MODERATOR: CHRISTIAN KALB (CK CONSULTING)

PHILADELPHIA – 29 OCTOBER 2014

INTERNET GAMBLING SESSION

Peter DeRaedt, President, Gaming Standards Association (USA)

Richard Guay, Member, Quebec Provincial Online Gambling Working Group (Canada)

Edward Lalumbe, Chief Operating Officer, Gauteng Gambling Board (South Africa)

Katrina Nepomuceno, Legal Counsel, First Cagayan Leisure and Resort Corporation (Philippines)

Jamie Nettleton, Partner, Addisons (Australia)

SPEAKERS

IAGR CONFERENCE - 29 October 2014

Challenges on Internet gambling in different regions of the world

Liberal gambling or prudential policy?

Main issues regarding consumer’s protection

The future of the Internet gambling market

OBJECTIVES OF THE PANEL

IAGR CONFERENCE - 29 October 2014

1. PRESENTATION OF THE INTERNET GAMBLING

MARKET

TOTAL WORLDWIDE GAMBLING MARKET: AROUND US$ 400bn

(Gross Win – 2012)

Source : H2 Gambling (2013)

IAGR CONFERENCE - 29 October 2014

34%

20%

29%

13%

4%

CasinoGaming machinesLotteriesBettingBingo & others

INTERACTIVE GAMBLING ONLY REPRESENTS 10% OF THE GAMBLING

INDUSTRY

Source : H2 Gambling

IAGR CONFERENCE - 29 October 2014

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

P

2010

E

2011

E

2012

E

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

1.3% 1.5% 1.9%2.4% 2.6% 3.0%

3.8%

4.9%5.8% 5.6%

7.0%

7.9%8.6%

9.2% 9.4%

Interactive Gambling Gross Win as a percentage of Total Gambling

EUROPE LEADING THE INTERACTIVE GAMBLING WORLD THANKS TO

REGULATIONS

Source : H2 GamblingIAGR CONFERENCE - 29 October 2014

Interactive Gambling Gross Win by player region as a percentage (2012)

45%

30%

14%

7%

3% 1%

EuropeAsia & Middle EastNorth AmericaOceaniaLatin America & Car-ibbean Africa

LEADING 10 COUNTRIES(INTERACTIVE GAMBLING)

Source : H2 Gambling / CK ConsultingIAGR CONFERENCE - 29 October 2014

Percentage of each country in the total interactive gambling gross win (2012)

ROW

Japa

nUK

USAChin

a

Nordic

s

Austra

lia

Franc

eIta

ly

Canad

a

Ger

man

y0%2%4%6%8%

10%12%14%16%18%20%

18%

15%14%

11% 11%8%

6%5%

4% 4% 4%

BETTING TO ATTRACT CUSTOMERSCASINO TO MAKE PROFITS

Source : H2 GamblingIAGR CONFERENCE - 29 October 2014

Interactive Gambling Gross Win by product as a percentage (2012)

45%

22%

12%

9%

6%6%

BettingCasinoPokerState LotteriesBingoOthers

MOST OF THE INTERACTIVE GAMBLING IS OFFSHORE

Source : H2 GamblingIAGR CONFERENCE - 29 October 2014

Onshore Interactive Gambling as a percentage of total interactive gambling

(Gross Win)

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

P

2013

E

2014

E

2015

E

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

41.9%

37.0%

32.4% 30.9%33.2% 33.9% 33.6% 33.6%

36.2%39.5%

42.0%44.5%

46.5%

OFFSHORE GROSS WIN IS IMPORTANTOFFSHORE SALES (TURNOVER) ARE HUGE

EXAMPLE OF SPORTS BETTING

Source : Sorbonne University (2014)IAGR CONFERENCE - 29 October 2014

Legal market15%

Illegal market85%

Offshore sports betting sales: Between US$ 300 and 1,000bn (2012)

2. GAMBLING REGULATORY POLICIES

A TRADITIONAL QUESTION:

WHAT IS THE BEST REGULATORY POLICY?

ANOTHER QUESTION: FOR WHO ?

IAGR CONFERENCE - 29 October 2014

FOR SOCIETY

?

FOR GAMBLE

RS?

FOR THE STATE?

FOR OPERAT

ORS?

ANOTHER QUESTION: WHAT IS THE STATE’S MAIN OBJECTIVE ?

