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Jun 4, 2012

Why Australia needs an online poker trial

Online poker is about to undergo major growth. Efforts to ban it will defeat the purpose of gambling regulation.

The debate over gambling, it seems, bears a close resemblance to that over drugs in its polarised nature and resistance to evidence and logic. This is not a debate where nuance and subtlety get much of a look-in.

Last week the Department of Broadband released an interim review of the Interactive Gambling Act. While identifying the extent to which the IGA had entirely failed to regulate or prohibit gambling, it actually proposed to increase the level of regulation on those forms of internet gambling that are legal and proposed some marginal changes in what it acknowledged was the useless effort to regulate the internet. The one faintly liberalising recommendation was that online poker be trialled in Australia, subject to heavy caveats and protections.

By week’s end, the review had been attacked by Tony Abbott and Nick Xenophon as opening the floodgates to online gambling or, in Abbott’s peculiar words, a “dark cave”. Indeed, his remarks are worth quoting at some length:

“I think that Australians are entitled to gamble responsibly but this is a whole new frontier of gambling which the government is proposing to open. Now, the problem with this recommendation from the government is that if it goes ahead, every computer is a casino. Every smart phone is a poker game and that’s just not on as far as the Coalition is concerned.”

Xenophon, who unlike Abbott can be taken seriously on gambling regulation because of his consistent position, knowledge of the issue and advocacy, was more measured in his language, but he glossed over the fact that this was a report by bureaucrats to the government, not a government report.

What the review team are aware of, and Xenophon and Abbott, judging by their remarks, seemingly aren’t, is that the only issue about online poker henceforth is whether Australians play it on Australian sites that are taxed and regulated locally or on overseas sites, because online poker is about to undergo a significant expansion.

As the review notes, late last year the US Department of Justice reversed its position on internet gambling, in effect meaning that absent action from Congress, online gambling other than betting on sporting contests (which has its own issues in the US) was legal. That has opened the way for US states to license online slots, poker and other forms of non-wagering gambling.

The state of Nevada is now in the process of allocating online poker licences for providers who team  with “bricks and mortar” casinos (thereby ensuring the support of gambling incumbents, unlike here where the clubs and pubs industry is campaigning against online gambling). This week there will be a key meeting to determine whether Bally and International Game Technology applications go forward. The licences will start reinvigorating the US online poker industry, which was virtually shut down in April last year, to the benefit of offshore sites. But this time, the industry will be regulated and linked to well-established gambling companies that already operate in the real world, and their marketing and promotional power.

The simple reason is that Nevada gambling revenues are struggling to recover from the financial crisis and revenue from card games, in particular, is falling, and the Nevada government, which like most US states has been desperately slashing spending, needs more. In 2007, total gaming revenue in the state reached $US12.8 billion but in 2008 and 2009 it fell 10% each year. It has since stabilised, and last year grew just ahead of inflation at 4% to $US10.8 billion, but revenue from card games and slots is continuing to fall or growing slower than inflation. And flat Las Vegas growth is no longer being offset by big growth in Macau for the gambling giants who operate there (WYNN and LAs Vegas Sands), with growth in Macau revenues slowing significantly as this Also Sprach Analyst chart shows).

Given Australians currently spend about $300 million a year on online poker in defiance of the IGA, the prospect of licensed, regulated online poker sites run by major US gambling companies is likely to inspire even faster growth than we’ve seen over the past decade.

The choice for Australian regulators is therefore simple: watch Australian dollars head to the US and other jurisdictions, or find a way to enable a regulated, licensed Australian industry.

But as last week demonstrates, even the slightest hint of deregulation induces hostility, in the same way that any trial of drug decriminalisation is demonised.

In this case, the problem is partly that many politicians remain even more poorly informed about media technologies than they are about drug use. Abbott’s glib line that “if it goes ahead, every computer is a casino. Every smart phone is a poker game” belies the fact that Australians are already using their computers as casinos and their phone as gambling devices and that will only increase, to the benefit of foreign corporations (not to mention organised crime and money launderers). What will happen when politicians eventually work out that there are whole internet-based economies operating through gaming environments, like the virtual markets where anyone can make and lose real money in MMORPGs — worth over $2.5 billion in the US alone last year.

