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Interactive Gambling Amendment (Lottery Betting) Bill 2018



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ISSN 1328-8091

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BILLS DIGEST NO. 106, 2017-18 9 MAY 2018

Interactive Gambling Amendment (Lottery Betting) Bill 2018 Kaushik Ramesh Law and Bills Digest Section

Contents

The Bills Digest at a glance .............................................. 2

Purpose of the Bill ........................................................... 3

Commencement details................................................... 3

Background ..................................................................... 3

Lottery Betting ............................................................ 3

Lottery Betting in Australia ......................................... 3

Context of the Lottery Betting Bill .............................. 4

Committee consideration ................................................ 6

Policy position of non-government parties/independents...................................................... 6

Position of major interest groups..................................... 7

Supportive of a ban on lottery betting ....................... 7

Against a ban on lottery betting ................................. 9

Financial implications .................................................... 11

Statement of Compatibility with Human Rights.............. 11

Key issues and provisions .............................................. 11

Banning of Lottery Betting ........................................ 11

Keno betting .............................................................. 12

Telephone betting ..................................................... 13

Other provisions ........................................................... 13

Transitional provisions .............................................. 13

Constitutional compensation provision .................... 13 Concluding comments ................................................... 14

Date introduced: 28 March 2018

House: House of Representatives

Portfolio: Communications and the Arts

Commencement: The substantive provisions will commence six months after Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at May 2018.

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The Bills Digest at a glance The Interactive Gambling Amendment (Lottery Betting) Bill 2018 (Lottery Betting Bill) amends the Interactive Gambling Act 2001 (the IGA) to prohibit the provision of online lottery betting and keno betting services to people in Australia.

Lottery betting involves betting on the outcome of a lottery or keno game or a contingency that may or may not occur during the conduct of a lottery or keno game. The major lottery betting service provider in Australia is Lottoland; much of the criticism of lottery betting services has taken the form of direct criticism of Lottoland.

The introduction of the Lottery Betting Bill follows lobbying from stakeholders (especially the ‘Lottoland’s Gotta Go!’ campaign), as well as increasing opposition to lottery betting from state and territory governments and Senators from minor political parties. The key arguments of those opposed to lottery betting services is that they do not contribute to the revenue of state and territory governments and that they take away business from local newsagents.

While the Lottery Betting Bill’s Explanatory Memorandum points to widespread opposition to the provision of lottery betting services in Australia, stakeholder reaction to a proposed ban is more complex. While the Lottery Betting Bill is supported by multiple newsagent associations, under the umbrella of the ‘Lottoland’s Gotta Go!’ campaign, other newsagent organisations are concerned that the Lottery Betting Bill will result in lottery companies (that do not provide these lottery betting services) forming a monopoly. Anti-gambling groups and sporting clubs sponsored by lottery betting service companies have also commented on the Lottery Betting Bill.

Specifically, the Lottery Betting Bill:

• ensures that online lottery betting services come within the definition of prohibited interactive gambling services under the IGA

• ensures that this prohibition cannot be circumvented by providing lottery betting services over the telephone and

• clarifies that a prohibition on lottery betting includes a prohibition on keno betting.

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Purpose of the Bill The purpose of the Interactive Gambling Amendment (Lottery Betting) Bill 2018 (Lottery Betting Bill) is to amend the Interactive Gambling Act 2001 (the IGA) to ensure:

• a telephone betting service under the IGA does not include a service relating to betting on the outcome of a lottery or a contingent outcome of a lottery

• an excluded wagering service under the IGA does not include a service relating to betting on the outcome of a lottery or a contingent outcome of a lottery.

In effect, the Lottery Betting Bill makes the provision of lottery betting services prohibited interactive gambling services under section 5 of the IGA.

Commencement details Clauses 1-3 of the Lottery Betting Bill commence on the day of Royal Assent. Schedule 1 of the Lottery Betting Bill commences six months from the date of Royal Assent.

