Paul Newson, Principal at Senet Legal and former head of the NSW gaming regulator, argues the time has come for Australia to legalize online poker.
The prohibition of online poker goes some way to revealing the sometimes slipshod and outdated gambling policy settings in Australia. On one view, policy approaches in Australian jurisdictions can be resistant to nuance and innovation, lack rigor and cogency and where aggravated by politicization, precipitate binary unsophisticated thinking and regulation, and blunt interventions.
Looking ahead, perhaps more worrying is the risk of policy approaches motivated by tainted or shallow analysis, unsupported by adequate assessment of merits and trade-offs, and undermined by limited, if any, monitoring and independent evaluation. The complexity of the industry and regulation of the sector is belied by uninterested politicians and bureaucracy arguably unprepared to create the conditions for sector innovation, vitality and leadership and while effectively managing commercial and harm prevention tensions to foster a sustainable, vibrant industry and advanced responsible gambling outcomes.
In an August 2018 Special Report to the NSW Parliament, consistent with section 31 of the Ombudsman Act 1974, under the heading Key Lessons for Whole-of-Government Managing restructures in the public service, the NSW Ombudsman referred to serious concerns about the “devastating” impact on organizational and staff capability of successive machinery of government changes regarding the management and administration of water resources in NSW. But media attention and scrutiny of such matters is fleeting, rarer still under COVID saturation, and political convenience and pyrrhic budget savings prevail over efficacy in most encounters.
While the NSW Ombudsman was responding to serious issues identified in water regulation, the same concerns apply to the inept approaches to government administration foiling effective gambling oversight. The disrepair of gambling regulatory arrangements in some Australian jurisdictions and degraded capability through repeated machinery of government interventions in regulatory settings, structures and operation – NSW illustrates naging the case perhaps uniquely – remains at odds with the NSW Ombudsman’s ominous 2018 findings, and the patent need for conviction, strategic leadership and modern and capable industry supervision.
While the opportunity to independently examine the adequacy of NSW regulatory arrangements as well as regulator and industry performance in NSW in response to the Crown Unmasked revelations was squandered by government, the continued lethargy in policy response is daunting and untroubled by any competent scrutiny. Notwithstanding dismay at the indolent policy approach, I understand that the withered NSW gambling regulator may be destined for yet another departmental reshuffle.
If correct, eschewing the unwise embrace of the Department of Customer Service and a generic approach to regulation would cause additional short-term disruption, but undoubtedly better position the organization, pending whatever policy gymnastics are revealed in the government’s eventual response to the NSW Casino Inquiry to build capability and effectively discharge its important supervisory role.
But to connect these musings to the status quo for online poker you need to acknowledge the striking dichotomy between the high gambling spend per capita of Australians and associated substantial and escalating gambling taxation revenue accruing to state and territory governments, and the awkward position the industry occupies in the political psyche and cultural milieu. Simply put, there is limited political capital and disproportionate risk attached to disrupting the status quo, whether to foster innovation, remedy obsolescent legislation, encourage innovation and investment or empower the regulator to effectively supervise the industry. To debate gambling related policy and legislation risks enlivening a vortex of policy difficulty and rent seekers from all quarters, while also illuminating defects in existing arrangements. Unless policy proposals are framed within a crackdown or harm prevention narrative, they are unlikely to get traction, and sans a watershed intervention such as the Victorian Royal Commission into Crown Melbourne, or hastened momentum around advocacy, there is limited appetite for policy adventurism in this space.
But suspend pragmatic disbelief in sensible policy outcomes while we traverse some kindling in search of arguments, albeit not formidable research, for distinguishing online poker and removing it from the troubled wake of online casinos.
SKILL OR CHANCE
If you poll interested players you will elicit a cacophony of claims that poker is a game of skill, and while not attempting to be the final arbiter here, it occurs to me that poker has key features of a game of skill, but also possesses chance fundamental to its fabric. While chance is inarguably involved, the important question ought to be to what extent, and does it dominate?
It is difficult to settle a conclusive view, however it seems reasonable to acknowledge that sufficient evidence can be marshalled to argue that poker is not dominated by chance, and that performance and outcomes correlate with skill, particularly over time. That is, skill is increasingly relevant and performance predictive over longer durations and more hands. Even if you cavil with the degree to which skill is involved, online poker ought to be distinguished from other casino-style games such as slots or roulette, where chance is underlying.
