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Australia
Internet gamers brace for ban 
By Fred Faust

Anyone trying to set a betting line on the future of online casino gaming in Australia faces a very difficult task.

The industry was devastated by a moratorium that the prime minister's party pushed through Parliament in December. Three of the country's four licensed online casinos had to abruptly shut down. Other companies that had already been licensed but had not yet launched their sites were forced to abort their projects.

The operators and would-be operators lost millions of dollars in development costs. But the stakes may be even higher for the online gaming industry worldwide as a critical deadline approaches: May 19 is the date that the moratorium is set to expire.

During last year's long battle over the moratorium (it lost on a tie vote in October, then passed in December), Prime Minister John Howard and his ministers made it clear that they would prefer an outright permanent ban on Internet gaming. The idea behind the 12-month moratorium, which was retroactive to May 19, 2000, was to halt the proliferation of new gaming Web sites while a federal agency studied "the feasibility and consequences of banning interactive gambling."

Like the line from the old American West - "We'll give him a fair trial and then we'll hang him" - Howard's government apparently hoped the study would show that online gaming can and should be banned, laying the groundwork for enacting a ban upon the expiration of the moratorium.

At press time, the study had not been released, nor had a date been established for its release.

Asa Masterman, spokesman for the National Office for the Information Economy (NOIE), which is in charge of the study, told IGWB that the report "is being finalized and will be considered by the government shortly in deciding whether or not to proceed with a ban. The government has not yet made a decision as to the release of the report."

But Chris Downy believes otherwise. He's the executive director of the Australian Casino Association, a trade group that is leading the lobbying effort to dissuade Australian senators from imposing a ban.

"The NOIE report has been with the government since late last year," Downy said in February. He's not sure what the report says. It's possible, he said, that it won't be released until the last minute, perhaps in the heat of parliamentary debate over a possible ban.

Comments and recommendations from 59 individuals and organizations are listed on the NOIE Web site (www.noie.gov.au/projects/consumer/gambling/subs.htm), with groups ranging from casino firms and Downy's trade group to the Salvation Army and the Presbyterian Women's Association of Australia in New South Wales weighing in. Most of the submissions can be read online.

Government options
Downy and Jamie Nettleton, a lawyer at Coudert Bros. in Sydney who represents many gaming clients, say there are three options for the federal government after May 19:

1) Extend the moratorium (if the government needs more time to gather support for a ban).

2) Enact a permanent ban.

3) Permit states and territories to once again license online sites, but this time with more stringent and more consistent regulations.

"It's difficult to predict what they'll do, because everyone is keeping their cards very close to their chest," Nettleton said.

In addition to the NOIE report, another important document is percolating behind closed doors. That is what Nettleton describes as "Stage Two" of the National Model, and it could become public at any time.

The National Model refers to a draft of a regulatory scheme that was approved by a group of state and territory gaming regulators in May 1997.

This is what put Australia on the map as a leader in the legalization, with rigorous regulation, of online gaming. The Northern Territory issued a license to Lasseters, which began cash play in April 1999 - the first Internet casino to be licensed by a First World country.

In preparing the National Model draft, the regulators agreed that Internet gaming could not effectively be banned, and that it would be much better to regulate it. The draft called on state and territory governments, which have, as in the United States, traditionally regulated gaming in Australia, to investigate the backgrounds and finances of the operators of online casinos.

The National Model also included player-protection guidelines. Casinos were expected to know their players - that is, to get enough information through player registration to preclude the possibility of minors gambling at their sites.

The casinos were also required to offer, and enforce, options for players to set their own betting or loss limits, and to exclude themselves from the casino, either for a specified time or forever. There were also provisions for family members to request that a player be excluded. Credit gambling was forbidden, and links to counseling services for problem gamblers were required to be posted.

Some aspects of the National Model tax revenue. And some components of the National Model were implemented inconsistently when states actually began issuing licenses.

