Regulation of fantasy sports and gambling in the Asia-Pacific
Abstract
Sports fans have the opportunity to manage their own teams in fantasy sports contests by choosing and assembling them from real-life athletes currently competing in professional sports leagues. The effectiveness of their fantasy teams is based on how well these real-life players perform on the field. Fantasy sports provide a form of proxy sports wager because betting on professional sports is absolutely prohibited worldwide. There is some debate about whether puteam-choosing abilities or chance (or luck) are involved in fantasy sports games. Fantasy sports will be subject to gambling rules and may be declared unlawful if any element of chance is involved. The recent approval of fantasy sports by the US Supreme Court, the industry’s largest market, redirects attention to Asia-Pacific, the region with the fastest rate of growth. The regulation of fantasy sports and gambling in the Asia-Pacific region is examined in this article. Five insights are provided for stakeholders in the fantasy sports market following a 21-country investigation. We suggest a regulatory framework for the Asia-Pacific fantasy sports sector based on the Nevada model in light of our findings.
Introduction
An agreement between two or more persons to purposefully wager something of value (usually money) with the goal to profit from the outcome of an event that is entirely or partially influenced by chance is referred to as gambling or betting. In other words, gamblers are laying odds against ambiguity. This definition applies to sports betting because the results of sporting events are generally unpredictable (determined by chance). However, the skill of the bettor is required for interpreting and analyzing past performance analytics, which is technically equivalent to the skill of the casino gambler who has access to and uses published mathematical probabilities for casino games.
Sports betting was prohibited in the USA since 1992 as a result of the Professional and Amateur Sports Protection Act (PASPA Act 1992) The US Supreme Court’s 2018 decision that the PASPA Act violated American states’ right to authorize sports betting, however, put an end to such uncertainty. This important ruling made it possible for every American state to enact its own sports betting laws.
The focus has switched to the international markets now that sports betting is legal in the USA. Global legal gambling (lotteries, bingo, casinos, gaming machines/slot machines, lotteries, and sports betting) market size is estimated at USD456 billion by Draft Kings, the largest online sports betting operator in the world. At USD72 billion, sports betting accounts for 16% of the global market. Other industry watchers estimate that sports gambling, both legal and illegal, is a $3 trillion global industry. Gambling is a hugely expanding sector outside of the US in the Asia-Pacific region. With the exception of Australia and with some restrictions in Japan, Singapore, South Korea, New Zealand, and Taiwan, most nations in the Asia-Pacific area still forbid sports betting.
Despite this, regulators in the Asia-Pacific region have started to see the potential for bettors to evade sports betting laws by placing indirect wagers on sporting events via fantasy sports, a kind of sports betting. Participants in fantasy sports can choose players from the league to assemble their own fantasy teams. Then, in fantasy leagues, this squad “competes” with others of its kind. Daily fantasy sports, sometimes known as “DFS,” are a daily competition that can last a whole season. Each fantasy team’s success is evaluated based on how well its players actually performed for their own real-life teams. Cash or other incentives may be awarded to the “winning” fantasy squad. Fantasy sports, according to sports analysts, are a USD18 billion global market with a projected 8% annual growth rate until 2027.
Because there has been a strong case that fantasy sports is a game of pure skill rather than chance and so does not fit under the definition of gambling per se, it has operated in a gray area of regulation across the globe. The main point of contention is that fantasy sports teams are just that—fantasies—since they don’t actually exist or play in legitimate leagues. As a result, matches don’t have events or event results. Instead, the “winning” fantasy teams are those with the largest aggregate of points from fantasy player selections based on the performance of those players. Thus, just like a fund manager choosing stocks, a successful fantasy team manager must have a high level of skill in assessing historical sports data to forecast player performance.
The current regulatory environment in the Asia-Pacific is comparable to that in the USA before the passage of the Unlawful Internet Gaming Enforcement Act (UIGEA Act) 200F, which Congress passed to control illicit online gambling, and before the passage of the Paspa Act. There were five exemptions from the UIGEA Act that corresponded to the features of a fantasy sports competition: I winning was not linked to a single team performance or (ii) single athlete performance; (iii) winning required the participant’s skill to use collective statistical results; (iv) prizes awarded are not proportionate to entry fees or participant numbers; and (v) all prizes are disclosed at the beginning. The UIGEA Act effectively aided in the start-up of the fantasy sports sector in the USA with this level of confidence. Though the legal dispute in the USA (before to the Supreme Court’s 2018 ruling essentially legalizing sports betting) centered on whether fantasy sports entailed chance outcomes came later. Following the UIGEA Act, each American state adopted a distinct legal stance (i.e., skill or chance), illuminating the regulatory challenges that exist in the fantasy sports industry. The legal controversy persisted until the Supreme Court’s 2018 ruling, at which point fantasy sports in the USA were recognized as a legitimate enterprise. In fact, Draft Kings, the largest fantasy sports organization, developed into a powerhouse in online sports betting almost immediately.
