Australian gaming market facing new hurdles: Geoff Wohlsen

New changes to legislation in Australia are causing ripples across the market – from hotels to clubs – and differing from state to state. Meanwhile, oversight won’t lighten up, with major casino operators likely to see further impacts from investigations into alleged malfeasance. Consultant Geoff Wohlsen breaks down what is at risk and to what extent federal intervention is feasible when regulating gaming.

We’re joined today by Geoff Wohlsen, gaming industry veteran and the co-founder of Wohlsen Consulting. Thank you very much for being with us.

Hi, Kelsey. Nice to be here.

It’s been a very interesting year. For Australia, in particular, the gaming industry has undergone a few shifts, there have been quite a few regulatory fines which have been imposed. And then there’s been a lot more action, which is happening to basically curb gambling harm.

I’d like to delve into one one of the elements of that first, which was the ban on credit cards. I’m kind of confused about the timeline of the implementation. Has that been already been completely finalized?

Well, it’s funny, the legislation was passed by our law house, which is the House of Representatives here in Australia. And it’s a fait accompli that it’ll be passed in the Senate (which happened on December 6th, after this interview took place). So that was on the 14th of November. So, you know, we’re set to have this legislation implemented one way or the other. So yeah, it’s gonna happen.

It’s quite impactful legislation as well. I mean, according to some of the research, credit card deposits into online gaming accounts account for about 20 percent of the total deposits, that’s nothing to sneeze at. Do you believe that that figure is accurate?

Well, it’s certainly plausible. If you look at the transactions that occur in Australia on a card, some sort of card system or digital wallet 2022 data says that something like 76 percent of all transactions occur on some sort of card or digital platform. Now, that includes credit cards, and I think credit cards are around about 26 percent of total transactions in Australia. So I guess if you use that as a guide, you’d have to say that 20 percent is probably even an understatement.

I mean, where card transactions are at their highest, are at the sort of quick and convenient end: petrol, supermarkets, food, for example, they’re up around the 85 percent mark on card in total – that includes credit card transactions and debits. The younger cohorts, 18 to 29, are far more active as you would expect in using digital transactions. So, they’re up around the 85 percent mark. So you have to say, this type of gambling, this type of gaming and leisure activity probably attracts, and certainly does attract a younger demographic. So you’d have to say that it could even be higher, possibly even as high as 30 percent.

From what I understand from the legislation. It’s veered at online gaming activities.

It is. It is sports bet mainly and wagering. But what is exempt is lotteries and charitable lotteries.

Okay, and has there been any feedback from the industry so far? I mean, have they decided that this is inevitable? Or are they still trying to lobby for, you know, a slight reduction in some of the measures?

Some sort of concessions? Look, I don’t think so. I mean, they’re on notice some time ago, this came out of recommendations some years ago under a previous government. So the smarter organizations would have been planning for this for some time and adjusting their business models accordingly. So, I don’t think it’s been a surprise to anyone. And if they haven’t adjusted their business models well, that’s poor business, I suppose.

I’m wondering, from an operator point of view, obviously, we saw everything that happened. And we saw that the repercussions were both at the state and national level, as you mentioned ASIC, we also saw the AUSTRAC in investigations and potential penalties. If you were an operator, who should you be most afraid of? Should it be your state regulator? Or should it be the national authorities?


Well, they’ve all got fairly significant powers. But the ones that seem to have the greatest powers and the greatest coercive powers – and of course, the biggest financial fine capabilities are AUSTRAC and ASIC. And in fact, in Australia, the largest fines have now been handed out by AUSTRAC. The Australian record in terms of a fine being handed out by a regulator, went from AU$40 million to AU$700 million. A bank, Westbank, was fined AU$700 million.

And then another bank was fined AU$1.4 billion by AUSTRAC. So there’s a trend there. And it’s an upward trend. So they’re, I would be most concerned about AUSTRAC, if I were an operator in Australia, most concerned in that they have the enormous powers to find and coerce and require.

I’m very curious, though, because the state regulators are also the ones who are granting them permission to have their casino licenses. So was there ever any speculation or were people ever actually quite worried that the giants such as Crown Resorts and The Star Entertainment were actually going to lose their casino licenses in any of their properties?

Well, when the Bergin Commission found that Crown wasn’t a fit and proper person to hold a casino license, at first instance, people were quite shocked about that. That finding doesn’t necessarily lead to the fact that they can’t hold and operate a casino. Obviously, what was put in place was a round of conditions. Conditions precedent for the opening of the casino to, to comply with in order to hold that casino license.

So obviously, there are on notice. And I think it’d be an enormous stretch to take a casino license off an organization that is publicly listed here in Australia, I think there are a lot of warnings that would be given first and certainly fines and conditions placed on the license.

But to actually take a license away from an organization that is publicly listed you are really affecting a lot of mums and dads, shareholders, superannuation funds and the like. So I think that public policy element comes into it as well.

