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.

Peter Fray

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