Will the Treasury gamble on betting?

Football on computer

The Sports Betting Board and football clubs are pressing for expansion of betting - with a payoff for the state.

At the end of last week, it was the turn of senior figures in Israeli sport to make the trip to Jerusalem to describe the distress their industry is experiencing as a result of the coronavirus pandemic. A session of the Knesset Education, Culture and Sport Committee dealt with, among other things, a plan for financial compensation for clubs, leagues, and sportspeople.

Beitar Jerusalem owner Moshe Hogeg called for immediate regulatory relaxations. "If the relaxations are allowed," Hogeg said, "then revenue in all branches of sport will grow substantially, and the league will be financially viable."

What relaxations do the football people have in mind? It turns out that behind the hearing at the Knesset lies something much bigger than a demand for financial compensation, something that has been brewing for several months. Discussion have been taking place with the Ministry of Finance Budgets Division on a demand for approval of new forms of betting to be operated by Toto (The Israel Sports Betting Board), in the Economic Arrangements Bill accompanying the forthcoming state budget.

The timing is not coincidental. First of all, Moshe Kahlon is no longer minister of finance. Kahlon referred to gambling as "contaminated money" and "a tax on the poor", and introduced a reform in which severe restrictions were placed on Toto and Mifal Hapayis (National Lottery). Betting on horse racing and the use of gambling slot machines, which brought in hundreds of millions of shekels annually, were outlawed.

The second reason is of course the state's urgent need for money. Expanding the betting market will create an additional source of revenue for the Ministry of Finance, and given the fiscal hole caused by the coronavirus pandemic, ministry officials will not relinquish even a quarter of an opportunity.

What, then, are the chances that, under the cover of Covid-19, Israel will loosen the reins on a betting and gambling market that already turns over NIS 11 billion annually? Perhaps the current situation, with rising unemployment and growing despair, makes it obligatory to halt any such initiative, and to prevent people from burning their cash.

Technological developments

The pressure being brought to bear on the Ministry of Finance by people in the sports business is to introduce in-play betting, an attractive form of betting in which people can place bets on the outcome of a sporting event after it has begun. At present in Israel, betting stops minutes before a game starts. Around the world, in-play betting has been available for many years.

With the development of betting technology using the television remote control or via a smartphone, in-play betting has been taking a larger and larger share of betting revenue. In some cases, in-play betting accounts for over 30% of betting companies' revenue, and it is growing in importance every year, at the expense of conventional betting.

The discussion on expanding the betting market has been taking place for several months. In addition, Mifal Hapayis has been holding talks with Ministry of Finance officials on allowing online betting.

With people desperate for any way of improving their financial situation, the hope of instant riches combined with attractive games could be dangerous for many, and the social cost could prove higher than the revenue that would flow to the state.

To overcome such objections, the representatives of the Toto and the football clubs have been trying to present the positive side of opening up the betting market. Their main argument is that the state allows obsolete forms of gambling, with a very narrow range of games for gamblers. They say that the suppression of the betting market has created an absurd situation: the Toto's offering is not attractive, and gamblers seeking more excitement find it though illegal betting. Thus the state loses out twice, from the flight of money from the legal betting market, and from the absence of taxation in the illegal market. Gamblers use overseas gambling websites with foreign credit cards and connect to such sites using VPN applications, and even deposit money with the sites using Bitcoin and other cryptocurrencies.

If there are ways around the restrictions and the Israeli gambling public is already there, in the illegal market, it is claimed in the talks with the Ministry of Finance, then it would be preferable to make these forms of betting legal. That way, at least some of the money would revert to the state as taxes.

Limited revenue

The decision on what direction the betting market will take will be made by Minister of Finance Israel Katz and Minister of Culture and Sport Hili Tropper. The politicians have a great deal to lose by making what would be an unpopular decision to expand the betting market. In the Ministry of Finance Budgets Division there is no unanimity on the matter. Some officials support the idea and point out the extra revenue and the advantage in the fight against illegal gambling. Some, however, have reservations. The presentation to the Ministry of Finance mentioned initial turnover from in-play betting of NIS 500 million a year, yielding a profit of NIS 40-50 million, a margin of 10% at best. Ministry of Finance officials say that it makes no sense to undertake such a move, with all the risks involved, for the sake of such small profits.

By law, the Toto's profit is not supposed to fall below 20.9% on revenue of up to NIS 2.6 billion. The football industry seeks to present long-term figures indicating revenue of NIS 1 billion within ten years.

A further question is, where will the money go? Legislation introduced by Moshe Kahlon broke the link between revenue from gambling and spending on sport. It now goes into the general pot. A senior Ministry of Finance official told the football representatives who asked how the spoils would be divided up, "Revenue from gambling is a tax on stupidity, and the state does not share tax revenues.'

For its part, the Ministry of Culture and Sport will demand an addition to the sports budget in return for agreeing to the changes. Ministry sources also mention their obligation to sport in Israel in general, whereas the fear is that in-play betting will mainly benefit football and basketball.

The Ministry of Culture and Sport stated, "Live betting is a complicated subject with many aspects. With the entry of the new director general to the ministry, the matter will be brought up for discussion and will be examined in depth. So far, the ministry has not been a party to the talks that have taken place on the matter."

The Ministry of Finance stated, "Routine staff work takes place in the Ministry of Finance on policy on gambling in the Toto, in relation to various aspects of approved gambling programs and no professional position has yet been formulated on changes in this area. As far as betting during a game is concerned, this is a subject that has been raised by the Sports Betting Board and by the sport administrations, with the intention of providing financial assistance to the relevant branches of sport."

The Israel Sports Betting Board stated, "The Toto will not comment on the question whether negotiations of this or that nature are or are not taking place on new games, and will not hand over its forecasts concerning them."

Published by Globes, Israel business news - en.globes.co.il - on June 22, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Football on computer
Football on computer
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