Gambling

Supplementary written evidence submitted by The Sports Rights Owners Coalition (GA 98)

The Sports Rights Owners Coalition ("SROC") is an informal group of representatives of international, European and national sports bodies. SROC operates as a forum through which these bodies can share information and experiences. In particular, the purpose of SROC is to enable:

discussion and sharing of best practice on key legal, political and regulatory issues;

raising awareness of new developments and innovation in sports rights; and

joint action by the sports to protect and promote their rights, including the prevention of .piracy of their events.

Individually and collectively, we represent a majority of the European and International leading sports and competitions, attracting millions of spectators, and many more millions of viewers in host nations and internationally across a growing variety of broadcast platforms.

One of SROC's founding objectives is: "to work with national Governments and other agencies to create regimes for sports betting that enables sport to protect its integrity, and establishes a fair return to sports for the use of their events."

SROC members consider that the UK was for many years both the leading commercial sports betting jurisdiction, with law that created a framework under which betting operators had to have contractual agreements with sports to be able to offer bets, and with an overall system that could protect the integrity of sport. SROC members do not believe that this is the case now. We welcome the Select Committee's inquiry and our submission is based on input and advice not just from our British members but from sports bodies around the world. This includes experience garnered from both France and Australia where legislative developments are ahead of those in the UK.

SROC urges the Committee to devote one of your forthcoming oral evidence sessions to the specific subject of the necessity of the recreation of a legal framework under which sport and betting operators have a relationship and would be pleased to put forward specific industry experts to give evidence to you.

• International Olympic Committee (IOC)

Many of SROC's members are also members in their own right within the Olympic movement, and it should be of interest to the Committee with London 2012 on the horizon that recently the International Olympic Committee has been vocal and active within the gambling debate. Jacques Rogge, President of the International Olympic Committee (IOC) has described gambling as the 'biggest threat to sport' and in June 2010 the IOC held a sports betting summit where he stated:

"It is clear that betting, through the financial benefits it generates, provides huge opportunities to sports organisations. However, there is a significant problem when betting leads to the manipulation of competitions and therefore threatens the integrity of sport. Cheating driven by betting is undoubtedly the biggest threat to sport after doping."

"For the sports movement it is crucial to develop a unified strategy and to collaborate closely with public authorities and the legal gambling industry. Only then will we be able to address efficiently this complex issue," Rogge concluded.

A copy of the recommendations from the IOC betting seminar are appended to this submission. They cover both the need for better integrity arrangements and for there to be a fair return to sport from betting companies for the use of their rights. There have been since been two subsequent stakeholder "Working Group" meetings which have concluded to set up expert panels of sub-groups to address three areas by the end of 2011:

1. Education: to evaluate existing programmes and determine joint programmes to be implemented, and study a basis for a code of conduct;

2. Monitoring, intelligence and analysis: to evaluate ways to improve consistency in monitoring, intelligence exchange, and analysis; and

3. Legislation and regulations: to study the possibilities of creating common principles and strengthening judicial and police cooperation

The Working Group also agreed that more needed to be done to strengthen the cooperation between sports, governments and betting operators to fight irregular and illegal betting.

1. The increased integrity threats on sports competitions

Promoting and upholding integrity is one of the key functions of all sports governing bodies and event organisers. The whole concept of sport is based on a fair competition between participants under agreed rules. It is a vital principle for any sport that all involved are competing to win, and are seen to be doing so.

Those who seek to influence the outcome or progress of sports events to secure rewards through betting undermine this principle. Any suspicion that this is happening can be deeply damaging.

The growth of the on-line economy and broadcast coverage of sport has seen exponential growth in betting activity with the development of new services such as online, exchange and spread betting and requires both sports and Government to remain vigilant against the negative impact it can create. This includes the increased risk posed by the proliferation in lay betting (bets on a negative outcome) and novelty bets on incidents that form part of the event (such as time of first no ball or yellow card).

As betting markets (both legal and illegal) increase in size as the variety of bets offered vary and increase, so does the risk of corruption and match-fixing, with subsequently higher costs incurred by sports bodies as they invest in activities such as early warning and detection methods, policing, enforcement and education awareness.

Policy development in the UK on the protection of sport from gambling is particularly relevant as it is the largest and most established gambling environment in the world with a long tradition of betting on sport.

