SkyCity's big money online casino plans upset minister
Sunday, 10 March 2019
SkyCity will exploit a gap in the law to launch a European-based online casino later this year, and the Government is powerless to stop it.
It's estimated up to $400m a year is currently leaching offshore from Kiwi gamblers to unregulated overseas websites. SkyCity wants to reclaim some of the $180m chunk of that which goes to online casinos.
The casino giant has told the Government it is unwilling to wait for law changes to allow it to operate a Kiwi-based gaming site.
Internal Affairs Minister Tracey Martin said she was 'disappointed they are forging ahead' but said the move showed the inadequacy of existing laws.
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SkyCity's move is an illustration of how governments worldwide are struggling to tax and regulate the huge online gambling market - last year, the British-based online sports betting site Bet365 turned over $47 billion in punts.
Presently, SkyCity is prohibited from running an NZ-based site, but can't be stopped from launching one based offshore - likely to be in Malta - which accepts payments in NZ dollars and is aimed at Kiwi gamblers.
SkyCity first signalled its plans last August, but Stuff has learned those have developed rapidly and talks have been held with the Department of Internal Affairs about its launch.
Martin said the move 'highlights how inadequate these laws are - it's not just for them, but also the huge number of offshore gambling games that are coming into New Zealand now … that we have no way to control'.
SkyCity's site would be unregulated - but it's understood it wants to blunt criticisms from pokie operators and the Problem Gambling Foundation by installing anti-problem gambling mechanisms and offering to 'pay' the right tax rate on any earnings - or alternatively donate it to charity.
On $180m, that sum could be up to $30m, although SkyCity spokesman Colin Espiner said it didn't expect to make a 'material profit' initially. SkyCity's current charitable donations only sit around the $4m mark.
In August, Martin signalled she would take a paper to Cabinet proposing new regulations for online gambling. Martin told Stuff that paper would now be presented in April, before public consultation on law changes.
SkyCity is understood to be confident Martin will push for regulated NZ-based sites to be permitted, if only to recoup some of that lost tax take. But any law change is about two years away.
SkyCity opted not to try for a reinterpretation of existing gambling law and is instead pursuing the offshore method. It must be set up entirely at arms' length from the New Zealand body, and based in a suitable jurisdiction: not Australia, where gambling laws are tight.
Many such sites are based in the European island state of Malta. SkyCity cannot promote the site to New Zealand gamblers and will instead have to rely on news reports and SEO rankings for publicity.
PROMOTION LOOPHOLE
An offshore site called Jackpot City last year demonstrated a legal loophole by placing adverts - including on TV3 - advertising a 'free' site, which then linked to their actual casino site. Problem Gambling Foundation chief executive Paula Snowden said she had lobbied government to close that loophole. SkyCity has promised not to use such 'trojan-horse' style marketing.
Last August, SkyCity chief executive Graeme Stephens told investors that online gaming was the future and a logical move for the company. But at the time, Stephens said he wasn't lobbying for a law change. In December, after an Official Information Act request, the DIA told Stuff there had been no correspondence with SkyCity around its plans.
However, last month DIA acting head of gambling Chris Thornborough told a gathering of the Gaming Machine Association of New Zealand - the pokie machine industry body - that SkyCity had approached them. Two sources confirmed Thornborough said: 'We've been approached by casinos about how they can take up the online opportunity' and told the meeting the future of gaming was likely to be online.
Thornborough said SkyCity had 'briefed us at a reasonably high level about what their plans were, but at a very conceptual early stage, and it was really as a courtesy'.
He said DIA had asked SkyCity to keep them informed to ensure they broke no laws.
Thornborough confirmed the DIA's view was there was no way to legally run an online gaming site from NZ.
SkyCity's Espiner said: 'We have also kept the regulator abreast of our plans to launch an offshore-based online casino site in the interim, which will be in full compliance with New Zealand law and will contain a range of best-practice host responsibility features.'
Espiner said the site would launch this year.
ONLINE COMPETITION
Worried pokie machine operators oppose the move, which could cut into their market.
Mike Knell, chief executive of the biggest pokie trust, New Zealand Community Trust, said an online platform might not pay the same duties or taxes, wouldn't have the same responsibilities around problem gamblers, and wouldn't be compelled to return money in community grants. Pokie trusts have to return 40 per cent of profits in grants. Knell said that should be preserved, so 'that our grandchildren and future generations can participate in sport and community events on an equitable basis.'
Another senior pokie industry figure said while monitoring problem gamblers in pubs could be hard, 'it's a damn sight better than the complete absence of control that occurs in the online gambling space.'
One serious gambler, who wagers in the six figures annually, agreed. 'I'd say you're into the danger zone - no longer do you have to be over 20, dressed appropriately, not be s…faced - all those restrictions that stop you spending big money.
'Even being in a public place means you have to behave a certain way. Sitting in front of a computer with a bottle of bourbon late at night removes those social norms and I think a lot of people will get themselves into trouble: they can throw you out of SkyCity for being pissed, they can't throw you out of your front room.'
Snowden said PGF would vigorously oppose SkyCity's plans and said online gamblers were particularly susceptible to problem gambling issues because there were no interruptions to their play. 'We would, and do, oppose anything that leads to a growth in gambling, because New Zealanders are already hurting from the growth in gambling now,' said Snowden. 'The harm in those areas is out of control now.'
Martin said her concern was the Kiwi betting industry was built on three pillars - trusted operators, minimising problem gambling, and offering some community benefit.
'None of those those things currently apply to the millions upon millions of dollars going offshore right now,' she said.
Martin suggested regulated sites might be forced to deliver a percentage of profits to community grants.
The issue is how to force overseas sites to comply with law changes such as being forced to give away some of their profits to charity.
In Australia, the government has tried using IP address blocking on overseas sites, but the use of Virtual Private Networks (VPNs) makes it comparatively easy for Aussie gamblers to evade the law. Martin said she'd talked to the British Gambling Commission, who licence sites, and force credit card companies to block credit lines to unapproved sites.
Any law change could also mark the end of the TAB and Lotto's monopoly on the sports betting and lottery markets in New Zealand. Martin said that was 'part of the conversation' but regulating their offshore rivals could level the playing field for TAB and Lotto.
The big-money gambler Stuff spoke to said offshore sports betting sites traditionally had three advantages over the TAB: a wider range of sports, a wider range of 'exotic' bet options, and better promotions, where the site gives 'free money' to bet with. But he said TAB had closed the gap significantly on all three fronts in recent times.
It's understood SkyCity wouldn't be interested in the sports betting markets, but it seems likely Australian and British betting giants would, especially after the Massara Report into the future of horse-racing recommended the sale of the government-owned TAB to offshore interests.
What's certain is that online gambling is a growing and lucrative market, and SkyCity's move appears to be a pre-emptive strike to ensure market share before the market is liberalised.
A senior KPMG executive, Michael Andrews, studied the 'black' economy for the Australian government last year, and as part of his tally, estimated $2b a year was leaking from Australia to overseas bookmakers.
If that figure was extrapolated to New Zealand, based on our comparative population, it would suggest about $400m leaving these shores each year.