Comparatively to the USA, the Asia-Pacific region’s legislators haven’t looked closely at fantasy sports tournaments yet. However, the tremendous growth of offshore online sports betting in the Asia-Pacific region and the arrival of DraftKings in the area will undoubtedly draw policymakers and regulators’ attention to the fantasy sports market. Applying the knowledge gained from the US debate, one might predict that the pace of academic discussion over the implications of Asia-Pacific fantasy sports regulation would have led to an early grasp of the legal and regulatory framework necessary for the area. This hasn’t been the case, though, with the exception of the Australian fantasy sports market. Potential new market entrants, millions of fantasy sports players, sports governing organizations, government stakeholders, and legislators in the Asia-Pacific region continue to struggle to gain a comprehensive understanding of the industry’s legal standing. This is partially due, in our opinion, to lawmakers in the Asia-Pacific region’s mistrust and fear of legalizing sports betting. However, allowing sports betting automatically legitimizes the fantasy sports market, as the US experience has shown.
This paper will so contribute in two different ways: One of the first studies on the Asian gambling industry, it provides a foundational understanding of the region’s sports betting and fantasy sports laws and (ii) proposes a potential future legal framework for Asian fantasy sports regulation. Our goal is to provide a descriptive and prescriptive article: What is the present legal climate in the Asia-Pacific for fantasy sports? How can we establish a world-class fantasy sports industry in the Asia-Pacific region? To this end, we are inspired by the 70 years of sports betting regulation in the US state of Nevada when performing our analysis and providing a future framework. Nevada has a fairly comprehensive regulatory framework and was the first US state to allow sports betting in its casinos. We aim to apply the Nevada best practices as our filter when examining gambling legislation, specifically sports betting rules in the Asia-Pacific region. Betty Harris, a former chair of the Nevada Gaming Commission, identified seven regulatory best practices for other countries in her 2020 law essay “Regulated Sports Betting: A Nevada Perspective”:
• Integrity is crucial in the game; sports betting will not succeed if the game itself has a history of integrity problems.
Federal rules are superseded by state laws, and tax rates and fee structures have a significant impact on both the legal and illegal sports betting markets. In order to decide whether to use legal or unauthorized bookmakers, gamblers must take into account the cost of placing their bets. The relationship between sports regulating organizations and sports betting firms should be determined by economics.
• Despite regulations, enforcement must continue since illegal gamblers are here to stay.
The highest standards of integrity, accountability, and regulatory compliance must be upheld by sports wagering and its technology. To retain trust, gaming infrastructure and technologies need to be under scrutiny.
• Protection of gaming customers. A thorough strategy for problem gambling is required.
This is our path: The greater Asia-Pacific region, which consists of 21 countries, is divided into three divisions in the paper: North Asia, South-East Asia, and Oceania. Look at Table 1. The state of gambling laws in each of the Asia-Pacific nations is first examined, with a particular focus on (a) land-based casinos because of their significant influence on gambling legislation and public opinion, and (ii) sports betting because the recent US legal controversy demonstrated the lawmakers’ strict distinction between sports betting and fantasy sports.
We will look into the specifics of any national laws governing fantasy sports that may exist. Our in-depth focus is on five nations—Australia, Japan, Singapore, and New Zealand—with sizable gambling markets, sports betting availability, and sophisticated gambling laws in order to provide a more thorough analysis. The two last sections talk about a future research agenda and policy proposals for the Asia-Pacific area.
Asian and Pacific gaming industry
Asian North
China (including Hong Kong and Macao), Japan, South Korea, North Korea, Taiwan, and Mongolia make up the region of North Asia. Particularly among the region’s Chinese majority, gambling has a long cultural history. The Chinese gambling consumer (especially for casino gambling) has had a considerable impact on the growth and sustainability of the Asia-Pacific gambling industry, as discussed in later sections of the paper.
Hong Kong, Macao, and China
Except for the Special Administrative Regions (SAR) of Hong Kong and Macau, gambling (including internet betting) is prohibited throughout China. There are two exceptions in Mainland China in the form of the Welfare Lottery and the Sports LotteryF, state-run lotteries. The only sports betting option in mainland China that enables bets on international football match outcomes is the Chinese Sports Lottery. With reported sales of $16 billion in 2018, the Chinese Sports Lottery ranked as the second-largest lottery in the world.
Between 1887 until 1997, China leased the Special Administrative Region (SAR) of Hong Kong to Britain. When it returned to China, an agreement was made to maintain the British system of government and legal system for an additional 50 years. The Betting Duty Ordinance Cap. 108 and the Gaming Ordinance Cap. 148 govern gambling in Hong Kong. Football and horse racing are both legal in Hong Kong, although there is only one licensed operator (Hong Kong Jockey Club). Online sports betting is still prohibited in Hong Kong, and is therefore governed by the Gambling Ordinance 2002. Fantasy sports organizers need to be aware of the Gambling Ordinance Cap, which states that any prize promotion involving a chance element needs to be approved.
