The Tribune

By LARRY SMITH

FOR some, this whole gambling referendum controversy is a storm in a tea pot, a mountain from a molehill, a monumental waste of money, time and energy, and so much ado about nothing.

“No matter what you do in the Bahamas, people are gonna find something wrong with it,” said one of those I surveyed. “This is a simple matter of individual choice - we should be able to do what we want, within reason. It’s just like the nonsense they spouted about Sunday shopping.

“Maybe we shouldn’t have let web shops proliferate, but we did and that’s the reality now. Try to close them and they will set up a system where you can gamble on your phone. Their assets are outside the jurisdiction, and they are very sophisticated.”

As for the question of public information and transparency, “Colorado recently voted to legalise marijuana, but are only now setting up a task force to figure out how to regulate it. Why spend time and effort on that in advance?”

A referendum is a single-issue ballot that may be either binding or non-binding. For example, the Scottish government will hold an advisory referendum on the question of independence from the United Kingdom in 2014. In this case, both a white paper and draft legislation have already been published.

Bermuda is expected to hold a referendum this year on the issue of casino gambling. The object is to develop a central casino, with tax revenue going to fund local entertainment. But in this case, the parliament has to pass a specific law to give effect to the question.

In the case of our referendum - on the regulation of web shops and the establishment of a lottery - we have only the serial and ever-mutating statements of the prime minister, some off the cuff and others communicated formally to parliament.

According to Christie, the referendum will sample opinion on the establishment of a national lottery. But the key question will be whether web shop gaming should be legalized subject to strict licensing requirements, regulatory supervision, and the payment of substantial fees and taxes.

He said the extra revenue (estimated at $20-40 million) will help fund scholarships, sports, arts and culture, as well as “a broad range of community, health, infrastructural, recreational and social outreach facilities and programmes, both public and private, throughout The Bahamas.”

A ‘yes’ vote would give the government a mandate to proceed with legislation for the legalization, licensing, regulation, and taxation of web shops. Only some would be licensed, and the others closed down.

To qualify, operators would need to have “the necessary experience, integrity and expertise”, as well as the financial resources and organizational capacity to operate in “an efficient, responsible and transparent manner”.

Operators would pay a license fee of not less than $1 million per year, coupled with a performance bond, and annual taxes similar to those levied on casinos. Web shops would also be required to contribute to the cost of the regulatory regime, as well as pay for programmes to protect players from gambling addiction.

“Like the casinos, licenced web shops would be subject to stringent regulation by the Gaming Board,” Christie said, “not only to better promote fairness but also to ensure that national and international anti-money laundering standards are scrupulously adhered to.”

It is beyond me why the government did not expand these points into a simple background paper outlining the dimensions of the gambling industry, defining the terms, and generally discussing the pros and cons. That would have taken care of most of the substantive opposition to the current process.

And it is beyond me why a cabinet full of lawyers would have attempted to hold an illegal referendum in the first place. An advisory referendum is unprecedented in the Bahamas, and gambling is an issue that has always sent shudders down the backs of Bahamian politicians - who are wary of offending their church-based supporters - so you would have expected them to plot a more careful course.

I say illegal because there was nothing in law at the time allowing for a referendum on a non-constitutional question and no way to pay for it, although amendments were quickly passed to rectify this. Nevertheless, former PLP chairman Raynard Rigby and DNA leader Bran McCartney (among others) insist that the vote remains illegal, as no specific act of parliament has been proposed or passed as a basis for this referendum.

The semantic arguments over the wording of the questions themselves are inconsequential. Tough Call is no lawyer, but it would probably have been better to use the word “regularise” rather than “regulate”. That would mean we are making web shop gaming conform to law - as in the regularisation of illegal immigrants. It’s a fine point, but in the scheme of things does it really matter?

Last week, talk show host Jeff Lloyd argued that since the PM has said the referendum is non-binding, the government could do whatever it pleased after January 28, and therefore “we shouldn’t waste a million bucks on a vote. This is nearly an insult to governance in the country. I cannot excuse the people from being pathologically confused by all the changing positions.”

Former finance minister Zhivago Laing said he was confused too. “The contradictions in this process are so stark. Fred Mitchell said the government would accept the will of the people. The PM says he can’t enforce the law now, but Bernard Nottage said he would if there was a ‘no’ vote. And Obie Wilchcombe said if there was a ‘yes’ vote the web shops would be closed anyway for up to three months.”