Background

Lottery Betting In explaining the term ‘lottery’, the Explanatory Memorandum to the Interactive Gambling Bill 2001 stated:

… the ordinary meaning of lottery is relevant in the context of the Bill. The Macquarie Dictionary definition of lottery is a ‘scheme or arrangement for raising money….by the sale of a large number of tickets, certain among which, as determined by chance after the sale, entitle the holders to prizes’. 1

Lottery betting and keno betting are also known as ‘synthetic lotteries’ and essentially involve betting on the outcome of a lottery or keno game. As explained in the Lottery Betting Bill’s Regulation Impact Statement (RIS)2 in relation to the customer of a lottery betting service:

… a customer does not purchase a ticket in the official lottery draw. Instead the customer chooses numbers through a third party, who will pay out winnings equivalent to those that the person would have received through the official lottery provider, should they have won. 3

Lottery betting can also involve betting on a contingent outcome of a lottery:

A ‘contingency that may or may not happen in the course of the conduct of a lottery’ would include, for example, the drawing of a particular number at a particular position, the first three numbers drawn, or the drawing of a particular ‘bonus’ number. 4

Lottery betting services can pay out wins from sales revenue, but also through an insurance policy model.5

Lottery Betting in Australia The IGA regulates the provision and advertising of interactive gambling services to people in Australia. The provision of online lottery betting services does not currently contravene the IGA. These services are therefore legal in Australia provided they are licensed.

1. Explanatory Memorandum, Interactive Gambling Bill 2001, pp. 29-30. 2. The RIS is at pages 6 to 25 of the Lottery Betting Bill’s Explanatory Memorandum. 3. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, p. 7. 4. Ibid., p. 29.

5. Ibid., p. 7; see also Lottoland, ‘How does it work?’, Lottoland website.

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The RIS’s overview of the industry identifies Lottoland Australia Proprietary Limited (Lottoland) as the company which is the primary provider of lottery betting products in Australia, but also identifies Bet365, William Hill and Ladbrokes as companies that offer these services.6 The RIS notes that there may be smaller providers of these services in the market.7

As stated in the RIS, ‘state and territory governments are responsible for the licensing and regulation of all legal forms of gambling within their jurisdictions.’8 The RIS states that most online gambling operators are licensed in the Northern Territory.9 The Northern Territory Racing Commission licences Lottoland as well as the other lottery betting service providers listed above.10 That only one jurisdiction is involved in such licensing is highlighted in the second reading speech that accompanied the Lottery Betting Bill. In that speech, the Minister for Urban Infrastructure and Cities, Paul Fletcher, refers to the fact that ‘lottery and keno betting services contribute significantly less tax and only to one jurisdiction in Australia.’11

South Australia effectively prohibits the provision of lottery betting services in its jurisdiction. The Independent Gambling Authority in that state ‘must authorise the bet “type” and approved “event” before a bet can be legally made. This is called an approved contingency.’12 Lottery betting is not provided for in the South Australian Approved Betting Contingencies Notice 2016.13 The RIS cites media reports which state that Victoria, New South Wales, Tasmania and Western Australia are also considering prohibiting the provision of lottery betting services to customers in their jurisdiction.14

Context of the Lottery Betting Bill There has been an increasing backlash from certain stakeholders against the perceived effects of the lottery betting industry. This opposition to lottery betting has largely taken the form of the ‘Lottoland’s Gotta Go!’ campaign. This campaign, launched in September 2017, was supported by the lottery company, Tatts Group, and conducted by a group of newsagent associations.15

The campaign makes a number of claims relating to lottery betting (specifically against the company Lottoland), centring on the argument that newsagents as well as state and territory governments are reliant on ‘real lotteries’ for revenue and lottery betting is not regulated in the same manner as other lotteries.16 This campaign has published advertisements in the media with comments such as the following:

6. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, pp. 8-9. 7. Ibid., p. 9.

8. Ibid., p. 8.

9. Ibid.

10. Department of the Attorney-General and Justice (Northern Territory Government), ‘Racing Commission: sports bookmakers and betting exchange operators’, Northern Territory Government website, last updated 3 May 2018. 11. P Fletcher, ‘Second reading speech: Interactive Gambling Amendment (Lottery Betting) Bill 2018’, House of Representatives, Debates, 28 March 2018, p. 3053. 12. Independent Gambling Authority South Australia (IGASA), ‘Regulations’, IGASA website. 13. [IGASA], Approved Betting Contingencies Notice 2016, [IGASA], South Australia, Version No. 001, as at 16 June 2016;

Authorised Betting Operations Act 2000 (SA). 14. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, p. 8. H Kempton, ‘"Not welcome here": Lottery betting to be outlawed in Tasmania’, news.com.au, 11 October 2017; K Lambie, ‘Drop in Lotterywest revenue

prompts plan to ban Lottoland’, ABC news online, 16 September 2017; R Harris, ‘Sickening lotto loss [Lotto hit to health cash] [Foreign Lottoland agency linked to tax revenue dip from local lotteries]’, Herald Sun, 10 July 2017 and Lottoland may face restrictions in NSW, SBS, 5 October 2017. 15. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, op. cit., p. 9. 16. Tatts Group, ‘Lottolands’ Gotta Go! homepage’, Lottloands’ Gotta Go! website.