Only one Chinese province, the SAR of Macau, permits casino gaming. However, Macau’s Portuguese administration, which had leased Macau from 1899 until 1999, permitted casinos, not the Chinese government, who had previously controlled the territory. Similar to Hong Kong, an agreement was made for all current legislation in Macau to remain in place for an additional 50 years after the territory returned to Chinese control. It’s interesting to note that the Portuguese government only granted Sociedad de Turismo e Diversoes de Macau SA (STDM), a company owned by the late Hong Kong tycoon and self-proclaimed “Asian king of gaming” Stanley Ho, a monopoly casino license once throughout their 100-year rule. This monopoly was destroyed in 2001 by new laws, just two years after Macau was returned to Chinese control in 1999. To grant gaming concessions, the Macau Gaming Law (Law No. 16/2001) and Administrative Regulation No. 26/2001 were passed. As a result, Macau is currently home to 40 casinos, making it the largest gaming center in the world. However, because travel visas are required to enter Macau, mainland Chinese citizens have limited access to the casinos there. Online gambling is not allowed in Macau, just like it is in Hong Kong and the Chinese mainland. Law No. 8/96/M, popularly known as the Unlawful Gaming Law, was passed in Macau in an effort to stop illegal gambling and betting.
Japan
Japanese culture and the government both have deep roots in the gaming industry. The Japanese government has always been relatively tolerant when it comes to authorizing sports betting on events like horse racing (“Keiba”), local football games (“J-League Sports Toto”), cycle races (“Keirin”), motor racing (“Kyotei”), and speed boat competitions (“kyotei”). The legislative compromise provides a sort of controlled gambling by having all races run by government-owned entities. The exception is “Pachinko,” a popular pastime in Japan and the equal of pinball in terms of chance amusement. Due to the fact that the prizes are in the form of tokens, it is the largest “gambling” contest based on chance that is permitted but unregulated. These winning tokens can be exchanged for cash at independent token selling machines or Pachinko parlors. It’s interesting that Pachinko game halls also provide gambling. machine slots In Japan, online sports betting is still prohibited. The Integrated Resorts Act, which was passed by the Japanese Diet in 2016, is a piece of law for casino gaming licenses that is modeled after integrated resorts. The extremely contentious rule restricts the number of licenses to just three operators, with a maximum term of 15 years per license (10 years for the first license and another 5 years for renewal), and further renewals are subject to local authorities’ permission. While the casinos will be accessible to visitors from other countries, frequent entry is only permitted for Japanese nationals. Nevertheless, despite the fact that the first casinos are not expected to open until 2025, public opposition has been fierce in Japan, largely due to worries about involvement with organized crime. The Specified Tourist Complex District Development Act (The Development Act), which stipulates stringent operational conditions for these three potential casinos, was passed in 2018 in order to appease the public’s mounting resistance to the IR Act. The bidding process for these casino licenses has been significantly slowed down as a result of the 2020 epidemic and the resignation of former Prime Minister Shinzo Abe, the casino law’s most powerful political supporter, in August 2020.
South, Korea
In South Korea, there are 23 land-based casinos, all but one of which are open to visitors from outside the country and cater mostly to visitors from China and Japan. Seven different sports are eligible for betting, which is done through a lottery system. The National Sports Promotion Act, which was passed in 2001, legalized sports betting. KToto Ltd. controls the sports betting monopoly. Platforms for fantasy sports are permitted to exist as long as there are no financial incentives. Operators have been able to get around this by providing “tokens” as a means of payment. The South Korean Football Association and the French blockchain-based fantasy sports business Sorare recently signed a deal that will see the players from the latter organization appear on playing cards for fantasy leagues. While the participants in fantasy leagues buy the cards from Sorare, they do not wager on games. Instead, the cards turn into collectible tokens that gain value from their rarity.
North Korea, Taiwan, and Mongolia
Through the Sports Lottery, which accepts bets on National Basketball Association and Major League Baseball games played in the US, sports betting is permitted in Taiwan. The Sports Lottery Issuance Act grants Fubon Bank the exclusive right to manage the lottery. The lone casino in North Korea is run by Sociedad de Turismo e Diversoes de Macau SA (STDM), also known as SJM Holdings, and is located at Yanggakdo International Hotel in Pyongyang, the country’s capital. Ironically for a remote nation, the single casino is only accessible to outsiders, most likely from neighboring China. In North Korea, there are no more casinos or sportsbooks. We were unable to locate any information regarding official gambling operations or legislation for Mongolia.
Asia, South-East
Malaysia, Singapore, Indonesia, Brunei, Timor-Leste, Thailand, Myanmar, Vietnam, Laos, Cambodia, and the Philippines make up South-East Asia. The nations of the area are a part of the Association of South East Asian Nations, a political and economic union (ASEAN). With a 600 million-strong population (consumer size), ASEAN has significant economic weight. Travel between ASEAN members is flexible and visa-free, which is a huge advantage for international gaming tourism.
Singapore
As a result of its prior status as a British colony (up to 1957), Singapore has long permitted horse racing betting, a fixture of upper class British culture. Singapore Pools manages the monopoly state lottery, while Singapore Totalisator Board oversees pools betting.
