Hong Kong tackles online gambling

The Hong Kong Jockey Club blames the Internet for turnover fall

By CNN.com Writer
Kristie Lu Stout

HONG KONG, China (CNN) -- The Hong Kong government is reacting to protect its gambling revenue as more punters switch from the racetrack to online betting.

Hundreds of offshore Internet bookmakers are offering discounted bets on Hong Kong Jockey Club races to attract Hong Kong's wired gamblers. Authorities are worried because 11 percent of the government's total tax take comes from the Jockey Club.

In response, the government has amended an outdated gambling ordinance that would bar Internet bookmakers from Hong Kong, a lucrative market that online betting sites worldwide cannot afford to ignore.

Other governments with income streams from gambling will be watching developments with interest.

New research from Internet measurement firm NetValue indicates a boom in Hong Kong user visits to cyber casinos. From 22 percent in October, the overall reach of the population going to gambling sites increased to 36 percent in November and to 41 percent in December.

The Hong Kong Jockey Club, which is also the leading source of charitable funding in the territory, experienced an 8 percent fall in betting turnover last year -- a fall that the club is attributing to illegal gambling and Internet betting.

Jockey Club executive director of corporate development, Kim Mak, said: "These are companies that make no contributions to Hong Kong, they are in fact stealing the important community resources of Hong Kong people."

New technologies, new challenges

According to the Hong Kong Home Affairs Department, the only legal gambling outlets are the racing activities organized by the Jockey Club and the Mark 6 lottery.

However, the government admits that the existing gambling ordinance is inadequate to challenge the latest breed of casino.

"We see that there are inefficiencies in the ordinance to handle the Internet and technology improvements," says a spokesperson from the Hong Kong Home Affairs Department.

QUOTE "It would be like charging an Italian for smoking dope in Amsterdam." - Nadja Von Massow, SSP International spokesperson

"It was drafted in the 1970s. With the advance of new technologies, there are new challenges we must face."

The department has introduced the gambling amendment to the Hong Kong Legislative Council, which is now studying the proposal.

Threat to revenues

Internet gambling sites deny that it is illegal for them to take bets from Hong Kong punters.

"It would be like charging an Italian for smoking dope in Amsterdam," says Nadja Von Massow, spokesperson for the online gambling site SSP International.

"A new market is a medium which is not going to fall under restrictions made by single governments."

During a Lunar New Year meeting last month, Hong Kong Jockey Club Chief Lawrence Wong singled out Antigua-based Easybets.com as a gambling revenue threat.

Easybets.com, the online arm of a 25-year-old chain of traditional bookmakers, is aggressively expanding into Asia to push growth beyond its current turnover of $120 million to $150 million a year.

Thirty to 40 percent of the site's customer base comes from Asia.

According to Easybets.com CEO Tim Lambe, his site's Asia-based gamblers spend more per bet than their American or European counterparts -- especially punters from Hong Kong, Singapore and Taiwan.

While Hong Kong officials argue that cyber casinos are taking the funds needed to improve the quality of life for Hong Kong's citizens, Lambe, a Hong Kong native, asserts that the tussle for takings is simply a commercial issue.

"It's a revenue problem. But everything has to be open to competition to improve its services," says Lambe.

"If they are worrying about revenue they should start thinking about improving the service or opening ways to legislation so they can tax revenues on offshore bookmakers."

Easybets
SSP International Ltd.
The Hong Kong Jockey Club

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