Offering multiple payment options while paying no tax and generating no employment or social betterment in SA.
The online gambling industry finds itself in a PR storm, fending off calls to ban it outright or at least subject it to the same advertising restrictions applied to cigarettes.
At a presentation this week, Sean Coleman, head of the SA Bookmakers’ Association, pointed to research by Yield Sec showing an even bigger problem – illegal gambling, which accounts for an estimated 62% of the total market.
Some 16 million South Africans, or 27% of the population, are reckoned to engage with illegal gaming sites.
Illegal betting is defined as bets placed in a jurisdiction where the operator is not licensed. For example, a South African placing a bet on a website licensed in the Caribbean, where regulations are weak.
“Offshore pseudo-gambling regulators are not part of a national regulatory structure and hence have no relation to national laws of any jurisdiction except that in which they sit,” said Coleman, whose organisation represents more than 100 bookmakers.
There are more than 2 000 illegal online gambling operators targeting South Africa, with 1 134 affiliates promoting these sites.
Affiliates are usually clickbait sites intended to draw traffic to the illegal sites, many of which are located in thinly populated jurisdictions such as the Caribbean island of Curaçao, Gibraltar, the Isle of Man or Malta. The Philippines is also home to many of these betting sites.
One Philippine-based gaming platform, Dafabet, is a primary sponsor of SA’s Proteas cricket team.
ALSO READ: TFG says ‘almost entirely extractive’ online gambling is greater threat than Shein
Legal vs illegal
Coleman called for better consumer education to help South Africans differentiate between legal and illegal gambling platforms.
The illegal sites are purely extractive, offering South Africans multiple payment options to place bets. They pay no tax and generate no employment or social betterment in SA.
It is time, says Coleman, for national gambling regulators and government policymakers to look more closely at these pseudo-licensing systems operated offshore.
Legal gambling through SA-licensed operators generated roughly R74 billion in gross gambling revenues (GGR) in the past year. This includes casinos, bingo, slot machines and online betting.
Yield Sec research estimates total illegal GGR earned by illegal gambling sites at R72.2 billion in 2024, compared to legal online GGR of R33.4 billion.
ALSO READ: R1.5 trillion turnover: Online gambling snares South Africa’s youth
Business is booming
It’s one area of the economy that is booming, with gross gambling revenues climbing about 25% a year.
The biggest growth is betting on horse racing, sports and online betting, where National Gambling Board (NGB) stats show annual growth north of 44% for the last three years.
This figure may be exaggerated by the re-shoring of bets that previously went to illegal offshore sites, says Coleman.
This ‘re-channelisation’ of bets to SA is a positive development, says Tyrone Dobbin of the Western Cape Bookmakers Association. “It brings gambling into the regulated system, improves tax collection and enhances consumer protection. Yet, this major regulatory success has received little to no public recognition.”
That may account for some of the growth in online betting, but not all of it.
ALSO READ: Online gambling and betting advertising is non-compliant with Gambling Act — minister
Shift in trends
One problem is the shift in betting trends from casinos, bingo and slot machines to online betting – both legal and illegal.
Relatively few restrictions on gambling advertising and marketing have been blamed for the growth in online betting, with students and some categories of social grant recipients blowing up to 50% of their grant money on bets.
NGB stats show a massive spike in online gambling since Covid. Recent research by Experian and Vault22 shows South Africans in financial distress are turning to gambling in their million and in some categories, spending half their social security grants on bets.
SA has national and provincial legislation governing gambling, but it seems to be ineffective, with just 285 cases of illegal gambling identified between 2018 and 2023. That seems a paltry haul for a supposedly well-regulated sector of the economy.
ALSO READ: R1.1 trillion worth of online bets in a year: Does SA need to rein in digital gambling?
Interventions
One way to curtail out-of-control gambling is to create a self-exclusion register, something originally proposed in the 2004 Gambling Bill but never implemented.
Twenty years later, individuals seeking self-exclusion are still subjected to outdated, cumbersome and often humiliating manual processes, says Dobbin.
“These require players to complete forms containing sensitive personal information which, in the best scenario, are emailed around the country to the various gambling operators in the hope they recognise the customer or exclude them if they have some online account.”
ALSO READ: Protect youth from online gambling
Call for coordinated enforcement
Bookmakers are also calling for a task team to look into gambling advertising and market conduct, and coordinated enforcement against illegal offshore operators, supported by a national public awareness campaign to educate consumers about licensed play.
Countries such as the UK, Australia and Belgium have banned the use of credit cards for gambling.
Lithuania bans all card payments to unlicensed gambling operators, while Australia allows debit cards to be used for gambling, but banned the use of credit cards, even via PayPal and Apple Pay.
In 2023, Finland started enforcing payment blocks to gambling operations not approved under its local licensing laws. Brazil has also started tightening up on card payments for online gambling as part of a broader drive to regulate online sports betting and casino sites.
Coleman says other measures that could be implemented to control the national gambling problem are licence condition restrictions to manufacturers operating in foreign jurisdictions, and the issue of cease-and-desist warnings to illegal operators.
Discussions have been initiated with the South African Banking Risk Information Centre (Sabric) with a view to restricting payment access to illegal sites.
Coleman believes intercepting internet requests for access to illegal sites could help, as well as IP blocking and geo-fencing that would restrict users’ access to their geographic location.
A more serious intervention would be domain seizure and ‘sinkholing’.
The latter is where, rather than simply blocking internet access to illegal sites, authorities take control of these sites and redirect traffic to a warning page or a controlled server known as a sinkhole.
ALSO READ: Almost half of South Africa’s working women gamble their hard-earned money
Regulatory landscape not helping
Part of the problem is a fragmented regulatory landscape divided between the NGB, the National Lotteries Commission (which oversees the national lottery) and the nine provincial licensing authorities, each tasked with issuing licences and regulating gambling within their respective provinces.
There’s also a National Gambling Policy Council with representatives from industry and government – but it has met just twice in the last eight years.
This has left the NGB and the provincial licensing authorities to operate in isolation, applying different interpretations of legislation and treating identical products inconsistently, says Dobbin.
This article was republished from Moneyweb. Read the original here.