The Singaporean government took the unprecedented step of approving casino operations through the Casino Control Act, which is governed by the Casino Regulatory Authority, in 2006 after realizing the need to reinvent and reposition the island nation as a tourism destination. Following an international tender procedure in 2010, two casino licenses—designated as “Integrated Resorts much like the Las Vegas casino resort model”—were given to the US-based Las Vegas Sands and the adjacent Sentosa Island casino operator Genting Group in Malaysia. In 2019, the government extended the two casino licenses until 2030 in exchange for investments to expand its operations. The Betting Act governed sports betting in Singapore up until 2014. The Singaporean government’s response to the influx of foreign-based online sports betting companies was to pass a particular law that forbade such conduct except in places where it is permitted. As a result, the government passed the Remote Gambling Act in 2015, which subjected both users and service providers to penalties and jail time. The Remote Gambling Act is enforced by the Ministry of Home Affairs of Singapore (RGA). Singapore Pools and Singapore Turf Club received authorization to provide online sports betting in 2016. The Remote Gambling Act, though undoubtedly designed to discourage internet sports betting, hasn’t had the impact that was anticipated. The Singapore Courts have actually refrained from handing down harsh punishments for first-time sports betting offenders under the Remote Gambling Act, saying in a 2019 case that: “The solution, it would seem, lies with Parliament to either increase the maximum fine to better deal with such situations, or to allow for fines to be coupled with other orders, including instruction and education on responsible gambling.
It’s intriguing that the Remote Gambling Act provided an exemption for games that aren’t entirely decided by chance, akin to the US UIGEA Act. In contrast to US law, fantasy sports companies have not yet “legally tested” such an exemption in Singapore’s Remote Gambling Act. However, it may not be dangerous to hold the view that Singapore lawmakers intended for fantasy sports to be categorized as a game of skill because they had the benefit of almost a decade’s worth of legal argument in the USA when the UIGEA Act went into effect. The proposed merger of regulating organizations into the Gambling Regulatory Authority (GRA), which is a precursor to a revision of Singapore’s gambling legislation, is a new development for 2021. This analysis might confirm the status of fantasy sports in Singapore and further clarify how they were defined.
Malaysia
Despite having a sizable non-Muslim population, Malaysia is a Muslim nation. Despite the fact that gambling is prohibited by Islam, Malaysia’s distinct demographics have historically led to political compromises over gaming licences and regulations. Malaysia has four laws governing gambling: the Common Gaming Houses Act, the 1953 Lotteries Act, the Betting Act, and the Pool Betting Act 1967. The granting of gaming licenses to non-Muslim organizations is now restricted by these rules. For instance, the sole casino operator is the Genting Group’s Genting Highlands Resorts, which is primarily owned by Malaysian Chinese. The casino resort is situated on a winding hill far from any major cities in order to evade continual public attention. Due to Malaysia’s past as a British colony, much like its neighbor Singapore, horse races have been regularly staged throughout Malaysia with the implied moral self-regulation that they are forbidden to Muslims. This is due to the fact that certain lottery results are based on the outcomes of these weekly races. All six of Malaysia’s major private lottery companies with licenses are owned by Malaysian Chinese ethnicity, with Berjaya Sports Toto, Magnum 4-D, and Pan Malaysian Pools being the three biggest (Da Ma Cai) Legal experts have bemoaned the fact that because Malaysia’s current gambling laws were all passed before 1970, they are unable to regulate Internet gambling, including sports betting.
Vietnam
Eight casinos make up Vietnam’s medium-sized casino gaming business, however most of them are resorts with foreigner admission only. However, there have been recent relaxations based on the casino’s financial stability. In 2018, the government approved a pilot program for a five-year period legalizing sports betting on horse racing, greyhound racing, and international football.
Cambodia
Naga World Resorts, a Malaysian company, received approval for the country’s first casino in 1999. However, since then, Chinese tourists have had a big impact on the boom in the Cambodian gambling market. For instance, Sihanoukville, a city in Cambodia, has become one of Asia’s burgeoning gambling hotspots, virtually entirely serving the Chinese market. Considering that gambling legislation was only recently passed in 2020, an astounding 193 casino licenses have already been issued in Cambodia (including online casinos). The Cambodian government outlawed all online gambling under stricter enforcement measures prior to the legislation and under pressure from the Chinese government, which had a significant impact on the local gambling industry. By the end of 2019, there were just 34 active casino operators instead of the previous 76.
Laos
In Laos, there are two casinos that are either Chinese or Macau-owned. Both casinos only serve Chinese visitors from across the Chinese border, similar to the Cambodian market. King Romans was the first casino to open, and Savant Vegas is the most recent. Recently, the Laotian government announced plans to boost gambling taxes or impose up to 50% of revenues, indicating stricter regulations in the future.
Myanmar
The political landscape in Myanmar, formerly known as Burma, is extremely convoluted. To begin with, the nation is in the process of converting from nearly 50 years of military rule to democracy. Elections have been held, but Myanmar still struggles with a long history of racial and religious divisions that even extend to its gambling regulations. There are still shattered and rebellious provinces ruled by opposing rebel elements against either the military rulers or the new democratic parties. In 2018, casinos became legal, but this provided yet another means for promoting political corruption. The granting of casino licenses by the government of Myanmar has been used as a negotiating tactic with the rebel forces. The widely publicized instance is the USD15 billion new development known as Yatai City, where rebel soldiers agreed to reintegrate into society in exchange for casino licences. However, it has been reported that the “rulers” of rebellious provinces like Yatai and Shan Province used cryptocurrency to conceal alleged money-laundering activities, which has caused problems for Myanmar with regards to international financial crime.