That’s the problem with the internet — people are always using it for things someone, somewhere powerful enough to influence politicians doesn’t approve of, and their first demand is to ban it.

That was the instinct that drove the Howard government’s original IGA. And banning might enable politicians to tell the Christian lobby and anti-gambling advocates that they’re doing all they can to address the issue, however futilely, but the policy has real-world implications — problem gamblers get less help, consumers get less protection, governments get less revenue. The very problem anti-gambling types claim they want to address is exacerbated by pretending you can regulate the internet.

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13 thoughts on “Why Australia needs an online poker trial

  1. zut alors

    ‘…watch Australian dollars head to the US and other jurisdictions…’

    Much better that the Oz dollar heads overseas and does not contribute to our economy or taxation system. When it becomes a monetary source for our government it then has the potential to influence policy.

    An example? The poker machine farce, resistance to bets capped at $1.

  2. John Bennetts

    What the dickens is an MMORPG?

  3. twobob

    … this is a whole new frontier of gambling which the government is proposing to open.

    LOL – Wow, how about that Aussie government- world leaders in opening online gambling!!1OMG!1
    To believe such rot one would have to remove 3/4 of your brain through the nose and place the remaining portion in a vice to stop it exploding.

    But what is even funnier is that this fellow, who yet again proves his ignorance of the internet, is poised to be our next prime minister. The only thing dumber than abbott talking about the internet are the country Australians who think that voting for him will bring back the good old days.
    Australia – the ship of fools it seems.

  4. Stevo the Working Twistie

    John Bennetts – MMORPG = “Massively Multi-player Online Role Playing Game” (eg: World of Warcraft). Hadn’t heard it used in a Dickens context before – you may just be onto something.

  5. Syd Walker

    I enjoy playing online poker from time to time, as light relief from politics. There’s a great google app which enables me to play anytime I choose – and when I’ve had enough, I simply close the window. No real-life poker-playing guests, with all their prejudices and endless thirst for booze.

    But would I ever risk a cent in an online poker game? I doubt it. The goal for me is to increase my stash of e-chips – not to see if I can outsmart tycoons who control the software. The former is a bit of intellectual fun, the latter a mark of hubris and folly.

    I can’t understand why people need to play poker for money. The world poker championships – while they attract cash prizes – aren’t played with piles of banknotes. All that’s needed is chips. The key is to actually want to win (not just a single game – but the overall match). Perhaps a little education is what’s needed most?

  6. Paul Bendat

    Those who ignore history are bound to repeat it. Keane repeats the same mistake as Queensland and Victoria did when coveting NSW poker machine revenue.

    Furthermore, liberalising does not solve the problem of poor implementation of existing regulations. Poker machine simulations are marketed to children without any restriction although adequate provisions already exist. Apps like Slotomania are amongst the highest grossing iPhone apps despite being a free download. The money is earned through in-app purchases to enhance or continue the simulated gambling.

    What makes Mr Keane confident that the government will implement the promised help or protection? Already the report waters down the Productivity Commission evidence based recommendation for opt-out default limits on gambling spends in favour of voluntary pre-commitment.

  7. Mark from Melbourne

    It strikes me as a no brainer. Either allow some form of regulated online gambling by Australian companies or allow continued unfettered access to overseas online gambling. The 3rd option of regulating/filtering overseas online gambling aint going to happen.

    Given this you would have to say that Abbott is 1. trying for cheap political brownie points, or 2. protecting his land-based gambling mates, or 3. a troglodyte, or 4. all of the above. You got it correct if you chose 4.

    The only thing worse than Abbott’s line on this was Xenephon’s taking the same stance as he should be a bit better informed. And the only thing worse than that was not one of the nampy bampy MSM skewered them on this point (or even raised a polite question that might have seemed like they dissented – at least not one that got published). No wonder Abbott gets a free ride in the polls and we continue to be treated to the farce we call political reporting.

  8. Hogarth

    The only thing that the government can possibly control/regulate/monitor is money transfer. Which is exactly how the US shut down FullTiltPoker and PokerStars.

    Unfortunately for the statist, Bitcoin solved that issue.

    Strikesapphire, Switchpoker…the list is expanding rapidly.

  9. Andybob

    Horse……………………………………………………………………………………………………Stable Door

  10. GeeWizz

    Not too sure how you can stop online gambling in Australia if the website is overseas