Net Betting Is 0-2 on the Week

Online gambling isn't doing well in court this week. Yesterday, a New York jury found Jay Cohen guilty of violating the Interstate Wire Act of 1961. Today, the Court of Appeals overturned a previous High Court decision, which allowed Victor Chandler and other U.K. bookmakers to advertise their offshore betting services on electronic media such as teletext.

Promotion or advertising of overseas bookmakers in the U.K. is prohibited under Section 9 of the 1981 Betting and Gaming Duties Act. Last year, when Teletext and Skytext withdrew advertisements placed by Victor Chandler, the company took Customs to court to determine if the prohibition on advertising included electronic media advertising. The case was heard in the High Court in July 1999, when the court ruled in favour of Victor Chandler. Since then Teletext and Skytext have accepted advertisements from offshore bookmakers.

Victor Chandler's David Grouse wasn't surprised by the verdict. "In many respects, it may prove to be 'too little, too late' for the U.K. government," he said. "The world bets at zero percent [betting duty], and U.K. 'players' want to as well. They'll find their way to zero percent sites, whether such sites pay some duty or none to the U.K. government." (The U.K. government currently charges a 6.75 percent General Betting Duty on all bets made in the U.K. The GBD is hotly debated, with bookmakers pleading with the Treasury to announce a lower betting duty in this year's budget due out in March.)

"This judgement does not affect our online activity," Grouse said. "VCI already has a solid base of nearly 20,000 U.K. customers selling on the benefits of the Chandler service to their friends - the best promotional tool any business can have, " he explained. "Plus, our new online betting site went live on 15th January of this year."

The U.K. government has a different take on the court decision. "The Government is delighted the Court has taken the common sense view that Parliament intended to ban advertising for offshore betting service," Financial Secretary Stephen Timms said. "This means we can continue to protect both the betting industry against unfair competition and the financial health of the racing industries who rely on the levy collected from each bet.

He added, "Bookmakers rely on the industry to generate their profits, yet by moving offshore they can undermine the very industry they depend on. Government intends to continue protecting the betting industry from unfair competition."

Grouse disagrees. "The U.K. government has failed to understand that sports betting is now a truly global activity, which doesn't respect international frontiers. This decision in no way 'ring fences' the U.K. market," he said.

Today's decision could have an even greater impact on the industry, since it may preclude advertising of betting services on the Internet. As U.K. barrister Gerald Gouriet explained, "The statue (Section 9 of the Betting and Gaming Duties Act 1981) was aimed at advertising telephone betting with bookmakers outside the U.K., 'tax-free betting', and never contemplated the Internet.

"But the words as enacted are wide enough to catch web-page advertising, with this latest case-law including a teletext screen in the definition of 'document'. So Ladbrokes, William Hill and Victor Chandler beware! The industry was very much hoping for the appeal to go the other way, but I always told the boys to brace themselves for this decision."

Also see:
What's Next for Teletext
Details from the Victor Chandler Case
Landmark European Cases on Internet Gaming