29 October, 2019
Summary of the Interactive Gambling Act 2001 (Cth) (IGA)
A recent case regarding the Interactive Gambling Act 2001 (Cth) (IGA) provides significant guidance on how the Act should be understood and applied. Importantly, the decision of Justice Sackar, in the NSW Supreme Court explores the line between a game of chance and a wager and sets the boundary between prohibited gaming services and lawful wagering.
The IGA prohibits online casino style gambling and online wagering using offshore betting services. It also prohibits online "micro betting" such as betting on events "in-game". Scratch lotteries, instant lotteries cannot be provided online and regular lotteries that are not licenced in Australia must not be provided to Australians. Online wagering provided by Australian licenced operators is permitted but since January this year betting on the outcome of a lottery is prohibited. The concepts, definitions, prohibitions and exceptions that create this framework are complex.
Background to the decision
Lottoland holds a sports bookmaker licence issued by the Northern Territory, allowing it to provide betting services relating to "bets on approved sporting events", which includes "other declared betting events". Prior to January 2019 Lottoland provided a service that enabled betting on the outcomes of Lotteries. In response to the ban on lottery betting services, Lottoland launched a range of new betting products approved by the Northern Territory Government. ACMA considered that five gambling products offered by Lottoland (the Impugned Products) t breached the IGA and on 7 June 2019 announced its finding that "several Lottoland online jackpot betting services were games of chance which are prohibited under the Act". Lottoland commenced proceedings in the Supreme Court of NSW seeking a declaration that the Impugned Products were not prohibited games of chance.
Facts
Each Impugned Product offered a fixed payout, independent of the number of customers participating. Customers 'win' when their chosen number (Customer Number) matches a Result ID produced from a number generator whereby the Result ID corresponds to a combination of selected digits taken from the opening value of specified financial indices at the appointed time (Winning Result ID).
Lottoland's case
Lottoland argued that the Products are 'excluded wagering services', as they relate to betting on 'an event, series of events or contingency'. Lottoland contended that the 'series of events' were the opening values of the relevant financial indices, and the movements in the levels of financial indices are generally acknowledged as 'events'. The term 'bet' in the IGA does not require that a person profess a view, it is merely the 'hazarding of money upon a contingency.'
Lottoland further claimed that the Products are "excluded wagering services" (a class of service that is not prohibited by the IGA) because they cannot be characterised as 'games'. According to various dictionary definitions, 'game' involves three elements; a contest, players, and rules. The explanatory memorandum of the IGA provides examples of games, such as roulette, blackjack, and interactive television-based quiz games. Evidently, argued Lottoland, the legislature did not intend the provision to operate as a catchall definition of 'game'. When a customer does not participate in the actual event or contingency, the activity is properly characterised as a bet or wager, rather than a game. Here, there is no interaction between players, no rules or procedures that govern the outcome of the wager, and the correlation between Result IDs and the Customer Numbers are fixed and ascertainable. Lottoland submitted that the legislative history of the IGA indicates that it was concerned only with prohibiting 'continuous'/'instant' betting, and micro-wagering, and that the Products do not have these 'instant' and 'continuous' features. Rather, bets placed using the Products are on events that happen at most once per day.
ACMA's case
ACMA argued that the Products are not services that relate to betting on an event, a series of events or a contingency, as 'betting on an event' refers to a situation where a person can be said to have professed a view as to the outcome of an event or events, and the person stakes money on that view. ACMA argued that other 'excluded wagering services' are typical examples of 'betting on events', such as horse racing or sporting events. Viewed in that context, the exclusions were intended to apply to services which are similar to the kinds of these wagering services, that is, events on which one could effectively form an opinion on. The Products do not involve customers 'betting on' particular parts of the opening values of financial market indices and customers do not profess any view about the particular indices. Therefore, there is no bet on an 'event' (the financial markets).
ACMA further argued that the Products are services for the conduct of a 'game of chance' or a service relating to betting on the outcome of a game of chance. ACMA equated the Products to 'roulette', a well-known 'game' as identified by the legislature. In the Products, as in roulette, the players or customers choose a set of numbers, and the winning number is randomly generated. The relevant 'rules', with respect to the Products, were said to be the Terms and Conditions for the Products. As the Products are played for monetary prizes, and because customers give consideration to play or enter, the Products fall within the definition of 'gambling service'. As the legislature deliberately chose to include specific words of limitation in relation to in-play betting and instant lotteries, it is clear that the legislature could have included such limitations in respect of 'games' if it had chosen. As it did not do so, ACMA argued that a broader reading of 'game' is warranted.
Decision
Justice Sackar held that the Products are excluded wagering services and therefore not in breach of the prohibition against interactive gambling.
The Products – Definition of 'Bet'
The process of selection of the Customer Number is somewhat entirely mechanical; there is no skill, opinion or belief involved, and little to no rational basis upon which the Customer Numbers are selected. However, the process by which money is staked using the Products can nonetheless be defined as a bet. It is not essential that one must profess a view in order to make a bet. This is clear from the definition in the IGA, where 'bet' means 'wager'. According to various dictionary definitions of wager, there is no requirement that any sort of opinion or view of the outcome of the event is necessary.
The Products – Definition of 'Game'
Due to the vast number of possible results, the selection is entirely random, and it would be near to impossible to make an accurate and/or informed decision about the likely Winning Result ID. There was no evidence or rational methodology of predicting the numbers at all. Furthermore, there are no traditional elements of a 'game' present in the Products. The definition of game in the IGA refers particularly to playing a game, and the amusement should be borne from the 'playing' aspect. There is no participation or competition with other players. The Products do not offer entertainment, but rather the possibility, however remote, of winning the jackpot, or some other prize. To be defined as a 'game' there must be a level of interaction, where the participants' actions must affect the outcome of the activity to an extent. Nothing the customer will do will affect the ultimate Winning Result ID. As the legislature has left the term 'game' relatively undefined, alluding to ordinary or historical understandings is permissible. The extremely broad definition contended for by ACMA would leave the term 'game' meaningless.
Conclusion
The decision provides welcome clarity to the scope of the prohibition imposed by the IGA and may assist licensed wagering services licensed in Australia to develop new products without risk of prosecution.
For further information, please contact:
Adrian J. Lawrence Partner, Baker & McKenzie
adrian.lawrence@bakermckenzie.com
