Transcript Timothy McNally, Director of Security, Hong Kong Jockey Club

Timothy McNally,
Executive Director, Security,
Hong Kong Jockey Club
Online 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
accounts in Hong
Kong
• 93,000 Customer
Input Terminals
• Mobile betting
• Two way terminals
• Internet betting
coming soon
Why the Monopoly in HK?
Government decision to control gaming
• 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
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?