In recent years the UK's Gambling Act 2005 facilitated a large liberalisation of this market place which has seen gambling grow exponentially. Every SROC member has sporting content that is bet on and promoted by UK betting operators, irrespective of whether that sport wants bets to be offered. This is no longer a case of betting just on the result of a sporting event but also all sorts of micro events that occur within events. Any sport could fall victim in the future, with higher risks for smaller sports and competitions as highlighted by a 2008 Salford University study. [1]

SROC would particularly emphasise to the Committee that there is a considerable risk posed to sport connected with activity occurring within the UK's regulated betting markets as well as illegal betting. Many sports including horseracing, football [2] , rugby league, tennis, cricket and snooker have had issues in recent years where the root of the corruption is financial gain through legal, regulated betting markets. It is a falsehood to talk in terms of "legal" and "illegal". Corrupters do not make distinctions, and such terms are an insult to nations who have their own laws and cultures on betting.

While in the UK the Gambling Act has the broad objectives of seeking to ensure that gambling is conducted in an open and fair manner (crime-free) which by implication (as DCMS has confirmed) covers sports betting, SROC would like to see the Act's remit extended so that it has specific reference to betting on sport.

Your terms of reference ask specifically about the impact of the Gambling Act 2005 and the effectiveness of the regulator it established, the Gambling Commission. In the evidence that follows, SROC highlights two major defects within the UK regulatory regime as well as the further measures it believes the UK Government needs to initiate to introduce a 'fit for purpose' regulatory regime for both sports and betting industries in the UK. These recommendations are based on core principles we promote for all jurisdictions.

2. A clearer and more specific criminal offence of cheating in sport is required, and adequate resources dedicated to its investigation and enforcement

Match-fixing is generally the result of criminal activities, such as corruption, fraud and money laundering. Such matters cannot be tackled by sports bodies and/or even the regulated betting industry alone.

SROC is calling upon all EU Member States to establish 'sporting fraud' as a specific criminal offence in their national law and devote appropriate resources to the investigation of this offence.

In 2009 DCMS commissioned Rick Parry to chair a Sports Betting Integrity Review. [3] One of the recommendations of this review was that the Government should review the offence of cheating (Clause 42) contained in the Act:

"That the definition of cheating in the Gambling Act 2005 (the Act) be reviewed and, if appropriate, given greater clarity"

There is no evidence that this has happened.

Sport also believes that too low a priority is given by the Police and Gambling Commission to the issue. The reasons are perhaps self evident; complexities, absolute cost and police budget priorities coupled with cross border jurisdictional issues.

Consequently, greater efforts need to be dedicated to the resources available to sporting bodies and the Gambling Commission and the Police should be mandated to investigate and then prosecute all those who cheat. Match-fixing is a complex crime akin to financial fraud and requires specialist and dedicated investigatory resources. We would highlight to the Committee that while the Government currently invests approximately £8m a year to anti-doping measures (in grants to the UK Anti-Doping agency) that it does not allocate any specific resources at all to the fight against betting corruption.

Given the scale of the problem and its inherent cross-border nature, international police cooperation should be fostered to detect and ultimately deter match-fixing. Similarly, judicial cooperation between investigating and prosecuting authorities should be encouraged. We note that Interpol has recently taken a role in this area.

Close cooperation between state prosecuting authorities and sports governing bodies is essential here. This would support sports bodies in their prosecutions of disciplinary cases whilst at the same time allowing state authorities to benefit from their specialised knowledge in order to investigate and tackle crime.

3. The serious loophole in UK Gambling regulation that allows overseas operators (including so-called "British companies" located overseas) to evade Gambling Commission licence condition 15.1 needs to be corrected

SROC and other bodies campaigned for the introduction by the Gambling Commission of their licence condition 15.1 which places a statutory duty upon betting operators to share unusual betting patterns, and also to provide information requested by sports where they suspect irregular betting may have taken place. It is an important component of an anti-corruption regime.

Monitoring systems and memorandums of understanding (MOU) put in place by several operators and their dialogue with major sports organisations are helpful first steps, which we welcome; but there is no compulsory mechanism. Sports bodies need access to information by compelling operators through legally binding agreements so that sports bodies can carry out their own parallel oversight, using their specific knowledge of their own events to better protect against irregular betting patterns. It is not enough for sports bodies to have to rely on the goodwill (or lack of goodwill) of betting organisations to provide information which could have a major bearing on the future of the sport.

Arrangements for sports integrity will only be effective if they apply to all betting companies operating and/or advertising into the UK (taking bets from British bettors on British events). There is clearly little logic in having a UK regime operated by the Gambling Commission that certain operators can choose to avoid by locating overseas. Not only does this make licence condition 15 redundant, but other important protections such as the right to void a bet and whether to allow high-risk bets (such as those on youth football matches and spot betting) are undermined.

