Sports Betting in Africa: Challenges and Regulations

1. SPORTSBETTING IN AFRICAPRESENTED TO THE INTERNATIONAL GAMING REGULATORSCONFERENCE HELD 17 – 20 SEPTEMBER 2018 COPENHAGEN, DENMARKBY EDWARD LALUMBE CHIEF OPERATING OFFICER

2. PRESENTATION OUTLINE • Introduction • Unconscionable gambling contract terms • Client identification and verification for non-face to face online betting clients • General Data Protection Regulation (GDPR) • Prohibition against the use of agency or intermediary for gambling • Unlawful marketing • Categorisation of games • Current litigation on categorisation of games • Pending legislation • Conclusion

3. INTRODUCTION • Generally we Africans are passionate and crazy about sports, particularly football. • Sports events are not only a source of great entertainment to African fans but also an opportunity to win some money placing sports bets. • Although approximately 40% of the African population is below the poverty line, the continent is emerging as one of the most lucrative betting market in the world. • Huge demand for bookmaker licences. • Rapid technological developments in order to support the growing demand for sports betting tend to stretch the boundaries of what is and is not allowed in terms of the gambling policy and legislative framework.

4. UNCONSCIONABLE GAMBLING CONTRACT TERMS • The express or implicit mandate of the gaming regulators is to ensure fairness in the gaming industry particularly between the holder of a gaming licence and its clients or punters. • The gambling industry like other industries make use of the standard terms of contract. • Generally standard terms • Lack transparency due to lack of negotiations between the parties • Punters/players are not aware of the existence of certain contractual terms • The terms are set by one of the parties and the other party is placed in a take it or leave it position • Suppliers of goods or services on a large scale inter into thousands if not millions of contracts per year and they might not be able to afford negotiation with every customer (impracticable) • They simplify and shorten the bargaining process • Can lead to abuse

5. UNCONSCIONABLE GAMBLING CONTRACT TERMS • The freedom and sanctity of contract emphasises that parties must be held to their contracts and that the courts should not adjust the terms of their contracts on the basis of unfairness.

6. UNCONSCIONABLE GAMBLING CONTRACT TERMS • In modern times consumer protection appears to be increasingly recognised as a legislative principle. • Prevention is better than cure. Legislation aims to cure the reactive judicial control of unfairness. • In South Africa S48 of the Consumer Protection Act prohibits unfair general standard contract terms and contains some guidelines on fairness.

7. UNCONSCIONABLE GAMBLING CONTRACT TERMS • Some of the standard gambling terms that we refused to uphold include: • If the operator fails to verify the result of a match or market, the bet is deemed void and the player will be entitled to its take back • Voiding a bet due to the negligence of the gambling operator e.g failure to close the betting market prior to the commencement of the contest • Failure to adjust the odds in respect of betting in running to reflect or take into account the interim results of the contest. Clause provides that the odds will automatically be adjusted to reflect the market average. • Some standard terms that were held to be fair and upheld in favour of the gambling operator • Electronic signature • Ignorance of the law

8. CLIENT IDENTIFICATION AND VERIFICATION FOR NON-FACE TO FACE ONLINE BETTING CLIENTS • The money laundering control measures prescribed by the FIC Act impose certain obligations on accountable institutions such as bookmakers and totalisators • These obligations include: • The duty to identify clients (part 1) • The duty to keep records (part 2) • Reporting duties and access to information (part 3)

9. CLIENT IDENTIFICATION AND VERIFICATION FOR NON-FACE TO FACE ONLINE BETTING CLIENTS • Identification of clients and others persons • S21 prohibits the AI from establishing business relationships or entering into single transactions with clients unless they have established and verified identities of their clients or established and verified the identities of persons representing their clients. • Regulation 4 stipulates that an AI must verify • Full names • Date of birth • Identity number and • Residential address of a natural person • Regulation 4 is based on the view that the client is met face to face when his or her particulars are obtained

10. CLIENT IDENTIFICATION AND VERIFICATION FOR NON-FACE TO FACE ONLINE BETTING CLIENTS • The Financial Intelligence Centre adopted the view that • The establishment of an online betting account by a client with a bookmaker or a totalizator is considered to be the establishment of a business relationship • The mere production of a copy of the customer’s identity document (whether verified or not) will not be sufficient to establish that the customer’s identity has been verified • Regulation 18 provides for instances in which client information is obtained on a non-face to face situation. • In such cases the AI is required to take reasonable steps to confirm the existence of the client to verify the identity of the natural person.

