Source: Business Today

By Frederic J. Frommer  |Apr 17, 2009

HOW the internet has tested our perception of what is normal! In the past decade its shapeless form, with no beginning or end, has challenged what we see as right or wrong, our rights and the protection thereof, as well as what is permissible or not.

And so it is with online gaming. Governments around the world have grappled — even fumbled — with the thorny task of how to regulate interactive gaming.

They have had to ponder such issues as how much regulation is needed, if any? How does one deal with the fact that the internet knows no boundaries?

In the US, Congress is still considering how to approach the regulation of the online sector.

In SA we are a step further, with the Department of Trade and Industry recently publishing the National Gambling Board’s (NGB’s) draft online regulation for public comment.

Did SA really need to regulate the online industry? Online gaming groups such as Silversands and Piggs Peak are already forging ahead, quite successfully, without regulations in place. One might argue there is little point in regulating online gaming as it will largely be ineffectual in the void that is cyberspace.

But in SA there are several key reasons to do so. For one, it was necessary to create an equal opportunity for all operators. Silversands and Piggs Peak have exploited the lack of explicit online gaming laws to steal a march on other SA land-based casinos groups who had much more to lose — their licences for one — by playing fast and loose with the existing gambling laws.

There is also the issue of consumer protection and money laundering to consider — issues that are addressed by ensuring that SA players use a nominated account to gamble online. These accounts will have to comply with the normal banking and Fica requirements, curbing illegal movement of money. Players will also be protected from themselves as well as unscrupulous operators by controlling how they spend their money in these accounts. The biggest danger with online gaming is easy credit.

Then of course, there is revenue to be had — a temptation that government could not resist — with SARS levying a 6% tax on all gaming revenue from the operators to be licensed in terms of the new regulations.

The regulations will no doubt be far from perfect, with the internet by its very nature presenting numerous blind spots.

One difficult area from a South African point of view will be foreign exchange controls, an issue that has implications for all trade done over the internet.

The Reserve Bank, which has worked with the NGB to draw up the regulations, is keenly aware that the internet does not acknowledge national jurisdictions and the free flow of money will be pivotal to the success of a local online industry. Less rigidity on forex will be needed.

As those who have been involved in drafting these regulations will have discovered, regulating cyberspace requires more flexibility, which means controlling specific outcomes and not the entire internet.