RISK OF GAMBLING HARM
Without going down the rabbit hole of whataboutism, defending a prohibition of online poker based on the risk of problem gambling or exacerbation of gambling harm is problematic considering the accessibility and ubiquity of gambling products and platforms, abetted by mobile devices and white-label system providers.
Without fear of being confused amongst the phalanx of gambling researchers, former Senator David Leyonhjelm was reported as stating “Online poker is probably the most innocent of all gambling … it’s more of a game of skill, not just some sort of vacuous pull of a handle.”
It is also instructive to observe that the 2010 Productivity Commission Gambling Inquiry Report found that a gradual managed liberalization, starting with a relatively “safe” form of online gambling – poker card games – was appropriate.
Reasonable minds may differ on former Senator Leyonhjelm’s view or prefer cherry picking the Productivity Commission Report, however, the characteristics of online poker including its heightened social interaction, buy-in and skill component, can be distinguished from other forms of gambling, whether land-based or online, that have been more closely associated with gambling harm. Despite this, it is not uncommon for online poker to be corralled amongst online casino games which are spoken about, perhaps conveniently, as a homogenous collective.
PROBLEM GAMBLING PREVALENCE
Gambling harm is a serious issue and one that has historically not attracted sufficient attention from industry. More recently, innovation and advances in industry practice and culture indicate heartening engagement and growing commitment towards bolstering player protection and improving responsible gambling outcomes. So, while there is more work to do, and we need greater industry participation in public policy discourse, the cultural resistance towards owning responsible gambling outcomes is increasingly giving way to leadership on what the future of safer gambling looks like.
It is also relevant to observe that despite intrusive gambling advertising and a surge in the accessibility of online gambling, problem gambling prevalence in NSW has been largely stable over the previous 15 years, as shown by the last three periodic gambling surveys commissioned by the NSW Responsible Gambling Fund. The most recent survey published in 2019 declared problem gambling prevalence had moved from 0.8% to 1% of the population. This change was not deemed statistically significant.
The UK Gambling Commission, which is responsible for industry supervision in Great Britain, released statistics on participation and problem gambling for the year to September 2021, which showed that the overall problem gambling rate was statistically stable at 0.4% (year to June 2021) and that the moderate risk rate had decreased significantly to 0.7% (year to June 2021) compared to 1.4% in the year to June 2020.
Importantly, gambling data from the Gambling Commission incorporates online poker, as well as other casino style games and in-play betting which form part of the regulated industry in Great Britain. At least on this metric, it seems to rebut the catastrophizing that some gambling researchers and pundits contribute to the discourse on legalizing online poker in Australia.
REVENUE LEAKAGE
The NSW Government forecasts AU$2.8 billion (US$2.1 billion) in gambling and betting taxation revenue for 2021-22, escalating to AU$3.1 billion (US$2.3 billion) in 2023-24, and as much as casinos draw periods of insatiable media and sometimes community attention, they constitute a modest portion of the revenue pie. They also principally meet the substantial contributions towards the NSW Responsible Gambling Fund.
But this is about revenue foregone – revenue leaked to offshore jurisdictions under the extant prohibition that could have contributed to Australian state or territory public revenue and supported economic and social outcomes for communities, as well as created jobs and commercial opportunities for business. Moreover, to the extent that online poker participation contributes to gambling harm, under current arrangements the associated costs are not being defrayed by offshore operators but are subsidized by existing domestic operators within extant resources.
PROHIBITION
I think it is uncontroversial to state that behind the curt media grabs, the efficacy of prohibition is largely illusory, and such policy often creates or exacerbates unintended policy issues and adverse consequences. Demand doesn’t simply disappear and the marvel of human nature means consumption continues, albeit through creative, circuitous and unlawful routes. Notwithstanding these difficulties, prohibition may be justified to respond to the most severe risks or curb the most offensive behavior. I am just not sure online poker meets this threshold.
The sensible alternative is of course regulation. A regulated industry would provide entertainment and recreation for interested players, as well as service the cohort of professional online poker players. Consumer protections and responsible gambling provisions – either unavailable or possibly unreliable under current arrangements – would be key features of a domestic regulated industry.
Oversight from a modern and capable regulator would supervise and audit player safety, system integrity, AML requirements and revenue assurance, and industry would contribute to preventing and minimizing gambling harm through responsible gambling levies and other initiatives.
It’s policy idleness writ large to bundle online poker with all other casino style games and considering the liberalization of gambling generally in Australian states and territories, the treatment of online poker under the Interactive Gambling Act seems a difficult and troubling contrast.
