Prohibitions to credit betting coming into force in early 2018 mean that online corporate bookmakers are set to continue being impacted by amendments to the Interactive Gambling Act 2001 (Cth) (IGA) well into next year.
The Interactive Gambling Amendment Act 2017 (Cth) (Amendment Act) has already restricted online in-play betting which some online bookmakers offered through ‘click-to-call’ products, and from February 2018, online bookmakers will also be prohibited from offering credit betting services to customers.
What is credit betting?
Credit betting occurs when a customer is provided a line of credit, allowing the placement of bets without using deposited funds.
This practice is sometimes referred to as ‘deferred settlement betting’ allowing settlement of an account after the bet is placed and within a period of time (commonly seven days). An operator’s terms would typically have the right to debit a credit card if the credit advance was not settled within the required period of time (although many credit card providers do not allow gambling transactions to be charged to the card at all).
An important limitation is that credit betting does not include the use of a credit card (issued independently from the wagering service provider) to fund the betting account (regardless of whether the credit card issuer treats the charge as a cash advance or not).
How did the credit betting prohibition come about?
One of the recommendations from the O’Farrell Review into the Impact of Illegal Offshore Wagering (Review) released on 28 April 2016 was that online gambling operators should apply a wider range of consumer protection measures where credit betting is made available.
A greater level of customer due diligence would be one such measure. One concern identified was that suppliers of these credit facilities were not required to comply with rules affecting other lenders (like banks) in connection with the provision of credit because the credit offered by gambling operators does not accrue interest. In November 2016, however, Commonwealth, state and territory gambling ministers gave in-principle agreement to an outright prohibition on credit betting being offered by online wagering operators (rather than the enforcement of greater consumer protection measures).
The prohibition was set out in the Amendment Act and will be effective as of 17 February 2018. The delayed commencement is to allow time for both wagering service providers and customers to prepare for the introduction of the prohibition.
The Review also recommended the establishment of a national policy framework to set agreed minimum standards to provide consistency in the regulation of online gambling and target measures for consumer protection. The Department of Social Services facilitated the consultation period for a proposed framework from May to June 2017 and the National Consumer Protection Framework (Framework) is currently under development. The ban on credit betting was one of several elements set to be included in the Framework.
What are the consequences of breaching the credit betting prohibition?
The provisions of the Amendment Act outline expensive consequences if an online wagering operator is found to be in breach of the prohibitions.
The Federal Government has set both criminal and civil penalties for a contravention of the ban on credit betting. A corporate online bookmaker could face a maximum civil penalty of $787,500 (based on current penalty rates), with a separate offence being committed in respect of each day during which the contravention occurs.
Some final observations
After 18 of the 19 recommendations of the Review were accepted by the Federal Government, either in full or in-principle, the online gambling industry has faced increased scrutiny.
The Amendment Act and the development of consumer protections such as the Framework have been touted as the ‘most significant set of online gambling reforms introduced by a federal government’. For each online corporate bookmaker, the effects will depend on the amount of revenue drawn from particular products and customers betting preferences. For example, William Hill has stated that a ban on credit betting would affect 30 per cent of wagering volumes.
As with many consumer protection measures, a close examination of the context and measures proposed will identify potential inconsistencies or adverse outcomes. For example, the online gambling industry may well ask whether it would have been better to regulate the provision of credit through enhanced gambling specific consumer protection rules, rather than, for example, inadvertently encouraging the use of credit cards to fund betting accounts which might escape any form of diligence.
Online gambling operators will have an opportunity to provide feedback as part of a review into the operation of the credit betting prohibition, however this will not be until three years after the commencement of the prohibition.