The overwhelming majority of operators who are heading into the UK are not regulated by the Gambling Commission. So-called British operators who retain their brand names associated with their British heritage, now operate outside of the UK regime, having moved specifically to avoid the impositions of the UK fiscal and regulatory regimes.

SROC therefore fully supported the proposals put forward by the DCMS in March 2010 [4] to introduce new regulatory arrangements to require all overseas Gambling operators to obtain a Gambling Commission licence to transact with British consumers and advertise in the UK. It is very frustrating and a further indictment to the UK system that after more than a year we are still waiting for the Government to announce the conclusion of this consultation and how it intends to proceed.

SROC also believes that overseas betting operators taking bets in the UK must contribute to the costs of the Gambling Commission's licensing function, which includes sports integrity arrangements on a level playing field basis. This should introduce vital additional income to the enforcement process.

SROC has consistently drawn attention to the fact that a satisfactory arrangement has still to be found to ensure that sports betting operators contribute both to the integrity costs sport face and more widely pay a fair return for the use of the product. This is a subject we elaborate on in more detail below in reviewing the financial impact of the Gambling Act on sports bodies.

4. The financial impact of Gambling on Sports Rights holders and Fair Return

British law currently has no specific legislative mechanism for ensuring that sports bodies receive a fair return for the general commercial exploitation of their events by those who use sports content in their products.

The Gambling Act was considered and enacted on the fundamental assumption that there would be rights for sports bodies, under the EI.J Database Directive. This, however, turned out to not be the case, due to an ECJ decision in Football Fixtures and British Horseracing cases. [5] This is one of the key reasons why the Gambling Act framework has failed.

So whilst sport can seek a fair return under the legal frameworks that are well understood (and were assumed to apply in the creation by the Gambling Act) from everyone else who uses its content; media companies for broadcast rights, spectators who buy tickets, sponsors who purchase association rights and so on, it is only the gambling sector who use content while making no payment, and indeed deny across the world that they should do so.

At present, the benefits flow only in the direction of the gambling industry, with the operators giving nothing back to the sports in an act of economic free-riding. The sporting competitions on which bets are placed are the result of an intellectual, financial and human investment by the competition organisers, and so the latter should also participate in any financial profits generated by the commercial exploitation of competitions by third parties.

In 2009, the Remote Gambling Association (RGA) announced the initial conclusions of a study it had commissioned from Europe Economics into the funding of sports by private sector gambling operators. The RGA purports to represent the online betting operators (and that means non-UK, as the overwhelming majority are now very deliberately not UK business, despite their "British" brand names) The RGA study results clearly show that betting and gambling operators will only contribute significantly to funding of sports in Europe when mandated to do so by statutory regimes and that any investment they make of their own volition is on purely commercial terms. The RCA's own figures prove that only compulsion will bring significant betting operator revenues into sport. Without legally binding agreements, the funding of sport including grassroots sports across Europe, including at amateur, youth and women's levels, will be decimated.

According to the RGA figures, from a total of €3.4 billion per annum provided to European sport by public and private sector operators, a massive €3.2 billion comes from statutory levies and lotteries. Commercial and charitable contributions from operators amount to just €234 million per annum, or 7% of the total - an investment of less than €0.50 for every European citizen.

This means that only 7% of the total that is paid by betting and gambling operators to sports organisations comes from voluntary agreements. These operators cannot be counted upon to voluntarily contribute to reliable and sustainable funding for European sports, especially at grassroots level. It is worth noting that the previous Sports Minister, Gerry Sutcliffe, made concerted efforts to secure voluntary payments to sport from betting operators that were spurned by the industry. He now favours a statutory sports betting right.

Protecting sports competitions from any unauthorised commercial exploitation would also enable organisers to determine which aspects of the event may be the legitimate subject of betting and thus reduce the risk of match-fixing and fraud. Sports betting operators should have to pay competition organisers for their ability to offer bets on the sport, some of which revenues may be used to help finance the fight against match-fixing and some of which could also be re-distributed to amateur sport. Sports betting operators should respect the intellectual property rights of SROC's members - whether that be trademarks, data or those set out in legislation such as under The London Olympic Games and Para-Olympic Games 2006 Act.

Historically, UK legislation has agreed on the need to have mechanisms for fair return illustrated through the legislation that sees racing paid a Horseracing Levy from betting operators. This legislation dates back to the days when Racing was the only sport with significant betting revenues. Time has now moved on and other countries have moved ahead of the UK in modernising their legislative regimes.

