Betfair & W. Aussie Gov. At Loggerheads

Published: Sunday, February 18, 2007 Online-Casinos.com

BETFAIR AND WESTERN AUSTRALIAN GOVERNMENT AT LOGGERHEADS

Constitutional fight flares up in the land of Oz

In an article by respected legal writer Burke Hansen this week The Register reports on the legal battle between the international betting exchange licensed in Australia last year, Betfair and the provincial government of Western Australia, which is trying to impose its own draconian legislation

Hansen, a lawyer in San Francisco says that over a year of acrimonious finger pointing between Western Australia and the UK-based Betfair has escalated into a full-fledged constitutional challenge by the betting exchange against a law that recently went into effect in Western Australia outlawing betting exchanges (see previous Online-Casinos.com/InfoPowa reports).

Betfair responded immediately to the legislation by filing a claim with the High Court of Australia, seeking to have the law overturned as unconstitutional.

The law both makes it illegal to operate a betting exchange and criminalises the use of betting exchanges by gamblers themselves, a step even the U.S. Department of Justice has been too timid to take. Western Australian punters face fines of up to AUD$10 000 or imprisonment for up to two years for placing wagers on a Betfair-type of exchange.

Australians have a reputation as an easy going lot not overly concerned with the moral ambiguities of gambling, writes Hansen. State regulated Totalisator Agency Boards (TAB) have offered off-site wagering for forty years in every state in Australia, providing state guaranteed accuracy of the results posted. Casinos are legal, and online gambling giants like Sportingbet plc are fully licensed. So what's the big deal about Betfair, Hansen asks in his article?

The answer is the Australian horse racing industry, much like its American counterpart, had a fit at the idea of its cozy state monopolies being challenged by outsiders like Betfair. The argument before the High Court has some awkward similarities to the ones that have the US Government squirming in front of the World Trade Organisation in its fight with the government of Antigua and Barbuda.

Just as the American horse racing industry received an enormous "carve out" from Congress to allow it to continue wagering remotely while prohibiting foreign competition from doing the same, so the racing industry in Western Australia has fought tooth and hoof to protect its local industry.

The claim is that Betfair will freeload off the local racing industry, not paying taxes and failing to support the racing facilities themselves. They also claim that betting exchanges provide an incentive to throw a race, since punters are able to bet on losers, rather than just winners.

However, Betfair has already addressed these concerns in a separate deal with the government of Victoria, and it's hard to see how Western Australia is a special case.

Hansen points out that there are many similarities between Australia and the situation in the United States. Australia, like the United States, has a federal system of government, with state governments traditionally free to craft their own legislation on issues that impact local morality, such as gambling, and the federal government empowered to harmonise trade between the states or support national defence.

However, fair trade arguments aside, a recent decision by the Australian High Court has greatly expanded the jurisdiction of the federal government over corporate activity, even at a very local level, and will likely put a rude stop to Western Australian unilateralism.

The so-called Work Choices legislation passed by Prime Minister John Howard's government in late 2005 gave almost plenary power to the federal government to regulate corporate activity, even at a very local level. This radical revision of Australian labour law was upheld by the High Court on November 14, 2006, and it's highly unlikely that Western Australia has jurisdiction any longer over the activities of Betfair, even within its own borders.

As a result, Hansen concludes that under the business friendly Howard government, regulatory harmonisation between the states is the name of the game. When Betfair received its license in Tasmania last year, it walked away with a little more than it bargained for, he says.