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Shadow Operators Gain Momentum

Illegal online gaming under the spotlight

The revenue generated by the legal gambling industry is slowly being eroded by online and illegal gambling.

These operators create games that compete with traditional gambling operators, which has a detrimental impact on formal gambling revenue.

This ultimately impacts tax revenue for government, while further consequences include loss of employment opportunities, loss of local economic activity, and an erosion of consumer rights and protection.

This and other issues related to the gambling industry will be under discussion at the National Gambling Board’s two-day conference on 18-19 July 2019 in Pretoria.

The South African gambling industry is an important component of the local entertainment and recreation sector of the country, both directly and indirectly, and its tax contributions support the growth and development of the country. Gambling revenues are expected to rise to R30 billion in 2019, according to a recent Price-Waterhouse-Coopers report. In FY2017/18, the industry contributed R2.8 billion rand to the South African economy.

However, the most important factor that hangs over the formal gambling industry in South Africa is that of a growing shadow industry of illegal gambling activities, including online gambling, which has gained momentum in recent years.

Online casinos continue to be offered in South Africa despite it not being legal, except for online betting through bookmakers licensed in South Africa for online betting (eg sports events and horse racing). South Africans cannot gamble with international betting operators who are not licensed in South Africa whilst within the Republic.

At present the gambling industry, excluding the National Lottery, other lotteries including society lotteries, promotional competitions and sports pools, is regulated by the National Gambling Board (NGB) and is subject to the National Gambling Act, 2004 (Act 7 of 2004) (NGA).

As online casino gambling is illegal in South Africa, the penalties on operators are severe and gamblers can have their winnings confiscated.

They can also be prosecuted for participating in an illegal activity. The Department of Trade and Industry (“the dti”) presented the National Gambling Amendment Bill to Parliament in 2018, which proposed that no new forms of gambling are to be allowed and included improved provisions in the legislation to deal effectively with illegal gambling.

The proposed Bill suggests that provisions must be included to prohibit illegal winnings, with amendments to prohibit Internet Service Providers (the latter must not knowingly host an illegal gambling site), banks and other payment facilitators from facilitating illegal gambling, transferring, paying or facilitating payment of illegal winnings to persons in South Africa.

The prohibition will require the NGB to be vigilant in terms of alerting the institutions above of such illegal operators.

If the notification by NGB is not implemented, the affected institution or facilitating body will be criminally liable in terms of the Act.

Such winnings should be paid over to the Unlawful Winnings Trust. Funds in the Unlawful Winnings Trust, administered by the NGB, should automatically be forfeited to the NGB. The forfeited money would be utilised for responsible gambling programmes managed under the National Responsible Gambling Programme (NRGP).

The two-day NGB conference takes place under the theme, ‘The Gambling Regulators’ and Operators’ Dialogue’.

The NGB will showcase the organisation, as a leader in the gambling industry, by sharing results of the latest research studies and encouraging discussions about the regulation of gambling with its stakeholders.

  • Press release issued by National Gambling Board SA on Monday 8 July 2019

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