All questions

Overview

i Definitions

Israel's approach towards gambling has traditionally been restrictive. The Israeli Penal Law 5737–1977 (the Penal Law) places a general ban on gambling activity, including all forms of lotteries, betting and games of chance. Further restrictions under the Penal Law outlaw ancillary services pertaining to gambling, such as the operation of venues where gaming activity takes place. Chapter 12 of the Penal Law defines the types of activities that constitute gambling and betting under Israeli law, divided into the following three categories:

'Prohibited game' – a game at which a person may win money, valuable consideration or a benefit according to the result of a game, those results depending more on chance than on understanding or ability; 'Lottery' – any arrangement under which it is possible – by drawing lots or in another manner – to win money, valuable consideration or a benefit, more by chance than by understanding or ability;'Betting' – any arrangement under which it is possible to win money, valuable consideration or benefit, by guessing something, including lotteries based on the results of sports matches and contests.2

Drafting of the definitions was made intentionally broad and, consequently, their implementations overlap. When examining the Israeli legislator's intention behind the current wording, we find that the purpose was to distinguish between two types of activities: on the one hand, activities based on arrangements agreed between parties, such as lotteries and betting; and on the other, activities defined by their underlying game's predetermined rules – prohibited games.

Although the Penal Law does not use the terms 'games of chance' and 'games of skill', the legal definitions of the three categories of gambling are predicated on what is being referred to as the 'predominance test' (as captured by the phrase 'more by chance than by understanding or ability'). In other words, activities in which skill or knowledge outweigh chance or randomness in determining the outcome will be excluded from the scope of 'prohibited game' and 'lottery' under Israeli law. This test was also used by Israel's courts when deciding how to apply the prohibitions set in the Penal Law.

Nevertheless, the aforementioned predominance test was adapted somewhat by the Israeli courts in 2011. In its ruling, the District Court of Tel Aviv determined that where a particular betting game consists of both skill and chance, the 'social interest and utility' of the game in question should also be taken into account before considering its legality.3 In the matter at hand, the court ruled that the hybrid activity was, in fact, a form of prohibited gaming (rejecting an expert opinion stipulating the predominance of skill in determining the outcome of the activity).

Furthermore, in a ruling issued in May 2017,4 the Tel Aviv Magistrate's Court ruled that when determining whether a particular game is one of chance or skill, the game must be assessed in relation to an amateur player playing a single hand. This ruling does not itself constitute a binding precedent but it is demonstrative of the restrictive view Israeli courts take towards gambling. Nonetheless, in October 2018, the Supreme Court of Israel presided over a tax appeal5 relating to winnings generated by a poker player in tournaments outside Israel. In its ruling, the majority of the court was of the opinion that poker may not be a game of chance, especially when looking at poker tournaments as opposed to a single hand being played. However, these comments were made only in obiter dictum, and are not legally binding.

Against that backdrop, and although the matter has not been addressed to date by Israeli courts, it is the author's view that Israeli courts are likely to consider activities such as 'fantasy sports' as a form of prohibited gambling. While Israeli authorities tolerate true competitions of skill played for prizes, an activity with monetary prizes predicated on the outcome of an external sporting event (or multiple events) is likely to be considered within the definition of betting by Israeli courts, an area exclusively reserved under Israeli law to Israel's sports-betting monopoly.

The Israeli Ministry of Finance has issued a blanket permit for the conduct of promotional draws and sweepstakes, conditional on these being free to enter. Businesses may conduct a promotional draw no more than twice per calendar year, and at least 120 days apart. Other conditions (such as oversight by a lawyer or accountant) apply as well.6 Starting in September 2017, notification of any intention to run promotional draws must be submitted to the Ministry of Finance, along with supporting information, via a designated online system, using a smart identification card.

Binary options, contracts for differences, spread betting and other speculative activities related to financial instruments, currencies, securities and the like, are not considered a form of gambling under Israeli law. These activities are regulated under Securities Law 5728–1968. The Tel Aviv District Court ruled in 2016 that trading in binary options does not constitute a form of prohibited gambling.7 However, the Israeli Securities Authority (the Authority) has prohibited Israeli licensed trading platforms to offer binary options to Israeli retail customers.8 A 2017 amendment to the Securities Law severely restricts the involvement of Israelis in binary options trading (either with Israeli end users or elsewhere). The explanatory notes accompanying the amendment made reference to the Authority's position regarding the 'gambling-like' characteristics of binary options trading.

Under the general ban on betting in Israel, betting on the results of lottery draws (as opposed to entering the draw) is also prohibited.

ii Gambling policy

Israel is notoriously conservative with respect to gambling. An intersection of religious and socialist values has resulted in Israel banning most forms of gambling.

While the laws related to gambling have scarcely changed in recent years, the existing law contains a relatively broad prohibition. The Penal Law prohibits organising 'lotteries, betting and prohibited games' (Section 225) and participation in prohibited games (Section 226). Section 225 provides that a person organising or conducting a prohibited game, lottery or betting is liable to a penalty of up to three years' imprisonment or a fine of up to 452,200 shekels. Section 226 provides that a person playing a prohibited game is liable to a penalty of up to one year's imprisonment or a fine of up to 29,200 shekels. Oddly, Section 226 does not refer to betting or lotteries. In other words, the sanctions on participation are triggered only by playing a 'prohibited game'.