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Real lotteries like the ones you play through a newsagent contribute over a billion dollars a year in State and Territory lottery taxes. Money that helps to fund schools, hospitals and roads. Real lotteries also contribute as much as 70% of business revenue for some newsagents.

On the other hand, pretend lotteries like Lottoland pay no State or Territory lottery taxes. Nor do pretend lotteries contribute to lottery Association retailers like newsagents who employ 20,000 people across Australia.

Support your local newsagent and your local community. Tell your local MP that Lottoland's Gotta Go. 17

RIS analysis found the campaign’s claims likely to have general validity, although they cannot be quantitatively proven.18

Following the ‘Lottoland’s Gotta Go!’ campaign, there were media reports that states were considering banning lottery betting, in the same manner as South Australia. An article in the Australian Financial Review reported the following in October 2017:

This week, NSW deputy premier John Barilaro raised the possibility of banning online or ‘synthetic’ lottery products in what appeared to be a response to a voluble campaign called "Lottoland's Gotta Go!" headed by Tatts Group and newsagents concerned that online lotteries cut down on the number of people visiting their outlets.

That came after rumours Victoria would also consider a ban, while it was also expected Lottoland could be an election issue in Queensland. 19

As of 30 September 2017, the Northern Territory, the only jurisdiction where lottery betting is licensed, banned licensed sports bookmakers from taking bets on Australian lotteries.20 This was done through a direction of the Northern Territory Attorney General to the Northern Territory Racing Commission to remove Australian lotteries as an approved betting contingency.21 The RIS notes that this decision followed a letter from the Federal Minister for Communications, Senator Mitch Fifield, to the Northern Territory Attorney-General, Natasha Fyles.22 This ban effectively means that lottery betting operators, such as Lottoland, can now only accept bets on foreign lotteries.

Parliamentarians from minor parties, such as Senator Pauline Hanson from Pauline Hanson’s One Nation and Senator Nick Xenophon from the former Nick Xenophon Team, also expressed their desire for lottery betting to be banned.23 These stances are explored further in the ‘Policy position of non-government parties/independents’ section below.

In this climate of various stakeholder, state and territory government and minor party concerns around lottery betting, a media release put out by Minister Fifield on 27 March 2018 announced

17. Lottoland’s Gotta Go! campaign, ‘Advertisement: Lottoland’s Gotta Go! support your local newsagents’, The Australian, 11 September 2017. 18. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, pp. 9-12. 19. J Stensholt, ‘Why does everyone hate Lottoland?’ The Australian Financial Review Weekend, 7 October 2017, p. 27; see also

J Barilaro (Deputy Premier and Minister for Small Business (NSW)) and P Toole, (Minister for Racing (NSW)), Operation of synthetic lotteries in NSW, media release, 5 October 2017. 20. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, p. 24; see also J Walls, ‘Lottoland sent packing’, Northern Territory News, 15 November 2017, p. 3 and R Harris, ‘Offshore bookie cut out of lotto betting’, The

Herald Sun, 16 November 2017, p. 10. 21. J Nettleton and N Austin, ‘The Lottoland effect part 2: weathering the regulatory storm in Australia’, Gambling Law & Regulation Newsletter, Addisons Lawyers, Sydney, December 2017. 22. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, p. 24. 23. A Tillett, ‘Number's up for betting on lotto, say senators’, The Australian Financial Review, 20 September 2017, p. 6; see also

AAP, ‘Call to outlaw lottery betting’, The Australian, 20 September 2017, p. 2.

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the Government’s intention ‘to ban betting on lotteries and keno games.’24 Specifically, the media release stated:

The Government has formed the view that permitting betting on these services, also known as ‘synthetic’ lotteries, undermines the long-standing community acceptance of official lottery and keno products.

These products enjoy community support as they generate an income stream for small retail businesses and make a significant contribution, through licence fees and taxation, to the provision of public services and infrastructure by state and territory government.

Online services offering products that involve betting on lottery outcomes are relatively new and have generated considerable community concern. Since these concerns were first raised last year, the Government has listened carefully to a range of groups that have views on the undesirability of permitting betting on these products.

25

The Bill was introduced into Parliament the next day on 28 March 2018.

Committee consideration On 28 March 2018, the Senate Standing Committee for Selection of Bills deferred its consideration of the Lottery Betting Bill to its next meeting.26 No other Committee has yet considered the Lottery Betting Bill.

