Australian online betting operators are currently required to have systems in place to prevent minors and self-excluded persons from making bets. However, despite these systems, there are reports of minors and self-excluded persons making bets with Australian betting operators, sometimes fraudulently. In the course of this wagering activity, the player may suffer losses or make winning bets. This paper examines how these issues should be dealt with by online betting operators.
There are a number of laws and regulatory practices in place to ensure that minors and self-excluded persons are unable to access online betting services in Australia. Amongst other responsible gambling obligations, Australian licensed online betting operators are required to implement procedures to:
- verify identity;
- prohibit minors from gambling; and
- enable account holders to self-exclude themselves from their online betting services.
These obligations stem from gambling legislation, licence conditions and responsible gambling codes in certain States and Territories.1 For example, in the Northern Territory, licensed sports bookmakers must:
- prevent minors from opening accounts by having established account opening procedures and internal processes to prevent access by minors;2
- ensure systems are in place to record all bets and monitor betting patterns;3
- report all unusual and/or suspect betting patterns to AUSTRAC;4
- identify new clients within 90 days5 of an account being opened by reference to the '100 point' identification requirement;6 and
- provide clients with the option to self-exclude from their betting site.7
As part of the identity requirements under the AML.CTF regime, players are allowed to engage in wagering but no withdrawal, whether of winnings or the balance remaining, may be made until verification is completed.8 Players are only allowed to withdraw money from their betting account once identity verification is completed satisfactory by the betting operator.
There has been criticism that the identity verification period of 90 days is too lengthy. It was recommended by the Joint Select Committee on Gambling Reform that the timeframe for verifying identity when opening a betting account should be reduced to 72 hours in order to reduce the risk of minors gambling.9 In response to this recommendation, the Department of Broadband, Communications and Digital Economy stated that such measures may have merit and should be considered as part of a larger harm minimisation framework.10 As such, it is possible that the identity verification period may be reduced in the near future.
The existing law and regulatory practice does not deal with circumstances whereby minors or self-excluded persons are not caught by the internal verification and other processes maintained by online betting operators. This may occur when a person opens an account under a false identity or uses another person's account to place bets (in the case of a minor, where they use their parent's account, for example). In these circumstances, there is a lack of guidance on how these issues should be addressed and how liability and responsibility should be apportioned.
In respect of the capacity of minors to enter into a contract, both the common law and statute operate to restrict this capacity. Generally, a contract with a minor is voidable at the minor's election. However, certain classes of minors' contracts are binding in order to enable minors to do certain acts for their own benefit.
On the other hand, some contracts entered into by minors are completely void. Further, even if there were a fraudulent representation by the minor that he or she was of full age, the minor is not liable for damages as that would result in effect being given to an unenforceable contract. This highlights the difficulties faced by betting operators in dealing with fraudulent age and/or identity representations by minors since minors are generally not liable for their actions under contract.
The terms governing the contractual relationship between the online betting operator and the account holder become paramount where minors and self-excluded persons take steps (including by fraudulent means) actively to override an online betting operator's safeguards in order to place bets. It is necessary for online betting operators to have clear and transparent terms and conditions specifying:
- the betting operator's liability in respect of bets made by minors or self-excluded persons using a third party's account or a false account; and
- the rights of the betting operator when dealing with such circumstances.
In order to limit liability, online operators should consider incorporating in their terms and conditions provisions to the following effect:
- account holders must agree that, if they self-exclude, they will not place bets with the operator;
- although the operator will use reasonable endeavours to take steps to close the account of self-excluded persons and to prevent them from reactivating their accounts, account holders must acknowledge that the sole responsibility for liabilities arising from the betting activity of a self-excluded person should be that person and that it is not the operator's responsibility to ensure that the self-excluded person does not place bets; and
- all account holders must agree that minors will not use their account or credit card to wager with the operator, and acknowledge that the operator is not responsible for any liabilities arising from bets made using their account and/or use of their credit card by a minor.
It is essential that the rights of the online betting operator in connection with bets placed by minors or self-excluded persons are outlined clearly. There are three main steps an operator should take to address these issues, namely:
- the terms and conditions could include a reserved right which states that, if fraud takes place, the transaction will be void. This means that the operator will not be obliged to pay winnings as a result of fraudulent transactions. (This may result in an incongruous situation where losses are borne by the operator.)
- the operator may wish to include a provision which provides the operator with discretion to allow all bets to stand. By reserving this right, the operator has the flexibility to decide whether to void bets or to let them stand.
- the operator may refund the deposit and put the account holder in the position he/she would have been in had no bets been placed using his/her account.
In reserving these rights, operators can exercise their discretion on a case-by-case basis. However, operators should take a consistent approach when addressing these issues so as to avoid confusion and arbitrary decision-making. This will also be relevant where disputes relating to similar issues are referred to a regulator or another authority for determination.
In the absence of legal and regulatory requirements relating to the manner in which online betting operators should address issues arising from minors or self-excluded persons accessing their betting services including, by fraud, operators should consider how their terms and conditions should deal with these circumstances. Importantly, online operators should contemplate limiting liability by requiring account holders and self-excluded persons to take responsibility for the use of their own account.
Further, online operators should consider reserving their rights so that they have discretion to void a transaction, allow bets to stand and/or to refund deposits. This would allow online operators to exercise various options at their discretion but also take into account the relevant situation and the commercial factors involved. However, it is important that online operators act in a consistent manner when exercising their discretion so that they do not appear to be acting in an arbitrary or unreasonable manner.
1Note: only the Northern Territory, South
Australia, the Australian Capital Territory and Tasmania have a
mandatory responsible gambling code of conduct.
2Northern Territory Code of Practice for Responsible Gambling, s 6, http://www.dob.nt.gov.au/gambling-licensing/gambling/Documents/responsible_gambling_code_of_practice.pdf (accessed 25 October 2013)
3Northern Territory Government Submission to the DBCDE Interim Report on the Review of the Interactive Gambling Act 2001, pg 3, http://www.communications.gov.au/__data/assets/pdf_file/0004/155974/Northern_Territory_Government_-_Submission_on_the_interim_report.pdf (accessed 25 October 2013)
5Anti-Money Laundering and counter-Terrorism Financing Rules Instrument 2007 (No 1)(Cth), part 10.4.3
6Northern Territory Corporate Licence for a Sports Bookmaker – Standard Conditions, cl 20
7Northern Territory Code of Practice for Responsible Gambling, s 4, http://www.dob.nt.gov.au/gambling-licensing/gambling/Documents/responsible_gambling_code_of_practice.pdf (accessed 25 October 2013)
8Anti-Money Laundering and counter-Terrorism Financing Rules Instrument 2007 (No 1)(Cth), part 10.4.2(2)
9 http://www.aph.gov.au/~/media/wopapub/senate/committee/gamblingreform_ctte/completed_inquires/2010-13/interactive_online_gambling_advertising/report/report.ashx (accessed 25 October 2013)
10 http://www.communications.gov.au/__data/assets/pdf_file/0007/162277/Final_Report_-_Review_of_the_Interactive_Gambling_Act_2001.pdf (accessed 25 October 2013)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.