Israeli courts have expanded upon the language of the Penal Law, most notably by ruling that online gambling and betting available to Israeli consumers violates Israeli law (despite the fact that the law predates the internet). The Israel police have taken enforcement action against online gaming (focusing primarily, but not exclusively, on operations with an Israeli nexus). After an Israeli court refused to uphold a police order requiring internet service providers (ISPs) to ban access to foreign online betting sites, members of Israel's parliament tabled a bill to introduce such measures into the Penal Law (the bill did not, eventually, become law). In 2017 however, a new law was passed, entitled the 'Powers to Prevent the Commission of Offenses by Means of an Internet Website Act, 5767–2017'. This Act empowered district court judges to issue warrants to ISPs to block illegal gambling websites, at the request of the police or the State Attorney's office. ISP-blocking warrants were issued for the first time in October 2018, blocking access to three illegal gambling websites. The Bank of Israel has prohibited the transmission of funds related to gambling by Israeli financial institutions, and the State Comptroller has called on all Israeli authorities to take action to curtail the availability of internet gambling in Israel. In short, Israel's authorities are actively seeking to uphold the gambling ban, both offline and online.

Various Israeli governments have considered a limited liberalisation of the blanket ban on bricks-and-mortar gambling, by allowing the construction of a small number of casino resorts in Eilat, a resort destination on the Red Sea. No such initiatives have achieved any meaningful traction.

In 2017, the Israeli Minister of Finance revoked the permit granted to the National Lottery to operate a limited number of video lottery terminals (VLTs). This revocation has been judicially challenged by Lottery concessionaires before the High Court of Justice, but the challenge was rescinded later in 2017.9 In late 2017, the Ministry of Finance revoked the permission previously granted to the Israel Sports Betting Board to conduct horse-race wagering – a decision that came into force in January 2018.

iii State control and private enterprise

The only forms of legal gambling in Israel (other than a very limited exemption for purely social gambling activities) are the national lottery and a limited sports betting service operated by the state.

These services are regulated as follows:

  1. The National Lottery was established in 1951. It offers several weekly draws, scratch cards, a weekly subscription lottery and various other lotteries and raffles. The operations of the National Lottery are supervised and regulated by the Ministry of Finance.
  2. The Israel Sports Betting Board (ISBB) was established in 1967 under the Law for the Regularisation of Sports Betting 5727–1967. The ISBB has the exclusive right to organise and regulate sports betting in Israel. It offers betting on football and basketball games, after its limited horse race wagering offering was disallowed by the Ministry of Finance as of 2018.
iv Territorial issues

The regulation of gambling in Israel is entirely on the national level (local authorities have no jurisdiction on gambling-related matters). Notwithstanding, there have been proposals (none of which have progressed) to carve out Israel's prime resort location, the city of Eilat, from the general prohibition on terrestrial gambling.

v Offshore gambling

With respect to online gambling, Israeli courts have ruled that Israeli law applies to online gambling conducted by foreign operators, when it is made available to Israeli players. In other words, when a party to the gambling transaction is located in Israel, the entire activity would be viewed as a violation of the prohibition on gambling. Enforcement has focused on operators specifically targeting the Israeli market (i.e., advertising to Israelis, using the Hebrew language, etc.).10 To date, Israeli authorities have never taken enforcement action against foreign operators with no presence in Israel, who have not specifically targeted the Israeli market.

As noted, in 2012, the police attempted to order Israeli ISPs to block access to a specific list of online gambling sites and, following the ISPs' appeal, the blocking orders were struck down by the Israeli Supreme Court in 2013 for lack of explicit legal authority.11 A law empowering district court judges to issue orders aimed at preventing those in Israel from accessing websites offering online gambling services at the request of the police was passed in 2017. In 2018, the law was relied on for the first time by the Israeli courts in order to issue ISP blocking warrants against three offshore, online gambling websites.

To foil financial transactions related to online gambling, as well as other illegal online activities, the Bank of Israel (which regulates financial and credit institutions in Israel) has issued regulations imposing certain restrictions on financial transactions involving online gambling.12

Furthermore, in 2010 the Israeli State Comptroller published a comprehensive analysis of the illegal online gambling market in Israel. The report covered a broad spectrum of governmental agencies. The State Comptroller has urged Israeli enforcement authorities to implement the necessary measures to disrupt gambling-related transactions and block access to illegal gambling websites from within Israel.

Legal and regulatory framework

i Legislation and jurisprudence

The primary piece of legislation regulating gambling in Israel (i.e., the prohibition on gambling) is Chapter 12 of the Penal Law. The Penal Law defines the types of activities that constitute gambling and betting, the prohibitions applicable to such activities, and the limited exemptions available under law.

Additionally, the Law for the Regularisation of Sports Betting 5727–1967 governs the activities of the ISBB.

ii The regulator

The only forms of regulated gambling in Israel are the National Lottery, regulated by the Ministry of Finance, and the ISBB (which is a self-regulating statutory corporation).

iii Remote and land-based gambling

Israeli law does not separately regulate remote and terrestrial gambling. In fact, the law does not specifically refer to remote gambling. The application of the Penal Law to remote gambling was the result of a judicial interpretation of the scope of the law.

iv Land-based gambling

Land-based gambling (other than the National Lottery and the national sports betting offering) is illegal under Israeli law.

v Remote gambling

With the exception of the online betting services offered by the ISBB, online gambling is illegal under Israeli law.

vi Ancillary matters

As commercial gambling is illegal in Israel, there are no set requirements for licensing or approval of individuals holding particular positions within a gambling operator.

vii Financial payment mechanisms

Both the National Lottery and the ISBB only accept fiat money as a payment method for their services, and do not allow payment to be made in cryptocurrencies.