Opposing Views and Australia's Inaction

Australia's federal government announced this week that it will leave policy decisions regarding betting exchanges in the hands of the states and territories, and the voices for and against exchanges are making themselves heard.

The government had been reviewing the Interactive Gambling Act of 2001 for nearly two years with the task of determining its effectiveness, and whether betting exchanges should be banned was the most hotly debated issue. The Communications Ministry opted to leave the IGA in tact, making betting exchanges a state/territory issue.

The decision not to enact a federal ban on exchanges ultimately opens to the door for person-to-person betting in Australia, and Betfair, which heavily lobbied the government during the review period, naturally welcomes the news.

"The Cabinet's decision is a victory for the punter and for competition," the company said in a prepared statement. "It allows Australia the best opportunity to safeguard the interests of gambling regulation: protecting the vulnerable, keeping crime of out sport and ensuring that the consumer gets a fair go."

One of Betfair's primary arguments has been that the company's detractors oppose P2P betting for commercial reasons. The company points to the recent merger of major state-licensed betting agencies (Tabcorp and Tab Ltd.) as an important reason for allowing exchanges.

"(Legalizing exchanges) preserves competitive choice for local punters as the merger of Tabcorp and Tab Ltd. reduces the number of Australian tote operators," the company stated.

Betfair also reiterated a point that it has been making for months: that it is willing--in exchange for a license to operate--to pay taxes and fees for the business it has conducted in Australia since February 2003. The company said it would "work closely with Australian governments, racing and sport" by immediately re-entering into negotiations to "pay a suitable fee for its use of product."

The offer, for some in the racing industry, is still not enough. Betfair's opponents argue that exchanges should pay more than TABs and bookmakers pay, while Betfair says it will only settle for a deal that has it paying "the same percentage of gross profit. . . as TABs pay of their own gross profit on Australian racing."

Tim Ryan of the Australian Bookmakers Association has been a leading opponent of exchanges and played an important roll in getting agreements signed between racing officials in Australia and Asia creating a "good neighbor" policy that prevented countries from taking bets on other country's racing action. Ryan said the move by the government to let states and territories decide how best to handle exchanges will deliver a major blow to advocates of border protection.

"The federal government has made it very clear that interactive gambling is a matter for the states and territories," Ryan said. "At the same time, they deprived the states and territories international border protection--effective border protection that could have been put in place by non-onerous measures under s69A and Part 7 to frustrate/block offshore services."

The policy to which Ryan referred, "s69A," is a section of the IGA allowing the government to outlaw the funding of Internet gambling transactions if such a measure is deemed necessary. Ryan said the federal government could have used that section to effectively impose laws that would have made it nearly impossible for Australian residents to fund accounts through online gambling sites.

Adding to the consternation of Ryan, and others advocating cross-border protection, Betfair has indicated that it hopes to use Australia as a base for operations in Asia and other parts of the world.

Betfair stated that it will "renew its pursuit of license applications with the states and territories immediately. It has written to each to confirm it wants to be licensed in Australia, so that it can pay taxes in Australia. Betfair is committed to opening in Australia, where it can employ Australian people and build its Australian franchise."

Ryan wasn't the only one disappointed with the announcement. The Australian Racing Board also issued a release in which it sharply criticized Communications Minister Daryl Williams, the front man for the review and the government's point man in making the IGA review announcement official. (Williams was incidentally replaced today by Helen Coonan, a Liberal senator from New South Wales.)

"It should be noted that this review was completed for the Department of Communications over 12 months ago," the board stated. "A year of sitting on the minister's desk has now been translated into the minister deciding that he will sit on his hands. . . . However, of even greater disappointment is the intellectual emptiness of the reasoning that the communications minister has offered for this decision--that the licensing and regulation of gambling services has traditionally been a matter for the states and territories."

The ARB also said the decision would allow exchanges to continue operating offshore without having to pay back taxes or revenues into racing.

Nevertheless, officials with Betfair made it more than clear that their intention is to get a license in one of the states and operate above the board.