Policy position of non-government parties/independents Senator Hanson, the leader of Pauline Hanson’s One Nation party, has been a lead opponent of the provision of lottery betting services in Australia. In March 2017, Senator Hanson moved an amendment to the Interactive Gambling Amendment Bill 2016 that would have amended the IGA to outlaw lottery betting.27 The proposed amendment was not agreed to by the Senate.28 In her accompanying second reading speech, Senator Hanson stated:

Lottoland is jeopardising the 4½ thousand newsagents who rely on lotteries. They contribute $1.4 billion across the nation in taxes that are paid and a further $150 million in GST. Lottoland, you might think, is a big organisation, employs people and brings a lot to the country, but it does not. It only employs six people. And yet I am sure we have seen, if not hundreds of thousands, possibly even millions of dollars leaving the country, tax free.

29

It has been reported by media that pressure from Senator Hanson and Pauline Hanson’s One Nation was the key driver in the Government’s decision to introduce the Bill to ban lottery betting.30

Senator Rex Patrick, from the Centre Alliance Party (formerly the Nick Xenophon Team), is another proponent for a ban on lottery betting. Senator Patrick moved a second reading amendment on

24. M Fifield (Minister for Communications), Turnbull Government to ban ‘synthetic’ lotteries and keno games, media release, 27 March 2018. 25. Ibid.

26. Senate Standing Committee for Selection of Bills, Report, 4, 2018, The Senate, 28 March 2018, pp. 3-4. 27. Parliament of Australia, ‘Interactive Gambling Amendment Bill 2016: proposed amendments’, Australian Parliament website. 28. Australia, Senate, Journals, 32, 21 March 2017, p. 1091. 29. P Hanson, ‘Second reading speech: Interactive Gambling Amendment Bill 2016’, Senate, Debates, 20 March 2017, p. 1460. 30. J Kelly, ‘Bets on foreign lotteries off soon’, The Australian, 27 March 2018, p. 5.

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26 March 2018, during a debate on the Communications Legislation Amendment (Online Content Services and Other Measures) Bill 2017, calling on the Government to legislate to ban lottery betting.31 In his second reading speech, Senator Patrick stated:

Lottoland is not a lottery as most people would be familiar with; it is a synthetic lottery that threatens the viability of the Australian lottery system and, with it, the incomes of over 4,000 newsagents and lottery agents who sell legitimate tickets in Australian lotteries. 32

The Shadow Minister for Communications, Michelle Rowland, is reported to have stated that the Australian Labor Party has been concerned about these betting products and will need to consider the Bill.33 Ms Rowland has also signalled that one of the matters that the Australian Labor Party may consult with stakeholders on is ‘whether a transition timeframe shorter than six months would be optimal’ before any prohibition takes place.34 It has been reported in the media that Labor is expected to support the Lottery Betting Bill.35

Position of major interest groups

Supportive of a ban on lottery betting The RIS notes that the Department of Communications and the Arts consulted with stakeholders across industry, and state and territory governments on the impacts of lottery betting; the majority of these stakeholders were supportive of the Government’s proposed policy.36 The RIS states the following regarding industry’s broad opposition to lottery betting:

General consensus from stakeholders is that any sales revenue that is taken by lottery betting services, and away from traditional lottery services, will have a negative impact on the lottery industry, state and territory government taxation collections, and small businesses retailers that rely on lottery ticket sales.

37

The RIS also referred to other stakeholder concerns, including ‘concerns with the unclear terms and conditions of lottery betting services which appear to suggest that customers will not receive the full advertised prize should they win.’38

As discussed in the ‘Background’ section above, the ‘Lottoland’s Gotta Go!’ campaign represents the main anti-lottery betting campaign in Australia.39 As noted in the RIS:

Television commercials, billboards, in-store posters and parked trucks adorned with the slogan “Lottoland’s Gotta Go” were used to publicise the impact that Lottoland is having on newsagents and community services. 40

According to the campaign website, the following bodies form a part of this campaign:

• Australian Lottery and Newsagents Association

31. R Patrick, ‘Second reading speech: Communications Legislation Amendment (Online Content Services and Other Measures) Bill 2017’, Senate, Debates, 26 March 2018, p. 2179. 32. R Patrick, Second reading speech: Communications Legislation Amendment (Online Content Services and Other Measures) Bill 2017, Senate, Debates, 26 March 2018, p. 2163. 33. T Mcllroy, ‘"Synthetic" lottery betting ban on way’, The Australian Financial Review, 28 March 2018, p. 4. 34. Ibid.

