Timothy McNally, Executive Director, Security, Hong Kong Jockey Club Online Gaming - Implications...
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Transcript of Timothy McNally, Executive Director, Security, Hong Kong Jockey Club Online Gaming - Implications...
Timothy McNally,Executive Director, Security,
Hong Kong Jockey ClubOnline Gaming -
Implications for Regulators
Hong Kong Jockey Club
• Sole provider of horse racing and legal betting in Hong Kong
• Management of the Mark Six for the Hong Kong Lottery Commission
• Largest tax payer in Hong Kong
• Largest charitable donor in Hong Kong
Hong Kong Jockey Club• Non-profit charitable trust• Betting turnover of over
HK$83 billion (US$10 billion) in 99/00
• Tax payment of over HK$11 billion (US$1 billion) in 99/00
• Charity contribution of over HK$1.8 billion (US$120 million) in 99/00
• Total staff of almost 20,000
Betting Operations• 848,000 Telebet accou
nts in Hong Kong• 93,000 Customer Inpu
t Terminals• Mobile betting• Two way terminals• Internet betting comin
g soon
Why the Monopoly in HK?
• PREVENTS:• Corruption• Organised crime
involvement– Loan sharking
– Money laundering
– Race fixing
• BENEFITS:• Ensure government
tax revenue• Ensure contribution
for charity - HK model• Reduce community
cost
Government decision to control gaming
Challenges to Revenue
• 95/96: HK$80.6 (US$10.34)• 96/97: HK$92.3 (US$11.84)• 97/98: HK$91.4 (US$11.72)• 98/99: HK$81.3 (US$10.42)• 99/00: HK$83.4 (US$10.69)• Decline in revenue after 1997
(all figures in $ billions)
Challenges
• Illegal bookmaking
• Offshore operators
• Illegal soccer gambling
• Internet gambling
Common characteristics of challenges
• Pay no local taxes
• No contribution to charities
• No government regulation
• Illegal in HK
Internet Gambling• Sites offering new
communication to existing sports gaming service (e.g. - Ladbrokes)
• Sites offering exclusive Internet gaming (e.g. - casino)
• Hundreds of sites
Internet Gaming Operators• Ladbrokes, William Hill, Darwin All-
Sports, Dr Ho.com, Easybets, etc
• Many offer offshore books on HK horse races, some in Chinese language
• Many linked to local media (SCMP, Apple Daily, etc) web sites
ALL pay NO HK tax, no contribution to HK but take HK betting dollar
Internet Gaming - Downside
• Unregulated offshore casinos– Fraud of punters– Prey on compulsive gamblers– Easy access to minors/children
• Diversion of gaming dollars without benefit to community
• Trend will increase as Internet usage grows
Geographical Jurisdiction Problems
• Favoured offshore locations – Costa Rica (80+ operations)
– Antigua (31+ Internet gambling licenses)
– Curacao, Grenada, Dominican Republic (4+ Internet gambling operations licensed)
– Netherland Antilles, Trinidad, St. Vincent, Cayman Islands (1 Internet gambling operation licensed)
Offshore Internet Gambling
• Operations licensed in tax havens
• No recognition of laws in other sovereignties
• No mutual assistance agreements to enforce law
• No effective government regulation or oversight
Enforcement Problems
• Existing gambling laws drafted decades ago
• Law should be technology neutral or will be surpassed):– Legislation tied to a particular technology may
quickly become obsolete and require further amendment.
• Global Internet surpasses legal jurisdictions
Government revenue collection & regulatory authority defeated
Four Regulatory Models• US: ban Internet gambling by residents
• Australia: allow licensing to ensure propriety
• Europe (Holland, Austria, Finland, Norway) & HK: allow licensed Internet gambling to residents only - on activities legal within their jurisdiction
• Small jurisdictions (Costa Rica, Caribbean, Gibraltar, Alderney, etc): granting Internet gambling licenses
Australia
• Interactive Gambling (Moratorium) Act 2000
• Creates criminal offence, prohibits a person from providing an interactive gambling service unless already providing before 19 May 2000; severe punitive fines for offenders
• Prohibition ceases at end of 18 May 2001
Australia
• Queensland, Victoria, Tasmania, South Australia, the ACT and NT not supporting 12-month moratorium on new forms of interactive gambling
• Some States already providing Internet gambling licenses before May 2000
• No uniform Federal and State approach
• National enquiry underway
USA• Government pressure to ban Internet
gambling
• Interstate sports betting via Internet: Federal offence (1961 Wire Act)
• State law requires legality of any gaming operation at both ends (i.e. punter & bookmaker)
• 48 of 50 States have some legalised gaming
US Prosecutions• Feb. 2000 - Jay Cohen, CEO of World
Sports Exchange in Antigua, was found guilty in NY of violating the Federal Wire Act - 21 months jail, fined US$5,000
• L.A. based youbet.com paid US$1.3 million penalties & move operations out of California (State prosecution)
Attorney General Janet Reno:
• "The Internet is not an electronic sanctuary for illegal betting. If a state outlaws soliciting or accepting bets, you can't evade those requirements by going on line."
United Kingdom
• UK home to headquarters of major established bookmakers
• Liberal regulatory framework compared to USA
• grab.com: U.S. Internet gambling site was visited by 421,000 Britons in Dec. 2000
• Legal to gamble on an Internet site situated offshore
UK Legal Position
• Gambling legislation pre-dates Internet
• New Internet betting service requires license from local licensing Magistrate
• Gaming must be in licensed premises - no Internet license possible
• Ladbrokes, Coral, Victor Chandler, in Gibraltar (British dependency)
• William Hill in Ireland & Antigua
Target: Internet Asia
• Ladbrokes Cantonese service accounts for one third of online service turnover
• Victor Chandler trying recruit Cantonese speakers
• Far East punters targeted
HK Gambling Ordinance: Proposed Amendments
• Extraterritorial: bets placed with a bookmaker overseas
• Prohibit promotion of above activity
• Prohibit knowing use of premises for promotion or facilitation of bets
• Prohibit broadcast of odds or tip via TV or radio within 12 hours of event
Way Forward• Legislative treatment of Internet gambling
must be a local government decision to conform with the authorisations, regulation & controls required by that jurisdiction.
• If activity is prohibited in the physical world but not in the virtual world, then the Internet becomes a haven for criminal activity.
HK Gambling - Way Forward
• Viability of new gambling legislation?
• Question of wagering on other sports?
• Structure of the HK betting duty? (i.e. tax on revenue or profits?)
• Public controversy over any new gambling; increased social cost?
• New government solutions?
Summary• Diversion of total funds, untaxed &
unregulated, leads to lower quality gaming service, with no community input
• Government responsibility to balance the right of individuals to entertainment choices, establish regulatory framework, ensure international legal requirements met
Betting revenue should return to the community
Questions?