Sportsbet has challenged the ability of State Governments to prevent the deployment of retail betting terminals that connect to the website of a licensed interstate betting operator. Any decision could have wide ranging ramifications on any exclusivity or preferred rights conferred under licences (and the value of those licences) in Australia to conduct betting from retail premises located in a particular State/Territory.
On 21 September 2010, Sportsbet filed an application with the Federal Court in Victoria seeking a declaration that provisions of the Gambling Regulation Act 2003 (Vic) (the GRA) relating to instruments of betting are unconstitutional insofar as they operate to prevent the installation or operation of betting terminals provided by Sportsbet to pubs and clubs in Victoria.1
Sportsbet has developed a betting terminal known as the Betbox. The Betbox is a computer which is operated by a touch screen and connects to the Sportsbet website (the Betbox does not connect to any other website). Through the website, the Betbox allows a registered customer of Sportsbet to place a bet. Sportsbet installed a Betbox at a pub in Victoria called the Eureka Stockade.
Sportsbet's statement of claim indicates that it applied to the Victorian Commission for Gambling Regulation (the VCGR) for permission to install the Betbox but that this permission was refused. After the Betbox had been installed, it is alleged that the VCGR, acting on a written complaint from Tabcorp Holdings Limited (Tabcorp) (the exclusive Victorian totalisator licensee), seized the Betbox using its authority under the GRA. Under section 10.5.9(1)(c) of the GRA, a VCGR inspector duly appointed under the GRA may, if the inspector considers it necessary, seize any machinery, equipment or records for the purpose of obtaining evidence of the commission of an offence.
In a letter to Sportsbet, the VCGR advised that the operation of a Betbox in a hotel constituted a breach of sections 2.5.2 and 2.6.1 of the GRA. Section 2.5.2 contains offences relating to "betting houses" or "places of betting". Section 2.6.1 prohibits the possession of an instrument of betting.
Despite requests from Sportsbet, the VCGR has refused to return the Betbox.
Sportsbet argues that the provisions of the GRA are unconstitutional on 2 grounds:
(a) the provisions of the GRA impose a discriminatory burden of a protectionist kind 2
(b)the provisions of the GRA impose a discriminatory burden and are not justifiable.
Sportsbet contends that the operation of section 49 of the Northern Territory (Self Government) Act 1978 (Cth) and section 109 of the Australian Constitution prevent these types of restrictions being imposed by a State law.3
(c) Tabcorp, as the holder of the exclusive totalisator licence in Victoria, is permitted to install and operate its Easybet terminals in pubs and clubs in Victoria;
(d) the Easybet terminals and the Betbox terminals offers similar features to customers;
(e) Sportsbet and Tabcorp are competitors; and
(f) sections 2.5.2, 2.6.1 and 10.5.9 of the GRA (which have been used by the VCGR to seize the Betbox terminals) operate to protect the revenues of Tabcorp.
Sportsbet will need to demonstrate:
(a) that the legislation discriminates against interstate operators; and
(b) that either:
- the legislation has a protectionist purpose4; or
- the prohibition in the legislation is not justifiable.5
If the Court agrees that the law discriminates against interstate operators, it will need to decide whether sections 2.5.2, 2.6.1 and 10.5.9 operate for a protectionist purpose. If the Court considers that it does not, it will still need to consider whether the provisions are appropriate and adapted.
If the Court concludes that any of these sections are invalid because they are unconstitutional, the decision is likely to call into question the validity of retail exclusivity. A conclusion to this effect would have significant ramifications for other betting monopolies, including lotteries.
The proceedings are scheduled for hearing in April 2011.
While we are not aware of any action being taken in New South Wales, Betbox terminals have been installed in pubs in New South Wales. Sportsbet is using Paul Langmack, a former high profile rugby league player, as the public face of its roll out.
We will continue to monitor developments in Victoria and New South Wales.
1 Sportsbet & Anor v State of Victoria & Anor VID808/2010.
2 This area of constitutional law was considered by the High Court in Betfair v Western Australia  HCA 11 and the Federal Court in Betfair v Racing NSW  HCA 603 and Sportsbet v New South Wales  FCA 604. The latter two cases are on appeal to the Full Federal Court. We have considered all three cases in FocusPapers in 2008 (link to http://www.addisonslawyers.com.au/focuspaper/68) and 2010 (link to http://www.addisonslawyers.com.au/focuspaper/158).
3 Section 49 of the Northern Territory (Self Administration) Act 1978 (NT) requires trade and commerce between States and the Northern Territory to be free. The wording of section 49 is modelled on section 92 of the Constitution and has been interpreted as providing the same level of protection to trade and commerce between the States and the Northern Territory. Section 109 of the Constitution provides that a Commonwealth law prevails over an inconsistent State law.
4 If a protectionist purpose exists, it is irrelevant if a non-protectionist purpose also exists.
5 Even if legislation does not have a protectionist purpose, it will still be unconstitutional if the legislation is not justifiable through the relevant prohibitions not being appropriate and adapted for the purpose to which each one is directed.