Dr John Rodgers, who was instrumental in the formation of the Democratic National Alliance, told me that the Christie administration’s political fate will hinge on its implementation of whatever course the referendum vote suggests. He prefers a lottery rather than the regularisation of a few web shops, but this would present the government with the problem of establishing a new gambling industry while simultaneously closing down the existing one - no easy task.

Meanwhile, the web shop owners recently dangled a big carrot by suggesting they will amalgamate after the vote and offer the public shares in a new holding company. But financial advisor Richard Coulson doubts this is feasible. “I am certain that potential investors would feel strong ethical and image objections to supporting web shops and enriching their somewhat shady owners, even if they were technically legal”.

He questioned how the web shops could produce audited financial statements, and meet all the other requirements of the Securities Commission. “The practical difficulties are mind-boggling in trying to combine the accounts of two or more of these companies and write an acceptable prospectus. Maybe Mr. Flowers’ company is big enough to try it alone, but I still think investors would shy away. It could be different offering shares in an authorized national lottery company that is majority-owned by the government - if you could show profitability.”

According to lawyer Rowena Bethel, over the years there has been a significant growth of public sentiment in favour of legalising gambling because of the benefits that could be derived from it, notwithstanding the downsides. And she concedes that the evolution of web shop gaming has far outpaced the ability of law enforcement to control it.

“Technology and changing attitudes have played a big role in this evolution,” she said at a recent symposium staged by the Eugene Dupuch Law School.

“I am astounded at the online gaming capabilities available to Bahamians, and the impact of dismantling such a structure has substantial destabilizing implications for the country.”

Bethel is currently one of a group of experts advising the United Nations on open government. In her symposium presentation she said gaming had been identified as a threat to the stability and integrity of the global financial system.

“The question is how can it be managed so that the associated risks are appropriately dealt with in the interest of all stakeholders?”

In a 2010 public consultation report on the regulation of gaming, the Irish government acknowledged that: “Prohibition, however attractive it may seem as a means of control, simply does not work.” And many other countries in the Caribbean and elsewhere have arrived at the same conclusion, particularly as regards to Internet gambling.

“A revised regulatory architecture would recognise that gambling, while offering entertainment to many, also has significant downsides that necessitates and justifies regulation and control,” the Irish report said. “Gambling should be regulated as a means of extracting revenue and for other sound public policy reasons, such as avoidance of crime and protection of vulnerable persons. It should be unlawful except pursuant to a licence granted by the gaming regulatory authority, and that, therefore, the grant of a licence should be regarded as a privilege and not a right.”

Clearly, there is a great public interest motive for regularising and taxing the gaming industry here. For a long time most non-evangelical Bahamians have accepted that gambling is a fact of life that cannot be prohibited, that many Bahamians wish to engage in, and that a national lottery would be an easy way to generate revenue for good things like education, sports and culture.

The political class has been afraid to tackle this issue because of the influence of religious leaders on voters. In fact, both major parties had similar approaches in the last election – a referendum to provide political cover for the legalisation, regulation and taxation of gambling. However, the details of these approaches were never discussed by anyone.

The advantages of legalisation are to remove a major black market, with all that entails, and to generate public revenue from a multi-million-dollar unregulated business.

Unfortunately, the implementation of the PLP’s approach has been incompetent and confusing. And there is little doubt that cronies will benefit from whatever happens. But let’s leave aside the legal niceties, trivial objections, moral arguments and political motives for the moment and consider the overriding main issue.

There are three options going forward - or four if you count the status quo. Legalising and taxing the existing web shop industry. Banning the web shop industry and establishing a national lottery. Or setting up a lottery while allowing the existing industry to continue in some form.

Banning the web shops in favour of a lottery would leave us with the same problem we face now - how can it be done with the limited resources and capacity at our disposal?

Regulating the existing industry without a lottery gives legitimacy to a criminal class who will control the market. Regulating the existing industry in competition with a lottery may be the best option.

But, as always, the devil is in the details.

There is no doubt that the web shops could be closed down under current law - which prohibits the advertising and promotion of gaming, as well as gaming itself. They could just as easily be regularized by issuing certificates of exemption - which currently make the casinos legal. At the end of the day, I tend to agree with Rowena Bethel.

“Whatever personal moral convictions we may subscribe to individually about gambling, the issue that has to be addressed, in the cold light of prevailing conditions, is how best to manage the risks posed by the current state of the illegal gambling industry in The Bahamas.

“The benefits must be weighed against the negatives, so that the final solution produces a result that is both pragmatic and in the broader public interest.”

What do you think?

Send comments to

larry@tribunemedia.net. Or visit www.bahamapundit.com