China online lottery regulation with finance ministry: academic

New regulations in China for legal lottery products delivered via the Internet and via smartphone are with the country’s Ministry of Finance and could be announced within months, a conference session at Macao Gaming Show heard on Wednesday.

The news was given during the panel session ‘iGaming: regulatory issues and challenges’ at the Macao Gaming Summit – the conference portion of the trade event.

It came in comments from the floor from Li Xiaohua, director of the International Exchange Department at Beijing Normal University’s Lottery Research Center of China.

Mr Li said: “For this year the government already prepared for regulation and the licensing issues for the market. That will probably be announced later, with online licences issued to the market.”

He added: “Next year Beijing Normal University, I think in April, will prepare a forum to introduce more information about the regulations.”

“The regulations for China for Internet and mobile lottery are actually at the moment at [under review by] the Ministry of Finance; and other government bureaus have already revised them. We believe that there will be a potential market [for legally regulated products],” the research centre director stated.

Lottery sales in mainland China reached RMB37.2 billion (US$6.05 billion) in July, during the final phase of the FIFA World Cup soccer tournament. The figures were up by 52.7 percent from a year before, showed data released on August 26 by the Ministry of Finance.

That was mostly due to a 92.9-percent increase in sports lottery sales judged year-on-year.

Lottery sales in mainland China reached RMB279.41 billion during the first nine months of the year, an increase of 24.5 percent compared with a year earlier.

But many of the sales are still delivered via the old-fashioned way of going to a shop. Where smartphone and online sales are available, it is usually only for a particular province, not China-wide.

And one of the most popular forms of sports betting – so-called ‘in running’ wagers on live events – is not offered by the Sports Lottery in China. The reasons for its absence, industry sources have told GGRAsia, include the commercial risk of running a highly complex sports book with potentially huge numbers of people betting simultaneously.

e-wallet solution

One side effect of that absence is that illegal online betting is said to flourish in mainland China. While players in neighbouring countries such as Japan spend as much as 1.5 percent of gross domestic product on legal lottery products, in mainland China the spend on legal lottery product is only 0.2 percent of GDP, a person working in the mainland lottery sector – and who is not authorised to speak on the record to the media – told GGRAsia.

Harmen Brenninkmeijer, the panel moderator and senior vice president for Asia and strategic markets for Inspired Gaming Group Ltd – which is already supplying virtual sports game technology to China’s lottery system – had earlier pointed out that no overseas online betting brands are currently licensed to offer services in China.

But Beijing Normal University’s Mr Li, speaking to GGRAsia on the sidelines of the event, indicated that the Chinese government was looking not at a model whereby dotcom firms are licensed to compete in the open market, but where the Welfare Lottery and the Sports Lottery form partnerships with approved investors with the right expertise, including overseas ones.

They will then work to deliver new online betting products – but ones that are acceptable to, and monitored by, the Chinese government.

Mr Li said: “Now the China Sports Lottery has a partnership with Hong Kong Jockey Club, but the Sports Lottery will also need experience and technology from overseas. But how to do it in the right way is the key point. Because if they [the lottery] want to launch a new business model or a new lottery product, they [the Chinese authorities] will take that very slowly to test the market.”

The lottery industry source told GGRAsia that the model being looked at by China to link players with such new legal betting products is to create a national system for a so-called e-wallet – an electronic system for storing credit for betting based on real cash payments, so that those wanting to take part can be registered.

The person said: “One of the main things the government in China doesn’t like about offshore online betting – aside from the loss of domestic tax revenue – is that because it is currently illegal it is done anonymously. They [officials] don’t know who is doing the betting.”

The person added that a national e-wallet system would need to resolve how money collected nationally would be shared between the individual provinces. The current system of provincial lottery licensing means the betting is done locally and the money raised – less government costs and prize money – stays in that province.

MACAO GAMING SHOW 2014 GUIDE – CONTENTS