Skip to content

Review of current and future trends in Interactive gambling activity and regulation

Executive Summary

The Allen Consulting Group was commissioned by the Australian Government Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) to undertake a literature review of the current trends and regulation of interactive gambling, both in Australia and overseas.

The purpose of this study is to analyse and report on publicly available information regarding current trends in interactive gambling, including:

Key definitions and terminology for this study

For the purposes of this study the term interactive gambling is the overarching term used to define the range of gambling activities that occur through interactive mediums. Using this terminology:

Figure ES.1 illustrates how these definitions interrelate. Within this framework there are various forms of interactive gambling, for instance Internet gaming, Internet wagering, phone wagering, Television gaming, etc. Internet gambling is a collective term, which captures both Internet gaming and Internet wagering.

This terminology has been applied throughout this report to ensure consistency of language and to aid reader understanding. It is not strictly in-line with definitions in the Interactive Gambling Act 2001 (the IGA). For instance, under the IGA interactive gambling services are prohibited from being offered to individuals physically located in Australia, however the IGA also defines those services excluded from prohibition. In the IGA, these excluded services are not defined as interactive gambling services because the IGA defines all interactive gambling as those services prohibited (therefore, only prohibited services are considered to be interactive gambling). In this report, interactive gambling is used as an overarching term, and therefore is not used in the same way as in the IGA — ‘excluded services’ in the IGA are referred to as ‘legal services’, primarily because the use of the term excluded is confusing when referring to services that are allowed. Figure ES.1 shows which types of interactive gambling are exempt under the IGA (which are Internet wagering, phone wagering and wagering via digital television).

Figure ES.1: Framework for defining interactive gambling

Figure ES.1: Framework for defining interactive gambling

Regulation of Interactive gambling in Australia

The IGA is the primary legislation in Australia for interactive gambling. The IGA prohibits interactive gambling services from being provided to individuals physically located in Australia. The IGA does provide exclusions to this prohibition, whereby certain wagering and gaming services, are legally allowed to be provided in Australia. The framing of the IGA, given that it sets the parameters for legal and illegal forms of services, has had a strong influence on what aspects of interactive gambling services are provided by Australian based hosts. State and Territory legislation continues to regulate the way in which legal forms of interactive gambling can be provided in Australia (for instance, by licensing providers and setting requirements to protect players).

The exclusions afforded in the IGA to Internet wagering services (such as Internet sports betting) were primarily driven by perceived differences in the style of play — these legal forms of wagering were not considered to have the same continuous, and addictive, format as prohibited services. This study found that, in the period since the IGA was reviewed in 2004, the potential differences between Internet wagering and Internet gaming (the periodic versus repetitive style of play) are diminishing. The extent of Internet wagering opportunities now available to Australians at all times of the day appears to be transforming this style of play away from ‘periodic’ play.

Current supply and accessibility of interactive gambling services

In Australia the primary forms of interactive gambling are legal forms of interactive wagering on sporting events and racing. The sporting betting market has grown substantially in recent years, driven, in part, by growth in the use of the Internet and mobile phones as mediums for placing bets. New entrant to the market, Betfair, has brought to the market a new product based entirely on Internet and phone wagering.

There are currently no measures of the extent to which Australians are accessing overseas hosted Internet gaming sites (prohibited under the IGA). A preliminary investigation of accessibility, conducted by this study, found that large sites do use geo-location technology to block Australian-based access to Internet gaming and continuous play Internet wagering, both of which are prohibited from being provided to individuals physically located in Australia. However, this was not the case for all sites. To date, there have been very few reports of non-compliance by internationally hosted-sites under the IGA framework.

Characteristics of interactive gamblers

Research suggests that participation in Internet gambling (gaming and wagering) in Australia is very low (with participation rates in state or territory-based studies ranging from 0.2 to 2.7 per cent of the population). These estimates may have a negative bias depending on how ‘Internet gambling’ defined in surveys (as not all sports betting and wagering done on the Internet may be reported as Internet wagering). Notwithstanding some measurement variance, the levels of Internet gambling are considerably lower than lotteries and gaming machine participation (though sportsbetting participation is growing strongly, it is from a low base).

There is no evidence to suggest that individuals who participate in Internet gambling have a higher prevalence of problem gambling than other forms of gambling. This is partly due to the difficulties measuring problem gambling prevalence across a small proportion of gambling participants. Some researchers have asserted that the nature of Internet gambling (particularly Internet gaming) has higher risks for problem gambling because it can be repetitive and continuous, thereby making it more difficult for players to be aware of how much they have gambled. However, to date there are no robust studies showing a high correlation between growth in Internet gambling websites and problem gambling incidence, even in countries that allow a broader range of Internet gambling activities. This is an area where further research would be valuable.

Non-regulatory harm minimisation measures

Most large Internet gambling providers promote responsible gambling strategies and offer responsible gambling initiatives to players. The majority of these, such as self-set exclusion, and self-set betting limits or time limits, rely on individuals to recognise that they may need some assistance in limiting their play (and, therefore, the potential costs of their play). Research on the effectiveness of these measures is very limited. Surveys of gambling participants found a relatively moderate level of ‘usefulness’ for players. It is not clear the extent to which these initiatives have an impact on actually reducing potential harm through problem gambling. This is a potential area for further research.

International regulatory frameworks

International experience provides some useful regulatory models. The United Kingdom has moved away from a prohibition approach to licensing of providers. Other countries, including the United States, Canada and New Zealand have maintained prohibition on Internet gambling, including Internet wagering (which is more stringent than the Australian approach).

The impact of the UK model has yet to be properly observed, as licensing was introduced in September 2007. In the US, the introduction of regulation prohibiting financial transactions related to Internet gambling has already had an impact on the actions of large Internet gambling providers, with several removing access to their services by US patrons. There is a concern, however, that this approach may drive away larger publicly listed providers, but not smaller unregulated entities. These effects will continue to be monitored in the next 2-3 years.

Future technology trends

Technology in this field is constantly evolving, with new types of games and wagering methods being offered by providers to gain a competitive advantage. For governments, the important changes in technology to be aware of are those which have a transformation or ‘step change’ impact on the market. The key technological advances that would have a significant impact on the market are those that:

[ top ]