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How best can we regulate sports betting?

With a smartphone and internet access, one can
With a smartphone and internet access, one can access thousands of betting sites from any remote location in the world. FILE PHOTO | NMG 

The raging debate in Kenya today is about the legalisation of online sports betting, a debate happening across many countries. Online sports betting is one of the fastest growing transnational markets in the global economy. With a smartphone and internet access, one can access thousands of betting sites from any remote location in the world.

But in Kenya we are not having an informed conversation because we are conflating the two regulatory arguments which is taxation and the moral effects.

First, there is need to understand that accounting in the gambling industry is different. Gross Gaming Revenue/Gross Gambling Revenue(GGR) and not total amount of bets collected is the determinant financial index upon which gambling tax is charged on.

GGR is calculated as the difference between the total sum of all bet/wagers and the total payouts of wins. This is closely analogous to Mpesa where trillions of shillings go through its platform, but revenue comes from what Safaricom collects as money transfer fees.

Now, GGR in many jurisdictions averages around five percent to 25 percent of total collection of bets. For example, when the NBA proposed a collection of one percent on all bets placed on their games, the American Gaming Association said that the one percent fee would equate to 20percent of their revenue since they only keep 5percent of the total wagers.

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Just to get into SportPesa whose numbers have been the subject of debate, something is amiss. If the company earned a revenue of Sh20 billion as it claims, its total collection of bets was between Sh100-400 billion a figure that is too high. Putting it into context that is the Kenya Revenue Authority’s total collection between one to three months. That is what SportPesa collects as total bets in Kenya in a year, from an average of 250,000 bettors only on their platform.

Moving to the moral arguments, Kenya is not a nanny state where the State should impose prejudices on personal choice and freedoms. Its pretentious for moralists to argue that betting is a moral hazard when alcohol and tobacco which have the same socio-economic harmful effects are legal. Its also double-speak of government to license casinos and charity sweepstake but cancel online sports betting licences on moral grounds. The only moral argument that stands is about under-aged kids accessing these online sports betting platforms.

Therefore, the actual question that we face is, what is the best regulatory framework we should adopt because this market is here to stay.

The US which has chosen to burry its head in the sand - sports betting being illegal in almost all its states, has the largest betting black market in the world. The Super Bowl attracts staggering wagers of more than $4 billion every year but 97 percent of that is done illegally.

Also, ironically, its big sports betting black market is in fact fuelling sports consumption. The price of live-streaming of NBA games has become cheaper because of the online betting black market.

For countries where sports betting is legal, which is the case in many parts of the world, the fundamental issue is what regulatory principle works for you.

The UK, the largest legal online sports betting market after it was liberalised as early as 2007, encourages internet gambling providers to establish operations onshore to enjoy the economic impact and this has revolutionised consumption of the English Premier League.

France encourages foreign online providers to establish themselves onshore to offer competitive alternatives to unlicensed gambling. Sweden which recently opened up its online market followed the general trend amongst EU member states, only licensing local operators and divided them into three sections; first is the state with exclusive rights, second is gambling companies, and third to be held by non-profit sector.

The second part of this series will duel on what are the best practices in dealing with problem gambling – gambling addiction, as well as on betting adverts and media campaign from a regulatory point of view.

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