How SkyCity Casino operates online using a loophole in New Zealand

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Regulatory frameworks are always playing catch-up with evolving technologies, continuously creating gaps that innovative businesses can leverage. This reflects in the NZ online gambling industry, where many casino operators are offering their services despite the unfriendly regulations in the country. An example is SkyCity Casino, with its approach to capitalising on specific legislative details on New Zealand’s stand on online gaming.

This article explores how SkyCity Casino operates an online casino in New Zealand through a regulatory loophole. We’ll also examine the implications of this approach. Read on to find out more.

Understanding New Zealand’s gambling laws

Have you ever wondered why you can’t play your favourite online casino games in New Zealand? The answer is due to the country’s Gambling Act of 2003, which prohibits online gaming. This regulation’s primary focus is to ensure the control and minimisation of harm from these activities. Therefore, it guarantees fairness and openness and prevents crimes associated with gambling.

These laws allow only state-owned enterprises to provide gambling services to Kiwis. The act restricts all online operations within the country, except for the government-owned and managed Lotto NZ and sports betting run by TAB. However, under the law, it’s not illegal for New Zealanders to access and use offshore online gambling services.

SkyCity’s Online Casino: Operating from Malta

2019 saw the launch of an online casino by one of the key market players in New Zealand, SkyCity. They own and operate a lot of land-based casinos in the country. The company’s management detected growing customer demand for online solutions. However, this proved challenging, as New Zealand doesn’t allow online gambling.

SkyCity bypassed this limitation by collaborating with Malta’s Gaming Innovation Group (GiG). This company is based in a country well-known for online gambling due to its robust regulatory framework and tax-friendly environment.

While cooperating with GiG, SkyCity’s online casino services operate under a Maltese licence. This strategic move exploits what is often called a “loophole” in New Zealand gambling legislation. The law states that local companies cannot provide online gaming services in the country. However, it doesn’t mean Kiwis can’t visit offshore-regulated sites.

Why SkyCity Chose to Pursue the Online Industry

Before making this decision, SkyCity estimated that New Zealanders spend about $160 million yearly at online casinos hosted overseas. This prompted them to find their way around the restriction. They hope to get back some of those funds. The gaming platform informed the government that it would not wait for a change in legislation to take advantage of this online industry.

When this happened, the Department of Internal Affairs called for public submissions. They proposed introducing a regulatory framework for online gambling, including licensing domestic and overseas-based operators.

SkyCity representatives responded,” They were happy that the government is taking legal action to regulate online gambling. The casino welcomes the idea of online casino operators paying their fair tax. SkyCity hopes to see a well-controlled online-based industry where all services offer less harm to players.

A representative at Forsyth Barr, Andy Bowley, stated that the tax rate imposed on online casinos may be higher than that on land-based ones. However, nothing is confirmed, as the government is set to start the regulation on July 1, 2024.

Economic Impacts

The SkyCity online casino opens up new frontiers for the company to generate additional revenue from an economic standpoint. This is important in instances where physical casinos might be restricted, like during the COVID-19 pandemic.

Nevertheless, the effect of this on New Zealand’s economy is mixed. SkyCity contributes to the country as it pays GST on online gambling earnings from New Zealanders. However, all other profits and taxes go to Malta, where gaming companies have a much lower corporate tax rate than New Zealand.

This means that a significant amount of potential tax revenue goes uncollected by New Zealand, which could otherwise fund public services such as helping gamblers. In light of this, how these revenues are taxed should be reevaluated, and maybe an extra tax should be introduced solely targeting offshore gambling sites.

Ethical and Legal Implications

The angle with which SkyCity approaches this loophole raises several ethical and legal questions. Legal-wise, the company puts itself in a grey area but is still within the law of New Zealand. However, this sets off a whole set of much more complex ethical implications.

Some critics argue that with this, SkyCity would contribute to the problems the 2003 Gambling Act intended to mitigate. This includes issues of gambling addiction by encouraging even more addictive and less-controlled forms of online gambling.

While SkyCity does pay the GST from the revenue it earns from New Zealand online players, the main issue remains unresolved. The core of the matter is that the country is losing out on significant potential tax revenues, which could be much higher if the operation were based locally under a different legislative framework.

Regulatory Responses and Public Debate

SkyCity’s online adoption has caused much public and political debate in New Zealand. Some inland policymakers propose updating the Gambling Act to close the loophole.

The argument is that the document is too old when seen from the point of view of today’s reality, which points towards gambling over the internet. It was also discussed that New Zealand could benefit significantly from a regulated, safe, and taxed gaming industry for local and foreign operators.

Other policymakers caution that a broader legalisation of gambling will bring forth a corresponding expansion of its social costs. They have strongly urged either better controls or support for problem gambling. Both are strong points, as they will affect gambling in New Zealand.

Potential Reforms

Reform advocates suggest that New Zealand tighten restrictions or regulate access to offshore sites. This would help create a controlled environment where all operators, both domestic and international, must adhere to specific standards while paying taxes.

Therefore, it’s of utmost importance to evaluate the implications of these changes. The aim is to ensure that new rules do not inadvertently drive gamblers towards unregulated and insecure platforms. This is particularly crucial, as some foreign sites are unlicensed and lack player protection mechanisms or guidelines on responsible gambling.

International Precedents

In response to similar challenges, other nations have implemented various strategies. Notably, the UK has established a robust system for online betting licensing and regulation, with severe penalties for any operator violating the rules.

Sweden and Denmark have also created regulated markets, requiring all operators, foreign or local, to obtain a licence to serve residents. These international precedents demonstrate the feasibility and effectiveness of such approaches.

These examples could serve as models for New Zealand if it wishes to change its approach to online gambling. This will also help keep pace with technological advancements changing consumer preferences and address issues such as SkyCity’s regulatory and ethical concerns.

Conclusion

SkyCity Casino’s partnership with the Maltese company GiG to run an online gambling platform faces several challenges in New Zealand. While it is not illegal under the law, this form of operation, through a legal loophole, suggests that the country’s gambling statutes might need to be reviewed. It could even be reconstituted to adapt to the current state of things.

As New Zealand grapples with these challenges, it’s crucial to view what happened to SkyCity as a significant point in the broader discussion about effective regulation. This discussion raises essential questions about balancing economic matters and ethical considerations. The outcome of this debate—whether New Zealand legislates against online gambling or allows it on a regulated basis—will profoundly impact the future of gambling legislation.

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