Gauteng regulator investigates its options if Piggs Peak appeal fails
South African media are reporting that online gambling operators are again open for business following the lodging of an appeal in the Supreme Court in Bloemfontein by Piggs Peak.
The appeal is against a recent High Court decision that found that the act of gambling over the internet takes place at the point of interaction between the operator and the player i.e. the player's screen, rather than on the server of the operator which may be in a foreign country.
The Gauteng Gambling Board claimed that the decision made all unlicensed online gambling in the country illegal, causing a temporary shutdown of websites.
However, the principal litigant in the case, Piggs Peak's Swaziland-based owners Casino Enterprises, subsequently received leave to appeal the decision and has lodged such an appeal with the Supreme Court in Bloemfontein.
That accomplished, Casino Enterprises apparently followed legal advice that it could resume operations until the appeal has been decided.
The authorities appear to disagree with this advice, and have now commenced an enquiry into the options of the Board should the Casino Enterprises appeal fail.
One of these is whether the Board will have the right to seize all gains from the time of Judge Neil Tuchten’s decision on 20 August 2010, and whether that right could extend to any entity that facilitates online gambling, including banks, advertisers and internet service providers.
“It is business as usual” said a Piggs Peak online casino spokesperson last week after the parent company won the right to appeal what the Gauteng Gambling Board called a “ground-breaking ruling”.
However, Edward Lalumbe, the chief operating officer of the Gauteng Gambling Board, said unlicensed online gambling operators were gambling by re-opening pending the resolution of the appeal, and could face forfeiture of all the gains made since the High Court decision of 20 August 2010.
“It is not the end of the day. When the online casinos have exhausted their rights, we will appeal for forfeiture and will look to seize whatever gains they collected in the period after the original ruling," Lalumbe threatened. "We can’t stop them at this stage, but they will be taking the risk of following the advice of their lawyers.”
Lalumbe additionally revealed that the Board was taking legal advice regarding the extent of its authority to seize illegal proceeds.
“Whoever benefits from the proceeds of crime or is in some way involved in the provision of online gambling will be made to return the proceeds they have received from the activity if it is found that online gambling is illegal," he emphasised.
"We know what funds are at play, the money that gets moved by banks. We know who advertises and where they advertise, and we are following who gets what revenues.”
"In terms of the Prevention of Organised Crime Act, all people who make profits from an illegal activity can be required to return the profits of that illegal activity. We may see a lot of parties whose assets get frozen,” Lalumbe added.
Lalumbe's claims have been challenged by South African legal expert Paul Jacobson, who told media reporters that the gambling board may be over-reaching itself in terms of Internet service providers. “The judgment itself doesn’t refer to service providers at all," he said this week. "The gambling board is trying to use the judgment as an authority to include ISPs on the assumption that the ISP is facilitating and, therefore, involved in an illegal activity.
“The ECT Act has a provision that shields ISPs from liability in cases like this. ISPs shouldn’t have to actively police their network to see who is using their network or what’s going on across their network. ISPs act as mere conduits for data and in terms of the ECT Act must be hands-off to claim protection under the act.”
The situation may be less clear for media owners; online gambling companies operating in South Africa tend to advertise widely, and the situation is undoubtedly being studied by media company lawyers following an implied threat last week in which the Board's head of legal services, Lucky Lukhwareni, said companies involved in the advertising of online gambling could, if found guilty, be fined up to Rands10 million or 10 years in jail or both following the High Court ruling.
Meanwhile, legalization legitimising online gambling by regulating, licensing and taxing it at national government level remains dormant in the South African Parliament. Further action on the law awaits the recommendations of a review commission studying SA gambling in toto, which a Trade and Industry Department spokesman recently revealed is running around a month late on its submission deadline.