Almost all parties in Ireland agree that the current gambling laws do not adequately address online gambling. Most also believe that the regulation of online gambling could provide tax revenue and jobs, yet the progress of legislative reform appears to have stalled. Deirdre Kilroy examines why this has happened despite recommendations from the Casino Regulation Committee's report that a regulatory framework be established for online gambling.
The Irish's public's appetite for Internet betting and gaming has been growing. In that trend the country does not differ from other jurisdictions worldwide. However, the development of an online gambling industry has lagged behind that of some other countries. Why have we not seen this industry take advantage of the jurisdiction in the same way as the online sectors of other industries? Ireland has a well-educated, English-speaking population, generous grants and tax initiatives for on-shore IT and R&D activities, a low corporation tax regime, a good double taxation treaty network and an existing technology/telecoms infrastructure. Companies such as Google, Yahoo, Ebay, Amazon and Facebook are on the long list of online operators that have chosen Ireland as the location for their European headquarters.
One of the principal reasons for online gambling operators not arriving on Irish shores en masse is current Irish law. Gambling in Ireland is principally regulated by the Betting Act 1931 and the Gaming and Lotteries Act 1956. This legislation pre-dates many of the new developments in the industry. One of the most significant changes in the gambling business model in the last twenty years has been the provision of betting and gaming services over the internet. The difficulty with the fact that Irish laws do not expressly deal with the computer age is further compounded by a lack of case law providing guidance on the existing laws' application to business models which had not been dreamed of when the laws were enacted. Irish legislation starts with general bans on gaming and betting, and then specifies the exceptions to that general principle. The view generally taken is that operating an online betting or gaming server is not permitted by law in Ireland. Irish law pushes many Irish operators to locate their gaming servers and online trading companies overseas, and dissuades other operators from locating in Ireland.
Almost all sides of the gambling debate agree that reform of the law is required, if for no other reason but to clarify the meaning of the laws in Ireland today for online businesses. To date some minor reform has occurred on a piecemeal basis. By way of example, previously, the Betting Act 1931 made it illegal for an Irish resident to place a bet with a person operating outside of Ireland. This ban was nearly impossible to enforce and implement and became more anomalous as use of the internet increased. Indeed, many foreign entities accepted bets from Irish residents seemingly oblivious to the prohibition. The Horse and Greyhound Racing Act 2001 abolished the prohibition on the placing of bets by people within Ireland with people outside Ireland. This removed a barrier to trade for those operating online outside of the jurisdiction, but the laws applicable to running an online business from within Ireland are still not clear.
For this reason, relatively complex structures are currently used for compliance reasons. Non-gaming aspects of a business may be delivered from Ireland, through intra-group arrangements, to off-shore licensed operators that have their gaming servers located off-shore in the jurisdiction in which they are licensed. These structures have not been tested from a legal perspective in the Irish courts, but are operated with the Irish Government's knowledge.
In October 2006, the then Minister for Justice, Equality and Law Reform, Michael McDowell, established the Casino Regulation Committee, charged with reviewing the laws relating to casinos in Ireland. Focus on the area followed a report from the inter-governmental body, the Financial Action Task Force (FAFT). The FAFT had highlighted the risk of money laundering and financial terrorism in Ireland associated with casino operations.
Long after it was anticipated, the Casino Regulation Committee's report was finally published on 10 July 2008 . Indicative of the number and scope of representations made to the Committee from participants across the gambling industry, the report dealt with subject matter extending beyond the original brief of casino-related issues. The Report, running to over 200 pages, makes 32 principal recommendations regarding the regulation of gaming and betting in Ireland.
The Casino Regulation Committee devoted a chapter to the subject of remote gambling. While the Report discusses the area in some detail, the spirit of the approach of the Committee to remote gambling is captured by the statement that '[t]he Committee is of the opinion that there may be significant benefits for Ireland in this area if it is approached appropriately'. Rather than advocate prohibition, the government was urged by the Committee to 'examine the possibilities of providing a legislative framework for the regulation of online or remote gaming'.
The Committee flagged the following areas as requiring attention in an attempt to regulate the sector, listing them in a neutral manner:
- Cooperative approach with operators.
- Mutual recognition of regulators and service providers -- licensing and approvals.
- Role of the gaming regulatory authority.
- Inter-governmental agreements.
- Elaboration of national and international standards.
- Full assessment of business capability & financial viability.
- Player protection measures.
- Safeguards for the young and the vulnerable.
- Taxation - collection & remittance.
- Systems & software.
- Player identification and verification standards - IP & credit card checks.
- Identification of winners based on personal IDs (minors excluded).
- Privacy of Information.
- Advertising code.
- Payment methods.
- Anti-money laundering policy compliance.
- Remote gaming in non-licensed public premises.
- Retention of information for research.
When seen against the Casino Regulation Committee's analysis of the international online market and its comments regarding the United States' blanket prohibition strategy, it was no surprise that the Report and its conclusions were interpreted as recommending that Ireland position itself as a centre for remote gambling in Europe. The possibility of this approach - earning the Irish government new tax revenue - was also clearly flagged by the Committee and the media .
So what has happened since July 2008? Following the publication of the Report the Minister sought observations on its contents. Media reports of his statements indicated that he did not believe that introducing a ban on internet gambling was the route to take. He also indicated that he wanted to set up an informal Cross-Party Committee to examine all aspects of gaming in Ireland. This would move the process along in terms of developing a structure for reform to be introduced through legislation.
However the announcement of a Cross-Party Committee initiative, intended to gain all-party support for reform, soon evolved into a political controversy regarding the introduction of FOBTs (fixed odd betting terminals) in Irish bookmaker shops, which played out in the national papers and other media. Public statements by Pat Rabbitte of the Labour Party and the proposed Chairman of the Cross-Party Committee, Sean Barrett, highlighted the difficulties that might be encountered in tackling reform in the area. To date, the Cross-Party Committee has not been established, although the Department of Justice, Equality and Law Reform still maintains that it is the Minister's intention to set it up. When that might happen is not clear.
Where do we stand now? Well, Ireland's government continues to struggle with an unpredicted drop in taxation revenues and other income, like many others. While this may have prompted the Irish Government to double the tax levied on betting to two per cent, it may also increase the likelihood of it extending the indigenous industry's remit to the online sector, with a view to increasing jobs and income to the exchequer.
Clearly intended to drum up support for such reform, DKM Consultants have published a report suggesting that liberalisation of the current legal position relating to casinos and online gaming could lead to the creation of a significant number of new jobs and might generate considerable returns for the exchequer. The report (commissioned by the Gaming and Leisure Association of Ireland, A&L Goodbody and Mazars) principally focuses on the potential financial and market implications of such reform for Ireland .
With reports that income from online gambling being less affected that other income streams in the current recession and one media report putting the Irish public's spend on gambling at as high as €6bn per year , it may be that the Irish government may choose to place reform of gambling law on the legislative agenda for next year.
This will not remove the need, however, to address the list of issues raised by the Cross-Party Committee's Report by different industry voices and by public interest groups. Not all gambling sector participants are aligned in terms of their preferred approach to regulation . This fact, married with some strong lobby groups, vested interests and diverse positions working in the private, public and semi-state areas, indicate that Ireland has a long way to go before the legal reform mooted by the Casino Regulation Committee might make its way through the legislative process. Let's hope for the sake of clarity, if nothing else, that it will not be all talk and no action in 2009.
This was originally published in World Online Gaming Law Report, 7(12), December 2008.