IAGR CONFERENCE - 29 October 2014

Chanel gambling and fight illegal gambling (Example : Belgium, France / Online)

Protection public and social order(Example: Canada, Finland, Morocco, Singapore)

Money for the State(Example: Cagayan, Italy, Malta)

Employment(Example: Antigua, UK in 2001)

Some countries have no clear objectives !

A FIRST TENDENCY: LIBERAL OR PRUDENTIAL ?

IAGR CONFERENCE - 29 October 2014

EU / Gambling havens: Liberal betting

Africa/America/Asia: Prudential policy

Oceania: The balance ?

A SECOND ANSWER: WHAT FIGHT AGAINST ILLEGAL GAMBLING ?

IAGR CONFERENCE - 29 October 2014

No or weak fight: Gambling is treated like a “classical” sector

Strong fight: Black lists, ISP and payment blocking, work with search

engines, etc.

MAPPING OF STATE’S ATTITUDES TOWARDS GAMBLING

IAGR CONFERENCE - 29 October 2014

Priority n°1 = Competitive online gambling market

Priority n°1 = Protection of public and social order risks

Strong fight against illegal gambling

Weak fight against illegal gambling

AUSTRALIA

UK

SOUTH AFRICA

USA

ALDERNEY

CHINA

GERMANY

CANADA

BELGIUM

AUSTRIA

SPAIN

DENMARK

COSTA RICA

SOUTH KOREA

FRANCE

ISLE OF MANMALTA

ITALY

JAPAN

PHILIPPINES

MEXICO

RUSSIA

CZECH REPUBLIC

POLAND SWITZERLAND

SWEDEN

CAGAYAN

Source : Sorbonne University (2014)

What online requirements to fight social risks ? (stake limits, limitation of payment methods)

What requirements to fight money laundering ? (KYC, obligations to report)

What requirements to fight match fixing? (national platform, international convention, risky bets, alerts)

OTHER IMPORTANT ISSUES REGARDING INTERNET GAMBLING

IAGR CONFERENCE - 29 October 2014

THREE REMARKS TO FINISH

THERE ARE OTHER WAYS OF THINKING THAN THE EUROPEAN ONE

IAGR CONFERENCE - 29 October 2014

Monopoly 18%

Prohibition56%

Licences21%

INTERACTIVE SPORTS BETTING (204 COUNTRIES)

Source : Sorbonne University (2014)

FOR BIG COUNTRIES, OPEN MARKETS DON’T ALWAYS RAISE MONEY

(Case study: sports betting in Italy)

IAGR CONFERENCE - 29 October 2014

ITALY (in €m) 1997 2011 2011/1997

Sales (sports betting) € 2,000m(Totocalcio)

€ 4,000m(mainly fixed odds)

+100%

GGR (sports betting) € 1,000m Around € 800m -20%

Level of betting taxes 36% of sales 2 to 5% of sales (*)

Sports betting taxes € 720m Around € 140m - 81%

(*) Funny thing : the level of betting taxes might reach 20% of GGR in the futureWhat will happen: pay out rates increase, more risks for society and a new potential decrease of betting taxes ! And then more and more slot machines…

WHAT KIND OF GAMBLING CUSTOMERS DO WE WANT ?

IAGR CONFERENCE - 29 October 2014

Recreational customers: Play for “Fun”

Professional customers: (Including traders, problem gamblers, money launderers, match fixers, criminals)

Gambling: 10% of the customers represent 70 to

95% of Gross Win

3. PRESENTATION BY THE SPEAKERS

4. Discussion topic n°1:

Liberal Internet gambling vs. prudential policies

Gambling operators generally lobby to reduce taxes/gambling duties. What is the point of view of the regulators on this issue ?

DISCUSSION 1

IAGR CONFERENCE - 29 October 2014

5. Discussion topic n°2:

Main issues regarding the consumer’s protection

Anonymity of Internet customers and modern electronic payment means create new risks for society. How do you tackle these risks?

A small number of online gamblers “make” the market and realize up to 90% of the revenues of the gambling companies. Some of theses gamblers operate in a grey area. As a regulator, can you accept these “risky” people?

DISCUSSION 2

IAGR CONFERENCE - 29 October 2014

6. Discussion topic n°3:

The future of the Internet gambling market

The poker market has now been decreasing tremendously for a few years. Do you think that it is possible to change this tendency ?

Fight against illegal gambling with efficient tools becomes a key issue for many States who want to protect society. Will your country act in that way?

DISCUSSION 3

IAGR CONFERENCE - 29 October 2014

7. INTERACTIVE SESSION