Gambling Capital and published last month by The Economist supports the above statement. The chart shows that Australia was among the countries with the biggest gambling loss registered in 2016. Here it is important to note that loss here means stakes placed minus winnings paid out to players and excluding expenses. Gambling loss amounted to $18.3 billion in Australia, compared to gambling loss of $18 billion reported for the UK for the same twelve months.

Australia topped the ‘biggest gamblers’ chart with loss per resident adult totaling $990 in 2016. Loss per resident adult of around $370 was reported for the UK. One more quick look at the chart shows that gaming machines, or pokies as referred to Down Under, were the most popular gambling offering among Australian gambling customers. Online gambling led the way in the UK.

UK’s online gambling industry has grown for six consecutive years and although the UK Gambling Commission is yet to release data for the period between April 2016-March 2017, it is believed that the upward trend will be maintained for a seventh straight year. As mentioned above, the local industry is among the most strictly regulated ones in the world. What is more, local regulators and lawmakers have made sure to update the country’s gambling taxation regime regularly and that favorably to operators.

Yet, despite the heavy taxation measures and strict regulations, the UK has provided both operators and players with what can be defined as a relatively friendly environment for doing business and consuming the products of said business.

Why a UK-Like iGaming Regime May Work Out in Australia?

It can be said that Australia has already fulfilled some of the prerequisites for the transformation of its gray market into a well-functioning regulated machine. In the first place, although gaming machines may be the leading product vertical in the country, there certainly is a big and growing demand for online gambling.

For instance, MPs faced a major backlash from online poker players immediately after news about the potential ban spread last fall. In fact, the country’s online poker community has been since then busy with its own lobbying initiative, and a very successful one, against the proposed changes in the Australian iGaming landscape.

In the second place, Austraia-facing operators service high-value players, players who love a punt and can afford to take a punt regularly. Data by the World Bank shows that Australia’s gross national income per capita amounted to $60,070 in 2015. This placed the country among the top 15 countries by GNI per capita. In comparison, the UK reported GNI per capita of $43,390 for that same year. Said otherwise, Australian players may be having a better spending potential than their UK counterparts.

The rapid smartphone penetration has facilitated the growth of mobile gaming in recent years. And Australia can be a favorable market for mobile gaming, particularly given the smartphone penetration and 4G adoption rates reported for the country. According to research firm Deloitte’s latest Mobile Consumer Survey 2016: The Australian Cut – Hyper Connectivity: Clever Consumption, 84% of all Australians owned a smartphone last year. What is more, 4G adoption grew to 77% in 2016. Clearly defined gambling regulations, which will be focused on players’ safety, among other things, can certainly create a well-functioning mobile gaming environment in the country.

A recent infographic presented by the UK Gambling Commission showed that 43% of all online players used smartphones and other hyperconnected hand-held devices to wager in 2016.

Since introduced, the Interactive Gambling Amendment Bill 2016 has been promoted as a legislative piece that places players’ safety in the first place. The competitive iGaming space needs strict regulations, this is a fact that can be supported with multiple examples. However, limiting offering to just sports betting is not likely to secure players’ safety. The measure could actually do great harm, urging gambling customers to unauthorized operations.

The UK has been promoting responsible gambling as its top priority when it comes to the provision of gaming and betting services to local customers. And the UK Gambling Commission, various charity organizations, MPs, industry stakeholders, and other concerned parties have been trying to work together on providing players with a safe enough environment. Their efforts are not always as successful as they should be, but work is indeed done toward improving responsible gambling policies. A similar approach adopted by the Australian government could actually help much more than the introduction of draconian anti-online gaming measures.

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