35. Courier Mail, ‘Ban could see Lottoland gamble on the High Court’, The Courier Mail, 8 May 2018, p. 7. 36. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, p. 25. 37. Ibid., p. 15. 38. Ibid., p. 22. 39. Tatts Group, ‘Lottolands’ Gotta Go! homepage’, op. cit. 40. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, p. 9.

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• Lotterywest (a lottery owned by the Western Australian Government)41

• Victorian Association for Newsagents

• Lottery Agents Queensland

• Jumbo (‘a digital retailer of official government and charitable lotteries’42)

• TattsGroup (a member of the Tabcorp Group, ‘forms part of Australia’s largest provider of wagering, lotteries and gaming products and services’43)

• Lottery Retailers Association

• Lottery Agents Association of Tasmania.44

The campaign website states that Lottoland ‘is bad news for Australia’s family run newsagencies, real lottery agents and our local communities’.45 Specifically, the website makes the following claims and arguments against Lottoland’s lottery betting model:

• Lottoland is betting and not a ‘real lottery’ where you can buy an actual lottery ticket for a game

• lotteries contribute significant amounts of tax revenue to state and territory governments unlike Lottoland, which is not required to pay tax

• lotteries support more than 4,000 small business who in some cases rely on more than 50% of their revenue from lotteries, whereas Lottoland does not support small business

• lotteries are rigorously regulated whereas lottery betting operators are not.46

The RIS is generally supportive of the campaign’s qualitative claims. While the RIS notes that there is limited data available to quantify the actual impact of lottery betting, it agrees that any increase in lottery betting services at the expense of lottery ticket sales will have a general negative impact on small business revenue as well as on state and territory revenue.47

Outside this campaign, there also seems to be opposition to lottery betting from some members of the general public. Specifically, the RIS notes:

As of 5 March 2018, the Standing Committee on Petitions has referred 66 petitions with a total of 14,775 signatures to the Minister for Communications for response. The petitioners have called for the Interactive Gambling Act 2001 to be amended to prohibit lottery betting in Australia. Petitioners have also raised concerns about the impacts of lottery betting services on state and territory taxation revenue and the impact on small business newsagencies. The Department has also received ministerial correspondence items calling for a similar ban.

48

With regards to Keno betting, the RIS notes that the ‘expansion of lottery betting services has concerned the Australian Hotels Association and Clubs Australia whose members sell Keno lottery tickets in clubs and hotels.’49 ClubsNSW is reported to have expressed concern that Lottoland ‘was

41. Lotterywest, ‘About us’, Lotterywest website. 42. Jumbo, ‘What we do’, Jumbo website. 43. TattsGroup, ‘TattsGroup homepage’, TattsGroup website. 44. Tatts Group, ‘Lottolands’ Gotta Go! homepage’, op. cit. 45. Ibid. 46. Ibid.

47. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, pp. 9-11. 48. Ibid., pp. 12-13. 49. Ibid., p. 12.

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undermining the integrity of lottery and keno products… [and] undermining the tax base of state governments and the revenue base of clubs.’50

The Alliance for Gambling Reform, an anti-gambling advocacy group, has also stated its opposition to lottery betting in Australia.51

Against a ban on lottery betting The RIS notes that lottery betting operators were not consulted as part of canvassing regulatory options and would not be supportive of the proposed policy.52 Lottoland, which as stated in the ‘Background’ section above is the primary provider of lottery betting services in Australia, has made statements about its opposition to banning lottery betting. Lottoland has launched a petition, ‘Vote for Choice!’ noting that the Lottery Betting Bill’s policy objective will impact 650,000 customers and that ‘It’s your money and it should be YOUR choice’.53

The Chief Executive Officer (CEO) of Lottoland Australia, Luke Brill, has argued that banning lottery betting would cement a monopoly for Tatts Group, thereby disadvantaging newsagents.54 Mr Brill also stated that Lottoland does not compete directly with newsagents as it only accepts bets on overseas lotteries.55 In an opinion piece published in the Daily Telegraph on 17 April 2018, Mr Brill stated:

The government’s proposal looks like a hamfisted and totally unnecessary move designed to protect and entrench the monopoly currently enjoyed by Tabcorp-Tatts, which by their own admission spent some $5 million of shareholders’ money last year trying to run us out of town.

If the legislation is passed by Parliament, Tabcorp-Tatts will end up controlling the entire lottery market — online and offline.

This will mean reduced choice for hundreds of thousands of Australian customers who enjoy a flutter on the results of overseas lotteries via Lottoland.

