Paddy Power’s Australian subsidiary Sportsbet is locked in a legal tussle with the state of Victoria over the question of extraterritoriality. Darwin-based Sportsbet is challenging a fine issued by the Victorian Commission for Gambling Regulation over an alleged violation of Victorian law. Sportsbet’s alleged crime was allowing a promotional offer – specifically, $200 in free bets to new members opening accounts during the 2010 Melbourne Spring Racing Carnival – to be viewable online by Victoria-based digital devices. Sportsbet subsidiary IASbet was also fined, having offered a sign-up bonus of $1k.
The case is an interesting twist on the argument that an online wagering transaction is considered to have taken place where the online gambling company’s servers are located, not where the punter resides. (Even politicians in Atlantic City accept this as true.) Operators are bound by the laws of the jurisdiction in which they operate, and Sportsbet’s online betting license was issued in the Northern Territory. Victorian law prohibits offering incentives for opening a betting account, but there is no such law preventing Northern Territory-licensed companies from sweetening their pitch to a potential customer.
The Herald Sun reported that Sportsbet’s attorney Neil Clelland pressed home this point in County Court this week, insisting that based on the location of Sportsbet’s servers, if any offer had been made, it had been made in the Northern Territory, not in Victoria. Clelland warned that if the court upheld Sportsbet’s fine, any website visible from Victoria could be subject to similar prosecution. Clelland added that while some sections of Victoria’s Gambling Regulation Act addressed extraterritorial operation between the two states, there was no mention of extraterritoriality in the section dealing with inducements.
The hearing is ongoing, but it should be required reading for politicians in Nevada left giddy about the possibilities presented by the state’s new capacity to enter into interstate compacts for online poker. This is going to be a lot harder than you think.