Online betting payouts: Where does all the money come from?

The fixed-odds betting industry continues to grow both physically and online, and has remained a popular pastime for many who enjoy the thrill and anticipation of wagering against probability-based odds offered by a bookmaker. This form of entertainment sees consumers win payouts anywhere from tens of rands into the hundreds of millions. These often large sums of money are guaranteed if won through legal channels – so how do bookmakers afford to payout such significant sums on a regular basis?

Tasoulla Hadjigeorgiou, CEO of LottoStar.co.za says, “Over the past year, LottoStar.co.za has paid out close to R83 million. We continue to offer massive payout opportunities to over 57 000 registered users – for example, the current potential payout of half a billion rand on offer on the 19 December 2015,” she explains. “By law, bookmakers have to provide guarantees against their ability to payout those agreed funds, to protect both the consumer and their own business.”

“In order for us as a bookmaker to guarantee that we are able to pay these winnings to players, we have a number of financial provisions in place internally, which are audited and verified by the governing provincial gambling board – in our case, with the Mpumalanga gambling board.” In addition, larger potential payouts require insurance guarantees through major international insurance providers.

LottoStar.co.za’s payouts are not shared, meaning it is only possible for one winner to receive the payout amount. “For this reason, our payouts are only guaranteed if someone wins. Therefore, we insure the payout money with an upfront deposit to our insurers, as a bet is placed insurance is taken on that bet automatically.

“About 60% to 70% of any bookmakers’ business is generated through number betting, which has become a targeted niche market in South Africa. When dealing with such large payout offerings, it is imperative to be able to guarantee these promised amounts without compromising our business, as well as to ensure commitments made to customers are met,” Hadjigeorgiou concludes

ALL BETS ARE OFF FOR UNCERTAIN FUTURE OF SA GAMBLING

On 15 November 2015 the Department of Trade and Industry was expected to release the results of industry commentary regarding their policy document aimed at improving legislation for gambling industry regulation in South Africa, and could determine which businesses may or may not operate legally in the sector.

This discussion has come to the forefront due to the need for revised laws which accommodate for both the traditional and online betting and gambling sectors, and to put clear projections in place for the mandate of the National Gambling Board – the body responsible for ensuring effective and consistent enforcement of the National Gambling Act and its statutes.

According to Tasoulla Hadjigeorgiou, CEO of Lottostar.co.za, the renewed policies seek to address the occurrence and negative consequences of illegal or irresponsible gambling, but should also work towards creating a healthy, effectively regulated industry in which legal service providers can operate. “This can be achieved through effective and transparent laws, which are laid out after a full review of the industry,” says Hadjigeorgiou. “In order to ensure enforceable and clearly understandable parameters of the gambling and betting sector in South Africa, there is a need for all stakeholders to participate in sharing valuable insights and knowledge ahead of the negotiations of the new amendments.”

Hadjigeorgiou adds that this will assist with enabling a comprehensive and practical approach to policy making, which address both traditional gambling and betting legislation, as well as that geared towards the rapidly evolving virtual gaming landscape.

“As we rapidly move into the advanced digital age, the fast pace of new betting and gambling technologies which have become available has seen legislation having a tough time keeping up,” says Hadjigeorgiou. “As a result, many legislations have become irrelevant or contradictory to new developments and capabilities of the industry.”

Without clear control and enforcement, significant industry challenges have arisen in the sector under the current legislation. These include the proliferation of illegally operated online betting sites, as well as inconsistencies. These include contradicting policies at a national level versus provincial policies, which create limitations and hurdles for legal operators – factors which discourage industry development and investment.

“With the cooperation of industry stakeholders and governing bodies, it is possible to create a market for gambling and betting in South Africa that offers opportunities such as economic growth, job creation and profitability,” Hadjigeorgiou concludes.