Policy making, social responsibility and the gambling industry

1. Policy making, social responsibility and the gambling industry Professor Jan McMillen Director Australian Institute for Gambling Research University of Western Sydney

2. Background themes • Canada & Australia: common principles • Federal systems, state/provincial authority over gambling, varied approaches • Historical nexus between gambling legalisation & charitable/welfare funding • Strong emphasis on regulation, social issues • Differences • Australian gambling legalised since 19th century • Primarily government-run, prohibition on private ownership until 1970-80s • Privatisation, commercialisation introduced market imperatives, problem gambling (machines, casinos) • 2000-1 per capital loss $942, almost 4% HDI • 80-85% gamble regularly, 2.1% have problems

3. Regulatory rationale • The traditional role of government to regulate • Commercial gambling as a privilege, not a right • Control over market entry, probity of operators • Crime prevention, consumer protection • To generate revenue • replacing illegal activities that incur policing costs • revenue for welfare, public infrastructure • increasing leisure and recreation facilities • job creation (= ‘illusory” – PC 1999) • To mediate social costs • perception that gambling is a questionable activity • problem gambling, social harm • Emerging challenges to national sovereignty • Global telecommunications technology as the catalyst for change

4. Factors that influence gambling policy • The economic power of industry • Revenue imperative, ‘invisible’ form of taxation • Inter-regional rivalry • leakage of gambling expenditure • investment opportunities • Special treatment for some industries • Growth is supply driven (not consumer demand) • Policy learning • learning from other jurisdictions • from past policy failures • from research, community backlash • Relevant policy instruments, mechanisms • choice of policy options/design, convenient policy process

5. The Gambling Regulatory Cycle 1. Regulatory liberalisation 3. Community concern, industry pressure, information can lead to regulatory reform 2. Proliferation of gambling & impacts

6. What works: lessons from Oz • Casinos: • Control over market entry, regional monopolies • Licensing & regulation of gaming staff • On-site 24 hr government inspectorate • Parallel surveillance systems, override on CCTV • Police squads, undercover, ban on criminals • Auditing of cash transactions • Gaming machines (clubs, hotels): • Venue licences, restricted to certain venue types • Licensing of key staff • Centralised monitoring systems, auditing • What doesn’t: • Proliferation of gaming machines • Wagering & sportsbetting: • inferior regulatory standards, fragmented, inconsistent

7. Lessons from Australia (cont’d) • Crime prevention • Deterrence, detection, sanctions • Proactive policing at minimal public cost • Internal casino/venue crime • hidden ownership • theft, counterfeiting • cheating (card counting) • Community crime • Crime displacement • Problem gambling related crimes = inadequate data • Money laundering • Star City scandal, regulatory reforms • Prosecution, enforcement • Patrons, staff • Criminal prosecution, licence withdrawal automatic

8. Crime prevention (cont’d) • Licence withdrawal rarely used against venues • but publication of breaches, sanctions • Problem gambling crimes • tendency of the courts is to impose jail sentence • problem gambling is accepted in rare cases as ‘mitigating circumstances’, leniency in sentencing • mandatory counselling not successful • Liability for problem gambling • Tendency has been to find individual liability eg • the Katoomba-Reynolds, Lane Cove cases • the O’Malley’s case • the Star City case • Self-regulation, commercial approach is deficient • evidence of social costs/problems from PC’s national inquiry, state research

9. Problem gambling – regulatory reforms • Gaming machines = major source of problems • 10-14% of regular machine gamblers have problems • 2.1% gamblers generate 33% of total gambling revenue • NSW: 104,000 machines in clubs & hotels • 2.55% = highest national prevalence of problem gambling • Western Australia: no machines outside Perth casino • 0.70% = lowest national prevalence of problem gambling • Restrictions on consumer access • Away from shopping centres • ‘Cap’ number of machines (venue, region, state) • CIS requirements – demonstrate community benefit • Consumer information, signage, brochures • Controls over advertising and promotion • No external advertising, not to focus on ‘winning’, etc • Controlling the gaming environment • Lighting, ATMs, gaming not to dominate venue, multiple facilities • Controlling game features and design

10. Internet gambling - regulatory issues • Legislative and regulatory inconsistencies between states/territories • inadequacies of regulation, loopholes • detection, control of illegal activities • Integrity of the games & consumer protection • who sets the standards? are they enforceable? • Social impacts (eg underage gambling, problem gambling) • Is prohibition a viable option? • Commonwealth response: prohibition of gaming, proliferation of wagering/sportsbetting • who will enforce a ban? • limitations of national sovereignty, state laws • Disputes with USA & other nations are likely over sportsbetting/wagering

11. Developments in the UK • Principle of ‘non-stimulation’, restricted markets until 1990s • Privately owned National Lottery introduced commercial industry practices, uneven playing field • Internet bookmakers moved offshore to tax havens • Gaming Review 2001 (Budd Report) • proposes major liberalisation of gambling • introduction of gaming machines • in theory, growth is to be balanced by responsible gambling policies • Regulatory regimes not defined • Currently subject to industry lobbying

12. The way forward • Avoid policy lag • policy learning - be proactive, not reactive • avoid trend to devolve initiative to industry • A coordinated policy using all regulatory resources • review of legislation, range of regulatory options • Needs a ‘whole of industry’ approach, consistency (not ad hoc, incrementalism) • Collaboration, policy input by community groups , local authorities • consultation re licensing criteria • more specific regulations, application of appropriate sanctions • clarify offences & liability

13. Blueprint for gambling regulation • Separate structure of institutions involved • Allocation of roles and functions: who should do it? How should it be done? • policy development by parliament • control of all gambling by independent regulator • enforcement separate from policy & control • adjudication shared by control authority & courts • fund administration by independent trust, board • Defined,accountable processes for implementation and enforcement • Avoid conflicting principles & objectives • Open, consultative & informed processes • The guiding principle = the broader public interest