Philippines
Since more online gambling licenses started to be granted in 2016 as a result of the liberal policies of President Duterte’s Administration, gambling has become a significant growth industry in the Philippines, including a thriving online gambling sector. According to reports, 40–60 internet casino companies in the Philippines participate in proxy betting. These operators go by the name Philippines Online Gaming Operators (POGO). Proxy bets are bets made in legitimate online casinos by foreign gamblers, almost exclusively from China. Most of these POGOs are essentially casinos with Chinese ownership that are located in the Philippines. The Chinese government has recently put pressure on the local authorities to take action against these internet casinos because they enable illegal money transfers from the Chinese mainland. In the nation, there are at least 47 legal land-based casinos in operation, 43 of which are owned by the national casino regulator. In December 2020, the Philippines approved three casinos in the nation’s capital of Manila to offer online sports betting for horse racing and cockfighting as the pandemic significantly decreased tax revenues from land-based casinos.
Timor-Leste
Timor-Leste had to discover new sources of economic revenue after achieving independence from Indonesia in 1998 (via a popular referendum). Timor-Leste investigated the possibility of giving casino licenses as it negotiated for oil drilling concession rights with its neighbor Australia. The first application for a casino license was made in 2016 by Malaysia-based public listed slot machine manufacturer RGB International, who paid a USD200,000 deposit. However, the license’s issue was delayed. After that, RGB withdrew their application. However, Golden Sands Dili recently received Timor-first Leste’s casino license.
Thailand, Brunei, and Indonesia
In these three nations, there are no authorized gambling establishments. Since 1935, Thailand has prohibited gambling, largely through the Gambling Act BE 2478. (1935). Because they follow sharia law, Brunei and Indonesia forbid gambling in any form. Those who are caught gambling face jail time or a fine.
Oceania
All of the Pacific Ocean island countries (including Fiji, Tuvalu, Nauru, New Caledonia, Samoa, American Samoa, Kiribati, Solomon Islands, Vanuatu, French Polynesia, Saipan, Northern Mariana Islands, and Guam), Papua New Guinea, New Zealand, and Australia are collectively referred to as Oceania. We will concentrate on Australia and New Zealand for the sake of this essay for two reasons. The first is that any sports betting market in Pacific Island countries will be a very small industry due to their small populations. Second, the highly developed sports betting markets in Australia and New Zealand can provide deeper insights for other countries’ regulatory frameworks for fantasy sports.
In New Zealand
The national gambling regulator in New Zealand is the Department of Internal Affairs. The two laws that govern gambling and sports betting in the nation are the Gambling Act of 2003 and the Racing Act of 2003. Only the New Zealand Racing Board (NZRB) and Lotto New Zealand are authorized to provide sports betting and online sports betting within the nation in order to better regulate sports betting. It’s interesting to note that foreign bookmakers can accept bets from New Zealanders even though they cannot advertise their products there. Between 2017 and 2019, online wagers from New Zealanders put with NZRB saw a 60% increase in turnover, while wagers from New Zealanders placed abroad cost roughly NZ$300 million.
The Gambling Act of 2003’s ban on interactive gambling, however, may catch fantasy sports operators off guard, but fantasy sports tournaments may be exempt from the law. The New Zealand Department of Internal Affairs, for instance, provides the following clarification as part of its guidance on the Act:
Any tournament that includes “gambling” and requires payment to compete will violate the ban on remote interactive gambling. When a competitor picks or picks the winners for upcoming games or sporting events, there is usually some element of luck as well as skill involved. If admission is truly free, the Act will not apply. This kind of competition will be subject to the Act if there is any consideration or if the expense of communication is more than it actually is.
If the law is strictly interpreted in accordance with this justification, then choosing a fantasy sports team—which is a skill—can be legal because it does not involve picking winners or winning events, but rather the actions of specific real-life players. The Gambling (non-gambling activities) Regulation 2013 also provides a test for certain spot competitions to be deemed not gambling in that they I are related to the competition up to 7 days after the event, (ii) are “subsidiary to the competition or event,” and (iii) a one-time consideration is paid. Although Daily Fantasy Sports may be able to pass all three criteria, the regulation specifically refers to these games as “lotteries” in one place. Therefore, there is a chance that future legislation will change these rules and eliminate the concept of spot competitions, opening the door to the prospective legalization of fantasy sports in New Zealand.
Six land-based casinos were also permitted in New Zealand under the Casino Control Act of 1990, though the Gambling Act of 2003 limited the issuance of new casino licenses. Casinos are prohibited from providing locals with internet gambling under the same statute.
Australia
One of the biggest, most open, and most regulated gaming markets is found in Australia. The amount of gaming per capita in a country with just over 25 million citizens is astounding. The New York Times reported in 2018 that Australian gambling losses per capita are USD18.4 billion, which is double the US population’s gambling losses. There are 13 land-based casinos in Australia. In Australia, state and territorial governments regulate gambling. In all states and territories as of 2020, there will be 134 separate gambling laws (including amendments). Legal precedent indicates that a gaming law, once adopted in a state or territory, is applicable at the federal level throughout all of Australia. Due to this precedent, some new betting operators have chosen to incorporate and apply for gambling licenses in more accommodating and gambling-friendly jurisdictions, like the Northern Territory. Two of Australia’s first fantasy sports operators, Moneyball and PlayUp (formerly known as TopBetta), both of which hold licenses from the Northern Territory Racing Commission, were aware of such a tactic.