11. CLIENT IDENTIFICATION AND VERIFICATION FOR NON-FACE TO FACE ONLINE BETTING CLIENTS • Practical examples that bookmakers and totalizators accepting online bets should consider include: • Obtaining copies of documents that have been verified, should consider whether the person verifying is a professional who is subject to fit and proper test and whether is contactable to verify certification of documents. • All deposits into player’s accounts are received via electronic transfer only, from a bank account bearing the prospective client’s name. • Sending a letter by registered post to validate the address of the client and ensuring that the service is not activated until the signed acknowledgement of receipt is returned. • Verify the customer’s identity and address provided against third party database such as Home Affairs or other credit providers of credit verification systems.

12. GENERAL DATA PROTECTION REGULATION (GDPR) • Customer data and its uses are key components to competitive success in the betting and gaming sector in general • GDPR (EU Regulation no 2016/679 was adopted during April 2016 and become effective on 25 May 2018) • The objectives of GDPR are inter alia • Give back control to EU citizens and residents over their personal data • Enhancement of human rights of EU citizens and residents • Harmonisation of national legislation standards relating to data protection • Personal data refers to data relating to a living individual (data subject) and includes • Last name • Gender • Place and date of birth • Biometric • Political, cultural, economic feature or attitude etc.

13. GENERAL DATA PROTECTION REGULATION (GDPR) • GDPR applies to non-EU legal entities if they offer goods and services or monitor digital behaviour of data subjects incorporated in the EU, regardless of whether processing takes place within or outside EU. • Therefore GDPR will apply in the following circumstances • If the processing of personal data occurs within EU or • If the individual whose data is being processed is located within EU • Non-compliance can lead to a fine of: • Up to 4% of the annual turnover or 20 million Euros • 2% annual turnover in respect of minor breaches such as inadequately regulated data registry

14. GENERAL DATA PROTECTION REGULATION (GDPR) • The Gambling industry collects personal data for various purposes including: • Self-exclusion (Problem gambling) • Criminal purposes • Marketing purposes

15. PROHIBITION AGAINST THE USE OF AGENCY OR INTERMEDIARY FOR GAMBLING • The court’s in Gauteng and North West Provinces were called upon to interpret a legislative provision relating to the prohibition against the use of an agent or intermediary for the purpose of gambling • In Gauteng – Natal Bookmakers Society v GGB and South African Betting Services Limited • SBSL developed a web based betting platform (SA Bookmaker.com) • The platform offered a safe and secure and real time view of all available market offers and bids where bookmakers and punters can log on the internet and offer and place bets • Transactions on the site were anonymous • SBSL charged commission only on matched stake money. For bookmakers there was no commission payable when laying the bets • SBSL was licensed as a bookmaker by GGB • The court upheld KwaZulu Natal’s challenge that SBSL’s business operation was not that of a bookmaker but a business of arranging a marriage between the punter and the bookmaker

16. PROHIBITION AGAINST THE USE OF AGENCY OR INTERMEDIARY FOR GAMBLING • In North West – Hollywood Sportsbook v Northwest Gambling Board • Part of Hollywood’s business model involved the sale of top-up vouchers for use by registered punters on its online betting accounts • A top-up voucher (TUV) was a betting credit or betting currency used by a punter to top up his or her betting account and then place bets using funds available • No betting activity takes place at the outlets that sell TUV (Boxer, Edgars, Blue label, choppies etc) • NWGB argued that the sale of TUV was illegal as it constituted gambling and that it amounted to agency or intermediary for gambling purposes as prohibited by the legislation

17. PROHIBITION AGAINST THE USE OF AGENCY OR INTERMEDIARY FOR GAMBLING • The court dismissed NWGB argument on the basis that • A simple transfer of funds using TUV cannot amount to placing a bet or wager • By implication a bank cannot be said to be operating as an agent or intermediary for the purpose of gambling or betting • The placing of a bet and acceptance of a bet only occurs when the player actually places a specific stake on a specified contingency • From a voucher it cannot be determined on which event a bet is placed or any detail of the event or what the extent of the bet is or details of the sporting activity • The fact that TUV is an essential element (sine quo non) for betting it does not constitute agency or intermediary for gambling purposes • Key elements of the prohibition are agency, intermediary and gambling