And it means the little guys — the newsagents — will be at the mercy of this huge monopoly. 56

The Newsagents Association of NSW and ACT Ltd (NANA) is concerned that the Lottery Betting Bill will create a lottery monopoly for Tatts Group, who NANA says ‘increasingly pass on the costs of the lotteries system to small business, increase administration requirements and interfere with the way that Newsagents run their small business.’57 In a statement published on NANA’s website, NANA CEO Ian Booth states:

The Newsagents Association of NSW and ACT Ltd (NANA) has today warned that the passage of changes to the Interactive Gaming legislation will have the unintended consequence of creating a monopoly position in Lottery product sales in most of Australia.

50. S Tasker, ‘Pubs push for Lottoland ban’, The Australian, 21 February 2018, p. 19. 51. H Davidson, ‘Lottoland deal with newsagents 'the last thing' Australia needs, Tim Costello says’, The Guardian Australia (online edition), 5 April 2018. 52. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, p. 25. 53. Lottoland, ‘Lottoland petition - vote for choice!’, Lottoland website, 20 April 2018. 54. Lottoland, ‘Lottoland Australia proposes profit sharing offer to Newsagents’, Lottoland Corporate website, 5 April 2018. 55. Ibid.

56. L Brill, ‘Opinion: It's a sure bet legislation means Aussies lose out’, The Daily Telegraph, 17 April 2018, p. 13. 57. I Booth, ‘Interactive gaming legislation changes will create a lotteries monopoly’, Newsagents Association of NSW and ACT Limited website, 28 March 2018.

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NANA says that parliament should defer further consideration of the Bill until all of the consequences of creating a lotteries monopoly are resolved.

Rather than address the concerns of lost income to government and the community through license fees, taxation and community support, the Bill will effectively outlaw any effective competition in the market for lotteries products.

The Bill does not address the loss in income to Newsagents and other lotteries franchisees which has been caused by Tatts Group Lotteries aggressive push into online purchases. In their most recent financial reports, Tatts Group reported an increase in online sales to 16.5% of all their lotteries product sales. Overall, sales have not increased by the same amount, so Tatts Group Lotteries gain must be at the expense of small businesses such as Newsagents.

58

Despite being a member of the ‘Lottoland’s Gotta Go!’ campaign, media reports have suggested that the head of the Victorian Association for Newsagents was also concerned that the Lottery Betting Bill would increase Tatts Group’s hold in the lottery market.59

In response to the introduction of the Lottery Betting Bill, Lottoland proposed a profit sharing deal whereby ‘newsagents will receive 20 per cent of profits generated from every bet on overseas lotteries that they refer to Lottoland Australia, which could be worth thousands of additional dollars a month to individual newsagents.’60 It has been reported that NANA is considering this offer.61 On 1 May 2018, it was reported that Liquor and Gaming New South Wales was investigating the legality of this offer in response to concerns by the Australian Lottery and Newsagents Association, which supports a ban on lottery betting.62

In early May 2018, the lottery betting company myLotto24, which is licenced as a bookmaker in the Northern Territory, reportedly decided to provide lottery betting services in Australia despite the introduction of the Lottery Betting Bill.63 The company is reported to have agreed a profit sharing deal with the Victorian Association of Newsagents through the association’s Nparcel ecommerce system, under which 1,200 newsagents will receive a 12 percent commission on myLotto24 deposits made in-store plus three percent from every deposit made online by referred customers.64 This development and the proposed Lottoland profit sharing deal suggest the industry context is shifting rapidly.

The National Rugby League club, the Manly Sea Eagles, has also advocated against the Lottery Betting Bill.65 The Manly Sea Eagles are sponsored by Lottoland and the club has stated that Lottoland has provided more than $1 million in funding towards its operations.66 The club also reportedly made the following comments in a letter to the Prime Minister regarding the banning of lottery betting:

… you can see why we are concerned that the proposed ban on online lottery betting will have a serious financial impact on our organisation, our members, our supporters and our wider communities…We

58. Ibid.

59. S Tasker, ‘Lottoland dangles carrot to get newsagents on side’, The Australian, 6 April 2018, p. 6. 60. Lottoland, ‘Lottoland Australia proposes profit sharing offer to Newsagents’, op. cit. 61. iGaming Business Limited, ‘Aussie newsagent group reveals potential deal with Lottoland’, iGaming Business website, 18 April 2018 ; see also C Kruger, ‘Blotto land’, The Canberra Times, 20 April 2018, p. 38.

62. G Shipway, ‘Another hurdle for lotto betting’, Northern Territory News, 1 May 2018, p. 9. 63. Daily Telegraph, ‘Lottery provider takes punt on future’, The Daily Telegraph, 4 May 2018, p. 15. 64. S Smith, ‘Feds fail to scare lotto group’, The West Australian, 4 May 2018, p. 61. 65. E Boyd, ‘Sea Eagles line up to tackle PM’, The Daily Telegraph, 3 May 2018, p. 11. 66. Ibid.

