South African regulation of online casinos licensed in a foreign jurisdiction

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Abstract

Advances in technology brought about new popular gambling activities such as online gambling (sometimes called trans-border e-gaming) in South Africa and abroad, demand new regulatory structures since the current laws on gambling do not have provisions for online gambling. This article addresses the legality of engaging in online gambling within the South African borders by casino operators who are licensed in a foreign jurisdiction, giving rise to the issue of determining the place where the act of gambling takes place between a player who is in South Africa while engaging on the Internet with a server in another country. Although this article deals with the South African perspective, realizing that South Africa is a developing country and the law relating to the Internet might be behind, a reference to the online gambling law of United States (US) is made to showcase a need for attention to regulate online gambling in both developing and developed countries.

Introduction

Conventional legal frameworks governing the offline world are proving to be inadequate in the online world. Therefore, it has become imperative for national governments to have in place a clear policy framework for this rapidly developing sector.1 This article addresses the legality of engaging in online gambling within the South African borders by casino operators who are licensed in a foreign jurisdiction, giving rise to the issue of determining the place where the act of gambling takes place between a player who is in South Africa while engaging on an Internet with a server in another country. In online gambling, the player who is in one country is able to engage in online gambling with the casino operator who is located in a foreign jurisdiction.2 The question that arises is whether gambling takes place in a country where the player is or in the country where the operator is located. The question extends further if the casino operator is not licensed to operate a casino gambling in the country where the player is located perhaps even further if the casino gambling is prohibited in the country where the player is located. Can it be argued that since the casino operator is not licensed to operate casino gambling in accordance with the law of the player’s country, then such act is illegal in that country? Or since the casino operator is licensed in a foreign jurisdiction, then he can operate casino gambling in another country? This article puts in perspective the manner in which South Africa attempts to regulate online casino gambling in respect of the place where online gambling takes place.

The gambling industry in South Africa is a multi-billion rand industry.3 The overall gaming industry is about R16 billion in revenue each year and South Africans bet about R212 billion in legal gambling annually.4 About 7% of global gambling revenue is spent on the Internet.5 Looking at South African history on casino gambling, South Africa comes from a total prohibition of gambling. Most forms of gambling were banned in South Africa from as early as 1673.6 In the mid-1960s, the Gambling Act 51 of 1965 officially banned all forms of gambling except betting on horse racing. Casinos started their operations in the South African Bantustans7 in the late 1970s.8 In 1995 an estimated 2000 illegal casinos were believed to be operating within the country.9 There are some scholars who have argued that illegal gambling was tacitly supported by mining companies in order to keep black African workers locked in poverty and available as a source of cheap labour.10

The promulgation of the Constitution of the Republic of South Africa Act 108 of 1996 (the ‘Constitution’) brought about the legalization of casino gambling. The gambling industry was later regulated by National Gambling Act 33 of 1996 which was repealed on 1 November 2004 by the National Gambling Act 7 of 2004 (the ‘National Act’), whilst each province passed its principal gambling legislation.11 The National Act instituted a system of licensed casinos. The problem is that the advances in technology brought about new popular gambling activities such as online gambling which South Africa did not have before.12 The advances in technology demands a new regulatory strategy since the legislature did not have online gambling in mind. The online casinos began to advertise on the Internet and through more traditional broadcastings like radio and television.13

Section snippets

South African attempt to regulate gambling industry

In 1998 the National Gambling Board (the ‘NGB’) was established to effectively regulate and supervise the South African gambling industry based on domestic, continental and internationally recognized standards of compliance.14 The National Act led to the establishment of the NGB and the latter draws its mandate from the former legislation.15

The South African court on online gambling

For the first time in the history of South African, the South African Court (the North Gauteng High Court (the ‘High Court’)) had the opportunity to decide on the place where the act of gambling takes place in Casino Enterprises v Gauteng Gambling Board.30

Comments

The decision of the High Court has been taken on appeal to the Supreme Court of Appeal. However, there is much to comment on.

United States of America (US) and the State of Nevada

Advertising of online gambling sites on media such as radio and television, and other sources such as search engines and e-zines has led to an exponential increase of online gambling throughout the US. The US has more casinos than any other country in the world and the State of Nevada has the most casinos in the US.33 This article will focus on the US in general and the State of Nevada and a relevant case decided in New York in

Conclusion

The High Court in Casino Enterprises did not only focus on financial factors48 but also demonstrated the socio-economic factors which play a pivotal role in gambling in view of the impact it has on gambling. In as much as there are authors who have negative opinion on gambling, there are also those who are in support of it. For example, McMillen opines that a gambler who plays the game well, can win both self- and public

Phillemon Makakaba ([email protected]) University of South Africa, Mercantile Law, Pretoria.

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Phillemon Makakaba ([email protected]) University of South Africa, Mercantile Law, Pretoria.

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