5. EU/ International debates support SROC arguments

In the evidence above, SROC has identified the need for specific legislative measures that create a relationship between sport and betting to cover both the protection of sports integrity and to secure a fair return. We would like to draw the Committee's attention to some recent and notable developments in the EU.

SROC has been pleased to see increasing recognition of our position in key policy and legislative initiatives. The European Commission addressed the issue in its 2007 White Paper on Sport [6] and in its recent Communication on the European Dimension of Sport. [7] In 2009, the European Parliament went one step further and adopted the Schaldemose Report on the integrity of online gambling, which included recognition of the challenges faced by sports in the face of increasing volumes of bets and, subsequently, an increased chance of corruption. This Report recognised that "sports bets are a form of commercial exploitation of sporting competitions, and recommends that Member States protect sporting competitions from any unauthorised commercial use, notably by recognition of a sport organisers right, and put in place arrangements to ensure fair financial returns for the benefit of all levels of professional and amateur sport"

The European Parliament called for the adoption of a "sport organiser's right", by virtue of which no betting operator could offer bets on a sporting event without entering into a contractual agreement with the organiser. Such agreements will allow for the strict definition of each party's responsibilities in terms of prevention, monitoring and reaction to the risks of fraud, corruption and match fixing. Moreover a financial return to the sport would be guaranteed, with funds flowing directly into measures to protect integrity and grassroots funding.

After Australia and New Zealand introduced forms of financial return to the sports, France decided to replicate this model while opening its online gambling market. The "competition organiser's right" applied to betting has now been officially recognised in the French Law, and approved by the European Commission upon its notification by the French Government. After being challenged by the betting operators, the French Competition authority recently confirmed the validity of this sport organiser's right. SROC considers the French legislation as a very good example of best practice.

The key elements of the French Law [8] are:

Online sports betting in France is now permitted but subject to a licensing regime;

The sport organiser's right, enshrined for more than 15 years, is confirmed and extended to betting so that operators will have to enter into legally binding agreements with sports events organisers. These agreements will define the integrity measures to be implemented by both parties and the level of the financial return for commercial use of the competition;

Under the supervision of the Regulator, sport organisations will be involved in the decision as what types of bets are to be allowed on their events. Restrictions will be placed on bets where integrity risks are considered unacceptable;

The French Regulator will take action against unlicensed and unlawful online operators which seek to offer bets; and

Grassroots sport will benefit from a 1.8% turnover levy on all sports bets, which will be channelled to grassroots through a national fund (CNDS).

Moving forward, SROC and its members are calling on other European Governments to adopt a similar regulatory framework, and recognise the value of the "competition organiser's right" since only compulsion will improve integrity and ensure sustainable financing of sport. According to their own figures, betting operators can only be relied upon to ensure reliable and sustainable funding for European sports when statutory arrangements are in place.

While Spain and Denmark which are in the process of opening their markets are looking into this option, SROC hopes that the UK government will follow this good practice example and help sport to fight match fixing and to ensure sustainable and fair financing of sport.

November 2011


[1] http://www.epma-conference.net/Download/22012009/SalfordREPORT Feb08.pdf

[2] FIFA, is to donate to INTERPOL the largest grant it has ever received from a private institution to create an unprecedented ten-year programme worth millions of euros a year at a dedicated FIFA Anti-Corruption Training Wing within the INTERPOL Global Complex (IGC) in Singapore. http://www.fifa.com/aboutfifa/organisation/news/newsid=1431884/

[2]

[3] http://webarchive.nationalarchives.gov.ukfilhttp://www.culture.goy.uk/imaEesipublicationsireports sports betting integrity panel.pdf

[4] http://www.culture.gov.uk/consultations/6743.aspx

[5] httPl/WWW.5rb.COMMOCS/BritiSh%2OHOrSe%20RaCing%20BOard-V-William%20Hill%20Organization%20Ltd%2OCA%2013%20July%202005.pdf

[5]

[6] "In many Member States sport is partly financed through a tax or levy on state-run or state licensed gambling or lottery services. The Commission invites Member States to reflect upon how best to maintain and develop a sustainable financing model for giving long-term support to sports organizations" COM (2007)391, page 12

[7] "Calls to ensure sustainable funding for sport from private and public sources and financial stability of the sport sector should be taken into account: when further addressing the provision of gambling services in the Internal Market" COM (2011) 12 — page 9

[8] Law n° 2010-476, 12 May 2010, Available in French at:

[8] httpjiwww.legifrance,gouvIrjaffich Lexte.do;hessionid=?cid Texte=JORFTEXT000022204510&dateTexte=&old Action=rechJ 0&ca tegori eLien=id

[8]

Prepared 11th January 2012