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note that the principal argument supporting the proposed legislation is that a ban on online lottery betting will somehow protect newsagents. In fact, we believe the legislation will do the exact opposite. 67

Financial implications The Explanatory Memorandum states that the ‘Bill is not expected to have any significant impact on Commonwealth expenditure or revenue.’68

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Lottery Betting Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Lottery Betting Bill is compatible.69

The Parliamentary Joint Committee on Human Rights has not yet reported on the Bill.

Key issues and provisions

Banning of Lottery Betting Item 3 of Schedule 1 repeals subparagraph 8A(5)(c)(iii) of the IGA and inserts proposed subparagraphs 8A(5)(c)(iii) and 8A(5)(c)(iiia). This is the key provision of the Lottery Betting Bill in terms of achieving the Government’s policy objective of banning online lottery betting in Australia.

The IGA stipulates that prohibited interactive gambling services70 and unlicensed regulated interactive gambling services71 cannot be provided to customers in Australia. Section 5 of the IGA defines a prohibited interactive gambling service as a gambling service provided in the course of carrying on a business to customers using an internet carriage service, any other listed carriage service, a broadcasting service, any other content service or a datacasting service. Gambling service is broadly defined in section 4 of the IGA to include ‘a service for the placing, making, receiving or acceptance of bets’.

Subsection 5(3) of the IGA provides a list of services that are not prohibited interactive gambling services. This includes an excluded wagering service at paragraph 5(3)(aa). Section 8A of the IGA defines an excluded wagering service. As currently relevant, subsection 8A(5) provides that a service is an excluded wagering service to the extent that it relates to betting on an event, series of events or a contingency, subject to certain exceptions. Current subparagraph 8A(5)(c)(iii) provides one of these exceptions—a service relating to betting on the outcome of a scratch lottery or other instant lottery. (That is, betting on the outcome of a scratch lottery or other instant lottery is not an excluded wagering service.) However, betting on the outcome of lotteries more broadly, including through an online lottery betting service, is not covered by the exceptions. Accordingly, as highlighted in the RIS,72 lottery betting services are likely to fall within the definition of an excluded wagering service under subsection 8A(5) and therefore be permitted under the IGA.

67. Ibid.

68. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, p. 3. 69. The Statement of Compatibility with Human Rights can be found at page 4 of the Explanatory Memorandum to the Bill. 70. IGA, section 15. 71. Ibid., section 15AA. 72. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, p. 7.

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Proposed subparagraph 8A(5)(c)(iii) replaces the narrow exception related to betting on the outcome of a scratch or instant lottery with a wider exception that covers betting on the outcomes of any lottery. Proposed subparagraph 8A(5)(c)(iiia) stipulates that this extends to betting on a contingency that may or may or not happen in the course of the conduct of a lottery.

These proposed amendments would effectively ban the provision of online lottery betting services in Australia as such services would fall within the definition of prohibited interactive gambling services under the IGA.

It should be noted that, due to Constitutional constraints, the effect of the Lottery Betting Bill is restricted to lottery betting services provided online. The RIS identifies this issue as one potential constraint of the Bill:

Lottery betting services may still be provided at land-based venues or in face-to face interactions, however, they will be subject to state and territory regulation. 73

If the Lottery Betting Bill becomes law, then under subsections 15(1) and (2) of the IGA, a person will commit an offence if they provide a lottery betting service with an Australian customer link (that is, any or all of the service’s customers are physically present in Australia).74 The maximum penalty for the offence is 5,000 penalty units ($1,050,000) for each day that the offence continues.75 Subsections 15(2A) and (2B) provide a civil penalty provision for the same conduct, with a maximum penalty of 7,500 penalty units ($1,575,000) for each day that the conduct continues.

Section 15 of the IGA also provides that section 15.4 of the Criminal Code Act 1995 (extended geographical jurisdiction—category D) applies to the offence of providing a prohibited interactive gambling service that has an Australian customer link. This means that the offence can be prosecuted whether or not the conduct or the result of the conduct occurs within Australia. This may be relevant as lottery betting companies such as Lottoland are based overseas.76

Keno betting Item 1 of Schedule 1 inserts a note at the end of the definition of lottery in section 4 of the IGA. This note clarifies that a keno-type lottery is an example of a lottery. This proposed amendment effectively means that the other amendments relating to banning betting on the outcome or contingent outcome of a lottery will also apply to keno games.