Peter Bridge, managing director of Lasseters, said discussions between his industry and senators showed that many lawmakers were troubled by the inconsistencies.
"One of the concerns they had," Bridge said, "was described by one politician as 'a dog's breakfast' [a bit of this and a bit of that] of regulations between the states. That has been addressed by regulators."

Election questions
Regulators have been meeting off and on since October to refine the National Model. A final agreement has been slowed by state elections, which naturally compete with other matters for government officials' attention.

In fact, elections this year also complicate the handicapping of what will happen in May. There are four state elections, with a federal election likely late in the year.

Most of the state and territory governments fought the moratorium. They want to be able to license, and tax, online gaming, so they are motivated to agree on a new National Model that would assuage the senators.

The Australian Casino Association has also sweetened the pot by offering to pay 1 percent of the revenue from Internet gaming to community funds in each of the licensing states and territories. This money would be used to fund research on problem gambling and to help support groups that counsel problem gamblers.

"When you consider that the majority of these revenues come from international sources, and the 1 percent levy would be channeled for research and counseling services in Australia, I think this is very attractive to Australian legislators," Bridge told IGWB.

One of the ironies of the federal government's attack on online gaming is that very little of the four casinos' revenue came from Australians. One of the sites accepted no bets from residents of the country, and the other three only took bets from residents of the state or territory in which they were licensed.
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Bridge and the ACA's Downy are confident that the combination of an improved National Model and the 1 percent levy will help persuade enough senators to vote against a ban.

Others are not so sure. Nettleton, the gaming lawyer, believes that a ban might pass the Senate. Paul Barnes, vice president of worldwide sales and marketing for Access Gaming Systems, thinks a ban may be enacted, but not a permanent one. He also sees the possibility of an extension of the moratorium until after the federal election that's expected later this year.

Access, which moved its headquarters from Australia to Ireland three years ago, provided the software for all four Australian casinos. Since the moratorium, it has reduced its support staff in Australia.

"It's starting to look unlikely that a ban will happen," said Joanne Pafumi of the Rowland Co., a public relations firm that works for Lasseters. She said the revised National Model may provide an opportunity for Sen. Richard Alston, who led the federal government's charge on the moratorium, to say the moratorium resulted in changes that make a ban unnecessary.

"We're thinking that might be a fallback for Alston to be able to say, 'Well, OK, at least you guys have now got your act together and there is common regulation for this,' " Pafumi said.

According to a story in the Sydney Morning Herald in late December, Alston told another senator that the government would push for a strict, national set of regulatory standards if it couldn't get a ban.

Parliament's schedule leaves less time to act before May 19 than the calendar would indicate. Downy said Parliament would meet the last week of March and the first week of April, and then not until May 22. If the federal government plans to introduce legislation that would enact a ban to replace the expiring moratorium, it will have to move quickly, he said.

Consumers hurt
Consumers have been hurt by the moratorium, said Gary Ramos, president of Online Gaming Systems, a software supplier based in Las Vegas that has an office in Australia. It has given a boost to offshore operators, none of whom are regulated as rigorously as Australian sites, he said.

The moratorium has also bought some time for traditional casino firms that are considering Internet gaming, said Anthony Cabot, a gaming lawyer with Lionel Sawyer & Collins in Las Vegas and author of Internet Gambling Report IV.

"Those who want to get into the [online] industry don't have the pressure that Australia put on them to get to the market quickly," he said. "The Australian companies are on a different time schedule now."

The moratorium gives ammunition to online gaming opponents worldwide, Cabot said. "Opponents will continue to point to Australia and say, 'Look, these folks tried it and decided it wasn't a good idea and therefore put a moratorium in place. Why would we even consider trying it?' "

For the same reason, if the moratorium becomes a ban, it would be a setback for the online gaming industry worldwide, Nettleton believes.

"What everyone's really looking for is a home that's reputable," he said. "If a country like Australia - which has been looking at it very closely -turns its back completely and says, 'We can ban it,' then countries which are in the wings like the United Kingdom will be very reluctant to take a different approach. [In the United States] it would give ammunition to the likes of [Sen. Jon] Kyl."

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