Calling Your Bluff

With the prolific rise of online gambling, the trade mark and regulatory landscape is also an area of growing interest worldwide, including in South Africa.

In the USA, Kalshi Inc., which describes itself as a “regulated exchange dedicated to trading on the outcome of future events”, previously applied for trade marks covering “Bookmaking services” and “organizing, arranging, conducting sports betting and gambling tournaments, competitions and contests”. This was seen as being at odds with representations that it is not offering gambling services and is rather a prediction market operator that offers a financial product.

There is debate about whether its betting exchanges differ markedly from traditional bookmaking and therefore how these should be regulated. The latter is strictly regulated and even prohibited in some states of the USA.

With the intensified debate and scrutiny over the corporation’s principal business, its subsequent trade mark applications were devoid of gambling services and the earlier trade mark application on the records of the US Patent and Trademark Office no longer covers “Bookmaking services”.

This is an interesting strategy that raises important questions, including whether the corporation has intention to use its trade marks for the specific services applied for and whether it, in fact, does not offer gambling services, which are subject to tighter regulatory control.

It will be interesting to see how the matter finally plays out in the USA, but for now we can consider it briefly against our own position in South Africa.

Our gambling scene is strictly regulated with the application of national and provincial laws.

The National Gambling Act of 2004, administered by the National Gambling Board, is meant to coordinate the concurrent national and provincial laws regarding gambling and establish national norms regarding the licensing and regulation of gambling, whilst also ensuring the safety of society against the negative consequences of gambling.

The Provincial Licensing Authorities control gambling operations and activities within the specific provinces, and gambling operators engage these provincial authorities, each with their own requirements, to operate in that province. There is no single licence to operate nationally, and this framework is quite federalist, similar to the USA.

In addition, under our law, only certain gambling activities are permitted. Notably, online betting may only be conducted via a licensed bookmaker in South Africa, specifically authorised by a Provincial Licensing Authroity to offer online betting services limited to fixed-odd betting, including betting on sports and horse racing. Online gambling or interactive gambling online is strictly prohibited. Enforcement, of course, is a separate issue especailly in realtion to offshore companies that are not subject to our laws and trading solely online.

However, key take aways from the case concerning Kalshi Inc. is that the specific services applied for in trade mark applications could consistute an intention, or even an admission, to trade in relation to those services, because an intention to use a trade mark is a requirement for its registration. It is also arguable that the same representation, or admission, can be made in advertising claims. In Kalshi’s case, many state regulators governing gambling sought restraining orders against the corporation on the basis that the gamification of prediction market services amounted to unlicensed gambling. This included a consideration of its advertising.

In South Africa, a parallel can be drawn with the billboard alongside the R21 which states that Hollywoodbets is “SA’s biggest online casino”. The issue was whether this was an admission that the company offers online gambling, which is prohibitied. However, Hollywoodbets claimed that the claim made is intended to show the scale of its authorised services. The National Gambling Board, although steadfast in its view that online casinos or interactive gambling is prohibited, has merely called on the Provncial Licensing Authorities to address the conduct of licensees.

However, the National Gambling Policy Council is also reported to be fast-tracking new law intended to address online gambling, amongst other challenges, and the National Gambling Board will reportedly also develop its own regulations to deal specifically with gambling advertising. This will apply in tandem with the gambling advertising appendix to the Advertising Regulatory Board’s Code of Advertising Practice.

We are not hedging any bets yet, but watch this space with great interest as government seems to double down on this new wave of regulation.

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