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Amendments Complicate Australia's Net Casino Ban

2 July 2001

It was no surprise last week when the Australian Senate approved the federal government's Interactive Gambling Bill 2001, which seeks to prevent Internet casinos based in Australia from taking bets from Australians. But some unexpected, last-minute amendments have made the impact of the bill unpredictable, and they may prove unenforceable.

The bill passed Thursday night 33 to 28, after what the newspaper The Age called "a frantic 24 hours of horse-trading." Earlier in the process, the government had assured success by agreeing to exempt from the bill online lotteries (as long as they do not include instant winner games), and online race and sports betting (as long as bets are placed before the event begins).

The race and sports betting industries have strong lobbying clout. In particular, the government was able to get the support of a key Senator from a minor party, the Greens' Bob Brown, who wanted to protect the horse racing industry in his home state of Tasmania. The Greens, however, withdrew an amendment that would have tried to prevent Australians from placing sports and race bets, or participating in lotteries, at foreign-owned sites.

But the government agreed to other amendments, including one by Brown – called a "good neighbor policy" – that would authorize the Australian government to block Australian sites from taking bets from the residents of another country, if that country so requests and also has laws banning Internet gambling. Another amendment seeks to impede online casinos based outside Australia from offering gambling to Australians, by declaring that obligations incurred by Australians at such sites, such as credit card debts, are not collectible in Australia.

Both of these provisions may prove impractical or even unenforceable. So why did Prime Minister John Howard's Liberal government, which was assured of victory on the Interactive Gambling Bill 2001 once it agreed to exempt lottery, sports and racing betting, agree to amendments that can only complicate things?

"The key thing to remember with this bill is that everything within it is politically motivated," said Joanne Pafumi, a public relations consultant for Lasseters Holdings, which operates Australia's only licensed Internet casino. Howard's government, she said, wants to be perceived as doing something about problem gambling in Australia. In addition, she said, it's an election year and the federal government wants to develop closer ties with the minor parties.

The government has six months to develop the regulations necessary for implementation of the bill. Pafumi believes that the good neighbor policy and the debt collection provisions may be repealed when the government finds that they can't be implemented.

The "Designated Country" Issue

According to the bill, "Online casinos (in Australia) can't provide any services to Australians," said Jamie Nettleton, a gaming lawyer and partner at Coudert Brothers in Sydney. "And they can't provide services to a designated country, and this is where things start getting a bit confusing. A designated country is a country that puts its hand up and says, 'We have a similar restriction to the restriction in the Australian legislation, and therefore we want to ensure that we get the benefit of the Australian legislation.'

"That would be by virtue of a regulation or a statement made by the minister (the Minister for Communications, Information Technology and the Arts, Liberal Senator Richard Alston), here, recognizing it. It is unclear as to the standard that needs to be met by the legislation in the corresponding country. For example I don't know if the U.S. would be able to say that it has corresponding legislation . . . ."

Pafumi said Lasseters' lawyers believe that no country in the world currently satisfies the bill's criteria for requesting that Australia block foreign residents' access to a gambling site.

Australian media have portrayed the amendment about not honoring obligations from credit cards and other financial instruments as a "can't lose" situation for Australians who gamble at online casinos: They could collect if they win, but would not have to pay if they lose.

But Pafumi said that although Lasseters' lawyers are still studying this issue, "Our interpretation of the amendment is it would block people from receiving winnings, as well as incurring debts." She said the Australian Banking Association called implementation of the amendment "problematic."

"It's going to be a real mess," Nettleton told RGT Online, if the regulations follow the guidelines of the amendment. "It complicates matters horribly between banks, even though the target really is the offshore betting site."

This could pit the foreign casino's bank against the Australian bank that issued the credit card that's used to gamble, he said. It puts pressure on all the banks and payment intermediaries to correctly identify the transaction. Many online casinos also have sports books, and vice versa.

"How can you necessarily distinguish when a bet's made whether it's been made on a gaming site or a sports betting site, which is still legal . . . ?" Nettleton asked. Gamblers can also use intermediaries where money in their accounts could be applied to transactions like buying a book at Amazon.com as well as for gambling, he noted.

Coming to Australia: Cynthia Haines-Style Suits?

This amendment could lead to Australians filing Cynthia Haines-style suits, Nettleton said. Haines was a California resident who became famous for refusing to pay her credit card debts that were incurred from online gambling. California law doesn't recognize enforcement of gambling debts, and the banks and credit card companies settled with Haines.

There are other enforcement questions about the new Australian law. It sets up a procedure for Australian residents to complain to a government agency, the Australian Broadcasting Authority, about foreign gambling sites being accessible to Australian Internet users.

Australian Internet Service Providers would be required to comply with directions issued by the Authority, and prevent continued access to the gambling sites. As Nettleton said, "Considerable skepticism has been expressed by the Internet industry as to the practicability of these steps."

The bill also bans advertising in Australia by online casinos, even on the Internet, no matter where the casinos are based.

Foreign operators of online casinos that take bets from Australians will be subject to arrest and prosecution if they enter Australia.

The bill is the culmination of an 18-month campaign by the federal government against Internet gambling. In December, it enacted a 12-month retroactive moratorium, which expired May 19, on new online gambling operations.

Opponents of the federal policy vowed to continue the fight. In a statement Friday, Lasseters Managing Director Peter Bridge said, "The online gaming issue does not end today.

"This is bad legislation and we will keep arguing about the need for regulated online gaming until the Australian Government – whether Liberal or Labor – accepts that regulation is more effective than this limited form of prohibition."

The Australian Casino Association said it would continue to lobby for adoption of the AUS Model, which would provide stringent regulation of online gambling among all Australian states and territories.

For more information: Jamie Nettleton can be reached at jamie.nettleton@sydney.coudert.com. The Australian Casino Association is on the Web at www.auscasinos.com.

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