Hong Kong's Online Punters Face Uncertain Future

Change is on the horizon in Hong Kong. First, the government indicated that it would undertake a full review of soccer betting in the territory (which is currently illegal). Then, at the end of last year, the government published the Gambling (Amendment) bill focusing largely on offshore gambling as it relates to Hong Kong.

As anyone in the gambling industry knows, punters in Hong Kong take their betting extremely seriously. According to a survey published by NetValue recently, a staggering 41% of Hong Kong Internet users visited on-line gaming sites in December 2000. During the same period NetValue’s figures indicate that 40% of Hong Kong Internet users visited “adult-sites” (i.e. sites which contain pornographic or other adult content).

With gaming sites being as popular as sex sites, it’s no wonder that the proposed introduction of legislation which seeks to place further restrictions on Hong Kong punters accessing on-line gaming sites is causing a bit of a stir.

Legislative background

Broadly speaking under the Gambling Ordinance gambling in Hong Kong is unlawful (unless conducted through the Hong Kong Jockey Club which holds a monopoly in respect of gambling on horse racing and on Hong Kong’s sole lottery, the Mark Six). Specific offences under the Gambling Ordinance include “engaging in bookmaking” and “betting with a bookmaker”.

The difficulty with offshore gaming sites is that it is not clear whether the bookmaking takes place in Hong Kong or overseas and, accordingly, whether an offence is committed in Hong Kong. Over the past couple of years the Hong Kong government has maintained the position that operators of gaming websites (whether based in Hong Kong or overseas) and users of such sites would be in serious jeopardy of committing an offence under the Gambling Ordinance. This threat of legal action has by and large kept operators of offshore gaming websites from promoting their sites in Hong Kong.

Introduction of the Gambling (Amendment) Bill

With the publication of the Gambling (Amendment) Bill the Hong Kong government has targeted offshore gaming sites in two ways:

(ii) By introducing a new offence of “facilitating or promoting” bookmaking.

The bill has since been receiving a rough ride through the Bills Committee which is responsible for scrutinising the bill before it is considered and voted upon by the Legislative Council. In respect of (i) above, the Hong Kong government does not appear to have come up with any realistic strategy for enforcing the proposed new legislation against operators of websites which are based abroad.

The main argument against the government is based on the premise that it is pointless to enact legislation which is impossible to enforce. In addition, unless the government is able to enforce the legislation, it would defeat one of its stated aims which is to protect the Hong Kong Jockey Club’s revenue and thereby maintain the substantial revenue which the government derives through taxing the Jockey Club (if the legislation is known to be unenforceable then offshore sites will have nothing to fear by targeting Hong Kong punters thereby affecting the Jockey Club’s market share and revenue). One more straightforward option to maintain government revenue would be to legalise on-line gaming through an appropriate regulatory framework which enables the Hong Kong government to tax operators of gaming sites and thus maintain its income. This is not currently on the government’s agenda.

The proposed offence of “facilitating or promoting” bookmaking has also been heavily criticised. Consider, for example, a punter who places a bet on an Internet gaming site. The host of the site would commit an offence (bookmaking), as would the punter (betting with a bookmaker). However, it would also appear that those parties who enable the punter to connect to the site (such as his ISP) could commit an offence by “facilitating” the transaction, albeit unwittingly.

The penalty proposed by the bill for facilitating bookmaking is a maximum of HK$5 million and 7 years’ imprisonment. With a penalty of this size hanging over them, ISPs may well try to restrict their customers from accessing known gambling websites. This could have a major impact on the most well-known sites which could become difficult to access from Hong Kong and, as a result, Hong Kong punters could well turn to more obscure sites in order to place their bets.

One other impact of the bill which has not yet been considered fully by the Bills Committee is how it would affect punters who use their credit cards to place their on-line bets. First, the issuer of the credit card could itself commit an offence of facilitating bookmaking. Also, a possible side-effect of making on-line gaming illegal is to make debts arising out of the gaming transaction unenforceable, the result of which would be to make it difficult, if not impossible, for credit card companies to recover payment from their customers. Already, Hong Kong’s biggest bank, HSBC, has made a policy decision to refuse to authorise transactions with on-line gaming sites. Other major banks in Hong Kong are currently considering whether to follow suit.

Current status of the Gambling (Amendment) Bill

The scrutiny of the Gambling (Amendment) Bill by the Bills Committee is now on hold at least until April whilst the government rethinks its position on the key issues. For one, it appears that the offence of facilitating bookmaking will be amended to require evidence of knowledge or intent in order for an offence to be established. The government will also look further at whether it will be able to enforce the proposed new legislation against offshore companies.

Outlook for the futur

Although things won’t be changing in Hong Kong overnight, the introduction of the Gambling (Amendment) Bill means that change is now almost inevitable. In the meantime, in its efforts to push the bill through, the government has stated that the law as it currently stands does not cover offshore activities. It is, of course, a decision for the Courts, not the government as to whether any particular activity contravenes the Gambling Ordinance. However, given the current political climate regarding the Ordinance it would be surprising to say the least if the authorities decide that now is the time to start attempting to enforce the current legislation against offshore sites or punters using such sites. This article was written by Rob Deans, a solicitor at Bird & Bird, Hong Kong (e-mail rob.deans@twobirds.com). Rob is an expert on legal matters relating to the Internet and has advised extensively on Hong Kong’s Gambling Ordinance.