Despite this, there was a federal legislative response to the entry of offshore gambling sites into Australia. To control online gambling, the Interactive Gambling Act 2001 (Cth) and Interactive Gambling Amendment Act 2017 (Cth) were passed. The rule specifically outlawed all events using a combination of skill and chance, awarded with monetary rewards, requiring entry fees to participate in, and even bets between users of an online platform. However, the regulation excluded betting on “sports events” in order to permit online betting by Australian onshore incorporated betting firms like TAB Australia. As a result, a significant portion of sports wagers in Australia are put online, signaling regulatory comfort in allowing companies like Moneyball and PlayUp. As previously mentioned, another indication of tacit regulatory acceptance for fantasy sports betting came in 2015 when Playup, a fantasy sports operator owned and located in Australia, gained authority to list on the Australian Stock Exchange.
Leading Australian lawyers, however, are not persuaded that the “sports event” exemption covers fantasy sports in full because the outcome of fantasy sports wagers is determined by player performance (across many teams), not by that player’s specific team performance (a match event). Existing fantasy sports operators appear to have hedged their legal position by partnering with Australian sports governing bodies, strengthening the argument that fantasy sports increases fan interest in the sports leagues and thus legal sport betting, in order to get around this legal gray area and avoid a future legislative tilt. Along with strongly supporting the advantages of encouraging fantasy sports competitions for society and the sports industry, this also boosts tax collections for the government.
Overview
Our analysis of the Asia-Pacific fantasy sports market’s legal and regulatory environment, which covered 21 countries, provides five crucial findings for stakeholders. Contrary to popular belief, legal sports betting is offered in nine countries, or one-third of the nations in the Asia-Pacific area. In these many national marketplaces, there is, as is typical, a hierarchy of such product or bet options. Australia and New Zealand share the top spot in the ranking by allowing wagering on sports in all major league sports. In Japan, which is on the second tier, bettors can wager on five sporting events: J-League football games, horse races, auto races, cycle races, and speedboat races. By allowing wagers on a select number of major sports, Taiwan, South Korea, Singapore, and Hong Kong occupy the middle positions in the hierarchy (including overseas leagues). For instance, Taiwan’s gambling regulations permit wagers on American basketball and baseball games, whereas residents of Singapore and Hong Kong are permitted to wager on international soccer and horse racing events. Malaysia and China are at the bottom of the rung. While Chinese sports betting is restricted to bets on international football matches through a state lottery, Malaysia enables wagers on horse racing. These nine jurisdictions have together passed rules governing sports betting, which might be interpreted as governmental support for the coexistence of fantasy sports. According to our analysis, Singapore, New Zealand, and Australia all fall under this category.
The second realization is that there is no regulation of fantasy sports in the Asia-Pacific region at all. Given the similar regulatory landscape that existed up until 2018, including in the industry’s largest market, the USA, this is not surprising. Due to the fact that fantasy sports are virtually entirely played online, numerous Asia-Pacific nations have passed online gambling legislation that may have an impact on fantasy sports tournaments. While Australian law and Singapore law regulate online sports betting within their respective countries (through state licenses), only New Zealand allows offshore betting operators to accept online bets (including online sports bets) onshore (although they cannot market their services onshore). The Australian regulatory framework provides operational security for fantasy sports in such a scenario. Because sports betting is permitted in these markets (even if only for a select few sports), regulators can demand that fantasy sports operators obtain a license.
The third observation is that Indonesia, which has a population of 300 million people and is the second-largest potential sports betting and fantasy sports market in terms of consumer size, currently forbids all forms of onshore gambling because it is a Muslim country. Therefore, it would not be very idealistic to claim that offshore sports betting companies have already filled the void based on market dynamics elsewhere in the region. Despite this, Indonesia’s distinct political system may still present opportunities for betting operators in the future. Indonesia, the world’s largest Muslim nation, adheres to a moderate and tolerant style of Islam throughout the majority of its provinces. The island of Sumatera is an exception, particularly in the north of the island, where sharia law is strictly followed. The well-known tourist island of Bali practices Hinduism as its official religion, a testament to Indonesia’s tolerance and respect for its long-standing Hindu religious heritage. Bali also has lax laws for alcohol usage (forbidden in Islam) and Western style tourism lifestyle. Bali might be the first Indonesian location for a legal sports betting and fantasy sports operator if future political will allows it. Since 1957, Malaysia, a Muslim neighbor and one of only four Muslim nations in the world that has casinos, has offered horse racing as a form of sports betting.