Keno games likely fall under lottery for the purposes of the IGA, but this proposed amendment will put this beyond doubt. This proposed amendment has likely been included in the Lottery Betting Bill in response to pressure from clubs and hotel groups, who are concerned with keno betting specifically. The RIS for example refers to the following comments made by the CEO of the Australian Hotel Association:

Keno is licensed, regulated and taxed by the State and Territory governments. Keno is sold in hotels across Australia. In comparison to gambling on overseas lotteries such as offered by Kenoland, the Keno offered in Australian hotels: pays taxes in Australian states and territories; is wholly regulated within

73. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, p. 23. 74. IGA, section 8. 75. Section 4AA of the Crimes Act 1914 provides that a penalty unit is currently equal to $210. 76. Lottoland, ‘Why are we based in Gibraltar?’, Lottoland Corporate website.

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Australia; is offered only within a supervised retail environment; and helps hotels support over 50,000 community groups at the grass roots level. 77

Telephone betting Item 2 of Schedule 1 inserts proposed paragraphs 8AA(1)(aa) and (ab) into the IGA. Current subsection 8AA(1) provides that for the purposes of the IGA, a telephone betting service is a gambling service provided on the basis that dealing with customers are wholly by way of voice calls made using a carriage service and that satisfies any conditions determined by the Minister.78 Subsection 5(3) of the IGA provides that a telephone betting service is not a prohibited interactive gambling service under the IGA.

Item 2 will amend the definition of telephone betting service to exclude a service relating to betting on the outcome of a lottery or a contingency that may or may not happen in the course of a lottery. This will ensure that lottery betting services will not be able to circumvent the intent of the Lottery Betting Bill by providing services by voice phone calls. The Department of Communications and the Arts noted in the RIS that it is unlikely that lottery betting ‘services as a telephone betting service would be a viable business model’.79

Other provisions

Transitional provisions Subitem 4(2) provides that the amended IGA will not prevent a person from recovering a debt that was deferred or incurred before the commencement of the Bill. The Explanatory Memorandum notes that this subitem ensures that ‘providers of lottery services will not be prevented from recovering debts deferred or incurred by customers prior to the commencement of the new prohibitions’.80

It has been reported in the media that some customers who believe they are owed money by lottery betting services are uneasy about the potential ban due to concerns that they may not be able to get their money back as they cannot afford to launch their own legal challenge.81 A spokesperson for the Northern Territory Government stated that they anticipated that the Commonwealth Bill would include transitional provisions in relation to existing disputes.82 Parliament may wish to consider whether this provision provides adequate protection for customers of lottery betting services in such circumstances.

The table in clause 2 of the Bill provides for a period of six months between when the Bill receives royal assent and when the proposed amendments in Schedule 1 take effect. As discussed in the ‘Policy position of non-government parties/independents’ section above, the transition period is one specific matter around which the Australian Labor Party plans to consult stakeholders.

Constitutional compensation provision Subitem 4(1) provides that the proposed amendments in Schedule 1 will not have any effect to the extent that they would cause an acquisition of property from a person otherwise than on just terms, within the meaning of section 51(xxxi) of the Constitution. Section 51(xxxi) provides that

77. Explanatory Memorandum, Interactive Gambling Amendment (Lottery Betting) Bill 2018, p. 12. 78. The Minister has not made a relevant determination. 79. Ibid., p. 23. 80. Ibid., p. 29. 81. G Shipway and F Chung, ‘NT online betting company's gamble’, The Northern Territory News, 7 April 2018, p. 2. 82. Ibid.

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the Commonwealth Parliament may only legislate with respect to the acquisition of property by the Commonwealth upon ‘just terms’. Legislation that results in an acquisition of property other than on just terms will be invalid.

Subitem 4(1) aims to satisfy the ‘just terms’ requirement by providing that the amendments inserted by items 2 and 3 will be of no effect to the extent (if any) to which their operation would result in an acquisition of property otherwise than on ‘just terms’.

In response to prospects of a High Court challenge of the Lottery Betting Bill by Lottoland, Minister Fifield has reported stated that the Government is confident that the Lottery Betting Bill is ‘constitutionally sound’.83

Concluding comments The Lottery Betting Bill effectively prohibits the provision of online lottery betting services in Australia. Stakeholder reaction to this Bill has been mixed, and continued developments (such as profit sharing deals) may further shift stakeholder views on the proposed ban.

83. Northern Territory News, ‘Lottoland mulls High Court challenge,’ The Northern Territory News, 8 May 2018, p. 10.

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