Looking at the pubs and clubs versus the other operators. What’s the split like? Does that vary greatly from, for example, New South Wales to Queensland? Is it going to be more heavily weighted on one side or the other? Is it kind of common?

Well, the three big states – New South Wales, Queensland and Victoria.

In Victoria the slots are split evenly between pubs and clubs. In New South Wales, there’s about 90,000 slots in pubs and clubs. And roughly speaking, it’s about 65,000 in clubs and the rest, 25,000 in hotels in New South Wales.

And in Queensland, we see something like 22-23,000 slots in clubs and about 18,000 slots in hotels.

So you know, Queensland and Victoria are very fairly and evenly matched, New South Wales is very much a club market.

Interestingly, though, even though clubs have twice the number of slots in New South Wales than hotels, the hotels are chasing down the club market fairly quickly. And in fact, in Sydney, in the metropolitan region of Sydney, hotels have now surpassed clubs in terms of market share. Hotels account for 50 or 51 percent, slightly more than 50 percent of the total spend on slots in hotels and clubs, even though they operate roughly 50 percent of machines.

Across the whole of the state, it’s not quite past the 50 percent mark yet, clubs are still dominant in the regions. But you know, we expect that to happen at some stage. So hotels have been very, very strong operators of slots. There’s no doubt about it, they’ve got good locations, and they’re fairly aggressive operators. They will have a lot to lose if there’s any tax play in New South Wales, as hotels will in Victoria and Queensland.

Well, look, it’s hard in Australia. Without going into too much detail, in order to bring the Federation together, an Australian Government produced a Constitution that limited the heads of power of its legislative framework to only 50 or 52 heads of power that it could make laws on. And gambling isn’t one of them.

So for the federal government to legitimately pass laws that impact on gambling, it has to get, effectively, the agreement of the states and territories. Because if it doesn’t, it’s liable to be taken to the High Court and have that piece of legislation dragged down as being unconstitutional.

Now, I know, this credit card ban is being implemented through the Interactive Gambling Act of 2001, which sought to use the telecommunications power as the federal head of power under which it could legislate these regulations. And it’s done so again, using the telecommunications power. So it doesn’t have a gambling power, it has telecommunications power. Now, if anyone challenges that the High Court, and the High Court says is effectively a gambling piece of legislation, not a telecommunications piece of legislation, then it may well be determined to be unconstitutional.

So I think the federal government’s got a long way to go before they wrestle that head of power, that legislative head of power off the states and territories. I think the states and territories have a view that they want independence, and they don’t want the federal government to creep into their legislative framework. So I think it makes sense for the states and territories to all come under one legislative framework and one set of regulations. But the truth is, their constitutional framework doesn’t quite allow for it just yet.

Given the propensity for gambling, or the openness towards the idea of gambling, do you think that having regulation, or increased oversight is much better than any type of elimination of the activity given how it’s just going to drive it underground?

Oh, definitely. I mean, that’s just almost a truism. Look, if we make it too difficult, if we make it unattractive on a land based, highly regulated regulatory framework in Australia, will we see that activity go elsewhere? Well, I think, you know, economics 101 says, if you make product A less attractive, and people can switch to product B, which is more attractive, the substitution effect will always happen.

So we’ve got to be careful of that. We’ve got to make sure that our legalized regulated activity, gambling activity, is fun, reliable, is well regulated, but we can’t make it such that it is unattractive.

One of the things that the Victorian Government did decide, is looking at, is slowing the reelspin down of slots and various members of the Senate over the last 20 years have talked about a five second real spin slowdown, I think they currently run at around about three seconds in Australia. Now if you watch five spin real running at five seconds, it’s like it’s in slow motion. So I think we’ve got to be careful of those sorts of things that just take away the enjoyment factor.

I will say one other thing, and that is that, like any system moving to a cashless-based or a digital wallet system, will probably require several steps. And we have had a couple of general trials in Australia around digital wallets. And generally what was found is that the need to provide 100 points of ID – which included things like driver’s license, passports and things like that – and with several steps in the process, players found it very difficult to get on board. They found it very difficult to get on board.

Once they’re on board, they didn’t mind it. And I think one of the biggest challenges of the industry between now and when something is implemented will be that transitioning of people.

So I think it’s important for regulators, lawmakers and then regulators, to make sure that there is a grandfathering of whatever those systems are, so that there is an integration of those systems that it’s not a sledgehammer approach. A hybrid, if you like, period of time to grandfather those systems in. But certainly, by 2030, I think we won’t recognize what we’re doing, there’ll be a very different platform for payment, and movement of wealth or movement of some sort of value from one thing to the other. And it won’t be cash. We know that.

Well, I’m sure there’s gonna be very interesting things that are going to be happening. I’m still going to keep at least one or two bills within my wallet. 

Thank you very, very much for your time. I’m sure that we’re going to delve into more issues and hopefully we can see you as well at the ASEAN Gaming Summit. Thank you for your insights. Geoff Wohlsen, Wohlsen Consulting.