The support of sports governing bodies, which can provide lower investment risks for online fantasy sports operators in jurisdictions that do not license fantasy sports companies or that either forbid sports betting but leave fantasy sports competitions unregulated, is the fourth key insight. There is a chance for the regional football governing body, the Asian Football Confederation (AFC), to take the lead in self-regulating football-based fantasy sports competitions given the market sizes of four national football governing bodies (China, South Korea, Japan, and Australia) and their active engagement with fantasy sports providers. The AFC might take a cue from a parallel model known as sports integrity fees in sports betting used in Australian sports. Australian bookmakers who use match data for gambling must pay national sports governing bodies an integrity fee (i.e., determining odds, publication of match results). The sports governing body uses this fee to ensure that match-fixing and other forms of corruption are strictly prohibited in their leagues, protecting the business model and consumer trust of sports bookmakers. Such market stakeholder-driven self-regulation could assist Asia-Pacific legislators in easing regulations on fantasy sports competitions or taking regulatory risks. The medium-term impact would be increased fan interest in the actual game. The AFC has trialed early moves with fantasy sports within its flagship Asian Cup championshipsbut remains on the sidelines for further expansion of this strategy. This is contrast to its peers such as the European football governing body UEFA, which already actively promotes fantasy football using its own website.
The fifth and final insight may appear obvious, that is the role of the mainland Chinese consumer in gambling and sports betting specifically. The gambling sectors in Macau, Laos, Cambodia, the Philippines, and North Korea are all directly reliant on Chinese gambling tourism, according to our analysis in this study. Further proof of the enormous amount of both legal and illegal online gambling in the Asia-Pacific comes from the Philippines, where Chinese gamblers can indirectly place bets online. Therefore, China’s recent decision to restrict gambling tourism among its residents may lead to a huge rise in illegal offshore internet betting. While the percentage of sports betting in this pool is still unknown, there is a good chance that many of the bets made in the name of gambling tourism will end up on shady sports betting websites. What do operators of fantasy sports have to say about this? For starters, regulators may become exceedingly cautious about making any concessions for fantasy sports that may open the door for illegal gambling as a result of increasing traffic to unlawful online gambling sites. Second, by passing specific fantasy sports laws that have restrictions against pure chance-based competitions, forward-thinking regulators may see an opportunity to direct these new bets to fantasy sports competitions.
Regulatory framework for the fantasy sports industry in Asia-Pacific
In this section, we revisit the seven regulatory best practices from the Nevada sports betting model and take into account the results of our analysis. Then, we present a legislative and stakeholder framework for the Asia-Pacific region:
• Integrity is paramount in the game; sports betting will fail if the game itself is riddled with integrity legacy problems
Despite a long history of such activities, we discover that Asia-Pacific is still a hotbed for international football match fixingFootnote85. Even during COVID-19 in 2020, the international sports data company Sportradar reported 160 instances of match-fixing in Asian football matchesFootnote86. Therefore, sport governing bodies, in particular the Asian Football Confederation, need to improve its strategies to combat this malaise. Without confidence in the integrity of matches, lawmakers would be reluctant to approve sports betting and fantasy sports for the masses, if consumers are exposed to cheating on the field.
• State-level jurisdiction is supreme to federal level laws; \sAustralia, Japan and China are the three jurisdictions that have both state (regional) and federal gambling laws. In the past (until 2016), regions in the Philippines also had the right to grant gaming licenses. State-level authority to grant gambling licenses has the advantage to meet local conditions and needs such as tax codes, local job creation, religious factors and political climate. The opinions of the general public toward gambling are better understood by state legislators in their home districts.
Tax rates and fee structures have a significant impact on both the legal and illegal sports betting markets, according to this study. When deciding whether to use authorized or unauthorized bookmakers, punters must take the cost of entering the bet into account.
A gambler in the Asia-Pacific pays a very high opportunity cost for not having access to authorized online sports betting. As a result, thousands of illegal businesses flourish to meet consumer demand. By merely providing a legitimate good or service, this is the single most important justification for legalizing sports betting.
• “Government Mandates Are Not Necessary.” The relationship between sports regulating organizations and sports betting firms should be determined by economics.
With Australia being the lone exception, commercial agreements between the sports betting industry and the sport’s governing body were made without the involvement of the government. Countries like China, Laos, Cambodia, Malaysia, and the Philippines continue to experience direct government intervention in the markets for commercial gambling due to their political realities. If such interventions occur despite existing legislation, new market participants would be wary of making sizable investments in the infrastructure for sports betting and fantasy sports.
• Despite regulations, enforcement must continue since illegal gamblers are here to stay.
In Malaysia, Singapore, China, and Australia, illegal gambling is strongly discouraged by enforcement data. The New Zealand model, which permits both legal and illicit offshore operators to accept local bets online, is rather unique and may even deter dishonest illegal operators. A unique business model that competes with illegal (unlicensed) offshore operators is the Philippines regulation that grants licenses to offshore operators to operate from the nation (primarily for Chinese-based gamblers). The pre-emptive enforcement models used in New Zealand and the Philippines are examples.
The highest standards of integrity, accountability, and regulatory compliance must be upheld by sports wagering and its technology. To retain trust, gaming infrastructure and technologies need to be under scrutiny.