18. UNLAWFUL MARKETING • Restriction on gambling advertisements is now enjoying attention of regulators and governments • Italy has announced a ban on all forms of gambling ads on sporting events • Ireland raised a similar concern • Australia has imposed restriction on daytime gaming ads • S15(3) of NGA prohibits advertising that promotes gambling activity as being made available to the public free of charge or at a discounted rate • S57(2) of GGA prohibits bookmakers directly or indirectly undertaking to give any person money other than a wager in order to induce that person to bet on a sporting event

19. UNLAWFUL MARKETING • Online bookmakers embarked on certain unlawful marketing strategies • Offering persons who opened a new account and deposited money for the purpose of betting to credit their account with the amount equal to the deposit • Requiring existing customers to refer a new player and as reward both the new customer and the existing customer’s account will be credited with an amount equal to the initial deposit by the new customer

20. CATEGORISATIONOF GAMES • The Constitution of the Republic of South Africa provides for the functional areas of concurrent national and provincial legislative competencies • These include casinos, racing, gambling and wagering. Lotteries and sports pools are excluded as they constitute an exclusive national competence • A lottery is a game, scheme, arrangement, system, plan , promotional competition or device by which prizes are distributed by lot or chance • Fixed odd bets are mere one-on-one wages and not greater schemes for the distribution of prizes. (not a pool)

21. CATEGORIZATIONOF GAMES

22. CURRENT LITIGATION ON CATEGORISATION OF GAMES • Fixed Betting on the outcome of greyhound racing South African Bookmaker Association and others vs the National Gambling Board and others • The legislation prohibits both holding of dog racing for betting purposes and taking bets on the outcome of a dog race • Importation of dog racing pictures is not unlawful as it is lawful overseas and falls within any lawful contingency as contemplated in the National Gambling Act • Fixed odds betting on the outcome of a roulette game Casino Association of South Africa vs Portapa t/a Supabets and others • The casinos argue roulette game is a casino game and therefore no one without a casino licence can utilise the outcome of a casino game • Taking bets on the outcome of a casino game does not amount to operating or offering a casino game and falls within the lawful contingency contemplated in terms of the National Gambling Act

23. CURRENT LITIGATION ON CATEGORISATION OF GAMES • Betting on the outcome of a lottery National Lotteries Commission and Ithuba vs Lottostar and others • Lottery Commission and Ithuba challenged Mpumalanga Gambling Board for issuing a bookmaker licence to Lottostar on two grounds • The Lottostar is operating a lottery without a lottery licence • Offering bets on the outcome of a lottery results is unlawful as it erodes the income of the national lottery

24. PENDING LEGISLATION • Currently there are two pending bills that have a significant impact on sports betting in South Africa • National Gambling Amendment Bill • Proposes dual regulation of bookmakers by the Lotteries Commission and Gambling Boards with respect to revenue generated from betting on the outcomes of lottery. • Prohibits betting on the outcome of a lottery contingency both local and foreign.

25. PENDING LEGISLATION • Tobacco Products and Electronic Delivery Systems Bill • Repeals the Tobacco Product Control Act in its entirety including the current provision that permits smoking in designated smoking areas that does not exceed 25% of the total floor area. • Prohibits smoking in an enclosed public space or workplace. This implies that any part of the gambling area would be deemed an enclosed public place thus smoking in the gaming area would be prohibited. • In general it has several unintended negative consequences for the licence holders, employees, customers as well as tax collection and corporate social investment. • Many smokers who wish to still participate in gambling while still being allowed to smoke may choose to gamble at illegal establishments or via illegal online gambling websites where the level of compliance is already disregarded.

26. CONCLUSION The gaming regulatory compassis driven by or premised upon two broad objectives namely: • Protection of the public, particularly the vulnerable • Protection of the fiscus Our regulatory obligations enjoins us to find balance between the needs of the industry and regulatory objectives. Incorrect emphasis on the one above the other will result in either over or under regulation of the industry to detriment of all stakeholders.

27. THANK YOU!