Inside Asian Gaming

August 2010 | INSIDE ASIAN GAMING 23 pretty favourably with the US$15.4 billion generated by games of fortune in Macau in 2009 by 21.7 million visitors. Large amounts of revenue from horse racing have been reinvested into HKJC’s racing infrastructure and marketing. As a result, in 2008-09, football betting contributed more (HK$370 million) to community causes via the HKJC Charities Trust than the core horse racing product (HK$110 million). The Jockey Club has argued publicly and privately in the past that the issue is not whether private gambling franchises should be allowed as alternatives to the HKJC, but that the Club itself should be allowed to pursue amore aggressive commercial policy. That’s in terms of reducing the tax levied on the bets, making larger the maximum daily dividends allowed, increasing the betting products offered and in developing the way products are delivered to customers. All these suggested initiatives are designed to fend off the competitive threat from the unauthorised bookmakers. The SCMP acknowledges that aspect of the problem in its leader. “It [the HKJC] has struggled to compete or wring concessions out of the government, such as more race days and more flexible betting on major overseas horse races. Officials appear to be more concerned about avoiding antagonising the anti- gambling lobby of church and education groups that campaigned unsuccessfully against legalising soccer betting seven years ago. Yet any widespread gambling interest among the public that is not satisfied by the club is bound to become a goldmine for illegal bookmakers and organised crime syndicates,” says the paper. The Jockey Club has been offering ‘in play’ and so-called ‘Asian handicap’ online betting on soccer games, including the major European Leagues and FIFA tournaments, since 2003. Gee up Their introduction did result in new betting business coming to HKJC. In financial year 2003-04, the Club’s total revenue from all activities showed the first upward trend since 1997. The Hong Kong government claimed in 2003 that the advent of HKJC Football Betting—as the product is marketed—actually resulted in a decline in Hong Kongers betting illegally. Given that unauthorised betting is by its nature underground, one wonders how the government could be so sure. What we can say is tax revenues from the Club’s football betting in the 2003-04 soccer season rose 64.3% from HK$1.65 billion (US$210 million at today’s exchange rates) to HK$2.71 billion (US$350 million). The problem now seems to be that the unauthorised bookmakers have either clawed back ‘market share’ on soccer gambling or simply created new demand. A likely reason for this is that illegal bookies can offer a bigger percentage in prizemoney of the cash originally staked than HKJC, because they don’t have anything like the same overheads. In particular, they have no need to share revenue with the authorities either in tax or payment to community causes. Tax is levied at 50% of net stake receipts for HKJC soccer betting and the Club also gives some of its operational surplus on all betting operations to community causes. The unauthorised bookmakers—provided they have a sufficiently large prize pool—can potentially offer bigger individual dividends than the HK$10 million (US$1.29 million) per account per betting day allowed by HKJC. Illegal bookies also reportedly offer punters credit for gambling; something which, for regulatory and ethical reasons, the HKJC simply cannot do. Issuing commercial franchises for gambling services within Hong Kong as suggested by the SCMP would only help legitimate operators to compete with illegitimate ones on prize money if the tax burden on the legal product was drastically reduced. And issuing new commercial franchises won’t of itself deal with the competitive threat posed by gambling credit issuance by the unlicensed product. The chances of Hong Kong allowing credit-based soccer betting in the manner of credit-based VIP table play in Macau, with credit issuance by the bookmakers and any player losses covered by those players liquidating assets if necessary, is so remote as to be barely worth considering. Short of every Internet and telephone user in Hong Kong having to give their identity card number every time they want to surf online or make a voice call (with all the civil liberties implications that involves), it’s difficult to see how unauthorised online and proxy telephone betting can be stopped. Upward trend Records seized by the authorities detailing illegal online and proxy telephone betting in Hong Kong during the duration of the World Cup up to the 7th July recorded HK$270 million (US$34.7 million) being wagered—nearly four times as much as during the previous tournament four years ago, said the SCMP . Perhaps one possible remedy to stem the illegal betting tide would be to allow the gaming operators already in Macau—who have the longest exposure and greatest experience of free market competition in gaming services—to offer sports betting in Macau casinos and to create a parallel online sports betting offer that can be accessed by Hong Kong residents. Every time a Hong Kong resident used the service, the Hong Kong government could then be paid a share of the tax revenue levied on the bet, as HKJC Football Betting—a winning proposition Soccer Betting