The Nevada model called for thorough technological integrity at all gambling levels, particularly with online gambling (or wagers taken outside the casino environment). The Nevada Gaming Commission (established in 1959) regulates technology in gambling. In our analysis, we did not uncover (other than a casual reference) a discussion on gaming technology in the Asia-Pacific. We did discover that there are numerous private, proprietary fantasy sports platforms available in Asia (for the Indian market), which begs the question of how a regulator can determine the reliability of these technologies.
• Protection of gaming customers. A thorough strategy for problem gambling is required.
Strong and definite protections for problem gambling have been established in Australia, New Zealand, Singapore, and Japan. In response to public pressure, the Japanese government even passed the Specified Tourist Complex District Development Act (The Development Act) in 2018 to allay concerns about the potential effects of its 2016 decision to permit casino licenses. Our analysis, however, showed that in the majority of other jurisdictions, self-regulation or “gambler-beware” policies are more prevalent. Strong grassroots programs for problem gambling must be implemented by legislators in order to reduce opposition from a wary Asia-Pacific public.
We believe that in order to accomplish the goal, a combination of political courage, public opinion change, cooperation from sport governing bodies, consumer demand, government tax revenue imperatives, and industry lobbying would be necessary given the complex level of action and regulation needed to meet this best practice Nevada regulatory framework. But the Asia-Pacific market for fantasy sports and sports betting cannot afford to stagnate for years on end due to a lack of legislation or even lax regulation. As a result, we propose the following regulatory plan as a temporary measure for fantasy sports and sports betting in the Asia-Pacific: According to our data, 13 nations have already granted licenses to 178 land-based casinos in the Asia-Pacific region, some of which are found in Macao, Singapore, Australia, Japan, and the Philippines. This creates the possibility of amending the law to grant sports betting licenses linked to the existing, highly controlled casino licenses. Following the Supreme Court decision in 2018, states in the US swiftly embraced this approach. The Philippines recently (December 2020) imitated this strategy for three of its land-based casinos. Asia-Pacific authorities can emulate the US model and extend this by mandating the casino sports betting licensees to offer fantasy sports contests.
The idea behind this proposed framework is to circumvent the “skill or chance conundrum” by allowing the same licensee (casino) to run two distinct products: fantasy sports activities that require skill and sports betting that is based on chance. Casinos can charge fantasy sports players for access to these databases because they must gather statistical information about athletes and sports teams in order to calculate sports betting odds. The infrastructure (gaming systems) can theoretically be expanded up to provide online sports betting and fantasy sports games since many casinos also operate onsite internet gambling devices.
However, while encouraging the casinos to invest and provide fantasy sports platforms, the exclusive fantasy sports licenses should have a 5- to 10-year expiration period in order to protect against the risk of their monopolistic behavior. With a known company (casino), which is motivated to assure strict adherence to the new laws, regulators and lawmakers can immediately minimize the regulatory and policy risk of fantasy sports. This alternative also offers as a highly appealing windfall commercial potential for casinos to scale revenues. Additionally, tax revenues from gambling (sports betting) and entertainment (fantasy sports) are centralized at the casino, greatly lowering the risk of tax collection.
Agenda for future research
One significant finding from our analysis justifies further scholarly investigation. This is the entry of blockchain technology that looks to have carved out a viable opening for fantasy sports suppliers to coexist under the current restrictions. Blockchain offers prizes to be “paid” in alternate money (e.g., bitcoins) rather than cash. The South Korean fantasy football partnership with Sorare served as an example in our examination. Similar innovations have also been made in the world of fantasy sports in China and Japan. The fantasy basketball league event “Fantasy One” was launched by NEO Sports, Japan’s first fantasy sports company, in 2019. Winnings were distributed as gift cards. The Chinese Super League (CSL) football also linked up with cryptocurrency player FootballCoin to offer blockchain technology-enabled fantasy sports. It is important to keep in mind that not all nations may be welcoming of such innovation. For instance, in Australia, the Northern Territory is one of the states that forbids blockchain payments for gambling. Researchers may want to look into how cryptocurrencies and blockchain will affect the legal framework for fantasy sports. How can blockchain regulation affect the availability of bitcoin in fantasy sports prizes? Would authorities be less eager to carve out loopholes for fantasy sports if blockchain technology was incorporated?
Conclusion
Except for Australia, there is no regulation of fantasy sports in the Asia-Pacific region. Fantasy sport operators’ legal status is uncertain until sports betting is widely accepted in the area. Of course, this is reminiscent of the situation faced by the two titans of the fantasy sports sector, FanDuel and Draft Kings, in the early stages of their entry into the US market. Our analysis gave stakeholders in the Asia-Pacific region information on the potential application of current fantasy sports regulations as well as the way forward. Legislators in the area need to understand that fantasy sports encourage more fan engagement in leagues that play genuine sports. Instead of going the most popular current route of either including fantasy sports under general laws for sports betting or banning interactive or online gambling, legislators may want to study the Australian model of fantasy sports operator licensing as a compromise. The least preferred approach for legislation should be the ongoing state-by-state US legislation on sports betting (including fantasy sports), as it keeps the legal environment for the fantasy sports business unpredictable. Instead, a strong fantasy sports regulatory framework in the Asia-Pacific region should be based on the Nevada sports betting regulatory model.