Government to legalise online casinos – won’t make them give community funding

Saturday, 19 October 2024

Hundreds of millions of dollars of grants go to community groups every year from gambling, including pokies, Lotto and casinos – but legal online casinos wouldn’t have to, under new government plans. Steve Kilgallon reports.

Government plans to legalise online casinos won’t include compelling their operators to make charitable grants – making it the first type of gambling in New Zealand that won’t give funds to community causes.

A gambling boss believes that’s a “glaring omission” that could cost community organisations millions of dollars a year – but a cabinet paper claims making bookies give away money to the community creates a “perverse relationship”.

Internal Affairs minister Brooke van Velden has confirmed plans floated in that cabinet paper that she intends to permit up to 15 online casinos to operate legally in New Zealand, and hold them liable for tax and a problem gambling levy, but not any charitable contributions.

But Martin Cheer, boss of one of the biggest pokie trusts, Pub Charity, said: “If you are going to say to these people, we welcome you as corporate citizens, then make them responsible, and make them give grants.

“I can guarantee you they will not be put off imposing a community return… and if they are, then good riddance to them, they can go off and focus on the rest of the world.”

Cheer said that by legalising online casinos, the Government was rushing to plug budget holes by seizing on a new tax revenue stream without considering the risks of more problem gambling and the damage it would do to his sector, which returned about $330m in community grants last year. “The priority is to capture tax revenue, but at what cost?”

Online gaming has been a thorny issue for successive governments. Offshore sites don’t pay tax and levies or come under any government regulation but the only control that’s been used has been to ban advertising them. Previously, operators have got around that by using free ‘trojan horse’ sites to lure gamblers into offshore paid sites. The government plans to “channel” gamblers to legal sites which will pay 12% tax and abide by consumer protection and harm-minimisation rules.

Van Velden has more cabinet papers to come on the issue, and says she intends to pass legislation by the end of 2025, and have a regulator set up by the start of 2026. She wants to licence 15 operators.

She told Stuff the reason for not providing a community return was that pokies were “land-based and attached to a local community but when it is online-based, it is less clear where that local community is”.

Asked how that differed from the national lottery grants board, which distributes into smaller regional pools, Van Velden said to adopt that model would be a “very significant shift for the regulations”.

Her cabinet paper suggested that too many levies would make the new casinos “unattractive” for bookies.

It also argued that forcing gambling bodies to provide grants “creates perverse incentives to increase gambling activity as a means to increase revenue streams for community organisations”.

That position is supported by the Problem Gambling Foundation (PGF). Director Andree Froude said the foundation believed community funding needed to be decoupled from gambling. The PGF’s concerns with the new casinos was around the risk of more problem gambling, given the casinos would be open 24-7, continuous, and hiding problem gambling would be easier. She said regulation was overdue, because online casinos were, right now, “the Wild West”.

Four years ago, frustrated at the pace of change, SkyCity launched a site based in Malta - but legally can’t mention it to Kiwi punters. At the time, they pledged to give community grants from any profits. The then internal affairs minister, Tracey Martin, said that if she did licence online casinos, she would expect them to make a community return.

By law, pokie machines return 40 cents in the dollar of profit in grants. In 2023 that represented about $335m. Lotto returns 22 cents. The TAB is covered by the same rules as pokies, and in 2023 said it returned $17.5m to racing and other sports. Casinos are more haphazard: they range from SkyCity Auckland’s compelled minimum of 0.7% of net profits to Queenstown’s SkyCity Wharf’s 30%.

Three of the biggest pokie trusts have leapt into action ahead of the proposed law changes by jointly launching their own offshore gaming site - and they’ve said they will make community returns, regardless of the law.

But they’ve already found trouble with regulators for allegedly breaking the existing law banning the promotion of offshore gambling.

Section 16 of the Gambling Act explicitly forbids advertising and promotion of offshore gaming sites in New Zealand.

Last month, the New Zealand Community Trust, Lion Foundation and Aotearoa Gaming launched a Channel Islands-based site with a press release, database mailout, and promotions on all three trusts websites - including links to the site. Legally, Stuff cannot name or link to the site.

PGF complained to the Department of Internal Affairs (DIA), whose director of gambling, Vicki Scott, confirmed it was, in their view, a breach of the Act. Scott said the DIA were now “engaging with [the trusts] so they can better understand the new online casino offering”.

PGF’s Froude said the launch was a “definite breach” and said the maximum penalty for such an offence - a $10,000 fine - was quite light. But Gaming Machine Association chair Peter Dengate-Thrush defended the trusts, saying it was a “technical” breach and they were highly-responsible operators.

Stuff asked Jackie Lloyd, spokesperson for the three trusts, if they were aware they were of the apparent breach of the law. She said they had “complied with the request from the DIA”.

Froude said PGF were also considering an Advertising Standards Authority complaint about the site itself. She said the bright colours and imagery used, including a kiwi wearing a pirate’s hat, would appeal to under-18s, and the way the site was presented, she believed, made it appear as if it was Kiwi-based.

Lloyd said the site was R18 and had a proof of age registration.

Cheer said the three trusts’ move was hypocritical, given the pokie industry had been warning for years of the risks of online gaming. It was, he said, “an extraordinary lapse of judgement … you are looking at cannibalising your own business potentially for your own survival - it’s not a good look… I can understand commercial self-interest, but at what cost, would be my question?”

Lloyd said the trusts weren’t trying to undermine their own business, but simply “capture a piece” of an existing market. She said they were positioning themselves to secure a casino licence when they became available and were “very supportive” of online regulation.

She said the “primary reason” they had set up was “to capture some of that [market] to continue our returns to communities”.

“We see this as an opportunity to capture more funds for returning to the community.”