Casino advertising approval prompts problem gambling fears

Online casino operators will be allowed to advertise for the first time under a new market being opened up by the government, sparking fears of a rise in problem gambling.

The government is to auction off 15 online casino gambling licences, which will largely be snapped up by foreign- owned, multinationals.

Internal Affairs Minister Brooke van Velden, the Act Party minister in charge of regulating online gambling, said allowing the licence holders to advertise was crucial to the new market model.

"How do we ensure that it's actually profitable enough or beneficial enough for someone to even want to bid for the license? And we know that that comes from people being able to know that your product even exists," she told RNZ.

"If you're an online gambling outfit and you can't even advertise your product in a legal market, you're probably going to sit there wondering why you're even here. So we're saying yes, we would allow advertising."

A Department of Internal Affairs (DIA) briefing to van Velden, written in June 2024, says advertising will be allowed "in order to support tax collection" and reduce harm by channeling gamblers to licensed providers.

Currently it is illegal for offshore gambling sites to advertise in New Zealand and allowing ads could increase gambling harm, the DIA briefing paper says. "Allowing advertising and legitimising operators through licensing could have the unintended effect of encouraging more gambling."

But it says the government's new model can not work without advertising.

"Continuing the current advertising ban would substantially undermine the policy design, lessen the value and attractiveness of licenses and not enable channelling to regulated, more reputable operators."

Problem Gambling Foundation spokesperson Andree Froude said online casinos should not be able to advertise.

"It just feeds into the normalisation of gambling. It also opens up the doorway for inducements, which we believe also should be prohibited."

She said inducements, such as offering free games or topping up gambler's accounts, were a common industry tactic. "It does encourage people to gamble in a more risky way and it certainly does encourage people to spend more. So inducements are really concerning."

Martin Cheer, managing director of pokies operator Pub Charity Ltd, said New Zealanders could expect a lot of "noise pollution" as the online casino operators advertised their sites.

"I think people need to be prepared for the bombardment of advertising," he said. "There's enough being generated by Entain and the TAB and Lotto at the moment. You imagine adding in 15 others who've got nothing else to spend their money on but promotion and advertising trying to win over and grow their customer base."

DIA advice released to RNZ under the Official Information Act said the growth in online gambling had led to inquiries in the UK and Australia.

The UK inquiry found there was "good evidence" advertising could have a "disproportionate impact" on people with gambling problems. DIA told the minister that Australia's parliamentary inquiry "recommended that all advertisements for online gambling should be banned within three years".

Van Velden said advertising would be strongly regulated in New Zealand.

"Most of the ads you'd assume would be online, because that's where your target audience is going to be, right? So we're looking at a new area of how do you get the balance right about freedom of the internet and also the restriction of trying to advertise and target children and young people."

Documents released to RNZ under the Official Information Act include emails Sky City casino sent to van Velden, saying offshore casino sites that had been breaking the rules by advertising, should be denied licenses.

"New Zealand has been increasingly targeted by offshore online casino operators over recent years, many of whom have openly breached the advertising restrictions," Sky City told the minister.

Sky City chief executive Jason Walbridge, in an interview with RNZ, said Sky City had run an online casino out of Malta for the past five years and did not advertise because it was illegal to do so, but his competitors were breaking the law.

"We have more than 30 operators today targeting Kiwis, but they're advertising and so they're doing that illegally."

He said Sky City earned tens of millions in revenue each year from its online casino, but was losing ground to offshore sites.

"We're actually losing market share and revenue is declining because we're competing legally against operators who are competing illegally by targeting Kiwis through advertising."

Size of market is 'really concerning'

Local gambling operators and those who deal with gambling harm have been surprised by the size of the market the government is opening up by auctioning off 15 licenses.

"We had no idea it would be as high as that," Andree Froude of the Problem Gambling Foundation said. "We had thought around five, but to have 15 new players in the market is really concerning. How can that not be seen as an increase in online gambling, and, of course, then, an increase in harm?"

Walbridge said Sky City had analysed international markets and concluded seven licenses was the maximum New Zealand could sustain, without "overwhelming the market and making it so competitive that every day, you and I and our kids get up and see gambling ads everywhere".

Officials told van Velden that "countries, including Australia, Canada, Singapore, and the US, do not allow offshore websites to provide casino gambling".

But overall the officials support regulation, saying New Zealand was one of the only developed countries with an unregulated online casino gambling market.

"As a result New Zealand remains a haven for harmful gambling operations that scam consumers by not paying out prizes and provide a mechanism for financial crimes such as money laundering and serious fraud."

Official advice to van Velden shows that, because the sector is unregulated, there are wildly different estimates of how large the online gambling market is already.

A DIA briefing to the minister said the market revenue for online gambling was at least $304 million but turnover could be ten times that amount.

"If prize payouts are similar to Class 4 gambling (pokies), market turnover could be as large as $3 billion per year. This makes online gambling a bit bigger than the racing industry, and twice the size of Lotto."

Van Velden said a regulated market would provide more transparency.

"Once we regulate the market, we can actually capture that data and figure out whether or not it does increase over time," she said.

That would allow the government to see "whether we're getting the harm minimisation standards correct or the advertising standards correct to ensure that we're not incentivizing people to gamble online".

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