Comparing Online Gambling in the USA and South Africa: Lessons for South Africa

The comparison of online gambling between the United States and South Africa provides valuable insight into the regulatory landscape, taxation, and economic impact.

Understanding how online gambling is regulated in South Africa, as well as learning about the destination of taxes from sports gambling and iGaming in the USA, offers important considerations for South Africa's future decisions in this industry.

Note: The article was produced in close cooperation with the US legal gambling-based project JackpotSounds. Since the website focuses on aggravating big winning replays from American legal gambling establishments, they have direct expertise in the questions related to legislation and regulation of the market both in the US and all over the world.

Online Gambling Regulation in the USA

Aspect	Description
Legal Age	21 years old in most states that have legalized online gambling
Legal Gambling Activities	Online sports betting (legal in over 20 states as of 2024) Online casino games (legal in a handful of states like New Jersey, Pennsylvania, and Michigan) Online poker (legal in a few states like Nevada, New Jersey, and Delaware) Daily fantasy sports (legal in most states)
Regulatory Bodies	State-level gambling commissions and regulatory authorities Federal oversight through the Unlawful Internet Gambling Enforcement Act (UIGEA)
Player Protection	Age verification requirements Self-exclusion programs Responsible gambling initiatives
Licensing Requirements	Online gambling operators must obtain state-issued licenses to legally offer their services
Geolocation Restrictions	Players must be physically located within states where online gambling is legal to access and participate in online gambling activities

Taxation of Sports Gambling and iGaming in the USA

In the United States, the tax revenue generated from online sports gambling plays a significant role in funding state and federal initiatives. The tax revenue from sportsbooks contributes to

• the general funds,
• social services,
• public education, and
• statewide projects.

Furthermore, it enhances federal funding to Social Security and Medicare, aiding in the expansion of state and federal budgets.

The federal income tax rate on sportsbooks currently stands at 24%, and the tax revenue from online sportsbooks reached approximately $953 million in 2022 through October.

Economic Impact and Growth

The growth of the online gambling market in the USA has been remarkable. Over the past few years, sports gambling has surged, marking a notable shift from traditional casino games. It is projected that the online sports gambling market could reach $39 billion in annual revenue by 2033, presenting exponential growth and a positive upward trajectory.

Revenue and Market Size

In the USA, sports gambling demonstrated exceptional revenue growth, with an astounding increase of over 230% in the first 10 months of 2021 compared to the same period in 2020.

Year	Online Gambling Revenue (USD)
2020	$1,978.57 million
2021	$2,500 million
2022	$2,500 million
2023	$3,000 million
2024	$3,500 million
2025	$4,000 million
2026	$4,500 million
2027	$5,000 million
2028	$5,500 million
2029	$6,000 million
2030	$6,500 million
2031	$7,000 million
2032	$7,500 million
2033	$8,000 million

This revenue surge not only reflects significant financial gains but also highlights the swift adoption of online sports betting, particularly driven by mobile wagering.

Mobile wagering has become the preferred method for sports gamblers, with a notable shift towards online engagement.

Online Gambling Regulation in South Africa

Online gambling in South Africa is regulated under the National Gambling Act of 2004, which prohibits the operation and participation of online casinos and poker games.

However, licensed sports betting is allowed, providing a contrasting regulatory environment for different types of online gambling activities.

South Africa's approach to online gambling has been marked by legal ambiguity and regulatory complexity, presenting both challenges and opportunities for the industry.

The Legal Framework

The National Gambling Act of 2004 serves as the primary legislation governing gambling in South Africa, but it does not explicitly address online gambling. This has resulted in a legal grey area, with differing interpretations on the legality of various online gambling activities.

In 2008, the National Gambling Amendment Act was drafted to provide a regulatory framework for interactive gambling, but it has yet to be fully enacted, leaving the online gambling sector in a state of uncertainty.

Regulatory Landscape

South Africa's gambling industry is overseen by a decentralized system of regulatory bodies. The National Gambling Board (NGB) serves as the national regulator, while provincial licensing authorities (PLAs) are responsible for issuing licenses and enforcing regulations within their respective jurisdictions.

This fragmented approach has led to inconsistencies in the application of gambling laws, with some provinces, such as the Western Cape and Mpumalanga, being more permissive towards online sports betting and live dealer casino games.

Law	Explanation
National Gambling Act of 2004	Primary legislation governing gambling in South Africa, does not explicitly address online gambling.
National Gambling Amendment Act (2008)	Drafted to provide a regulatory framework for interactive gambling, but has not been fully enacted, leaving online gambling in a legal grey area.
Remote Gambling Bill (Proposed)	Introduced by the Democratic Alliance to establish a comprehensive regulatory framework for online gambling, including licensing and player protection measures.
Provincial Licensing Authorities (PLAs)	Responsible for issuing licenses and enforcing regulations for gambling activities within their respective jurisdictions in South Africa.
Provincial Licensing Authorities (PLAs)	Responsible for issuing licenses and enforcing regulations for gambling activities within their respective jurisdictions in South Africa.
National Gambling Board (NGB)	Acts as the national regulator overseeing the gambling industry in South Africa, working in conjunction with provincial licensing authorities.

Proposed Legislation

In a recent development, the Democratic Alliance (DA), the official opposition party in South Africa, has introduced a new Remote Gambling Bill to the country's parliament. The bill aims to establish a comprehensive regulatory framework for online gambling, including the issuance of licenses by provincial authorities and measures to protect players and address problem gambling. If enacted, the Remote Gambling Bill could provide much-needed clarity and consistency in the regulation of South Africa's online gambling market, potentially unlocking its significant economic potential.

Challenges and Opportunities

The lack of clear and unified online gambling regulation in South Africa has presented several challenges, including the growth of unregulated and potentially unsafe black market activities, as well as the loss of potential tax revenue and job opportunities to other gambling jurisdictions. However, the country's large population, growing internet and mobile penetration, and rising interest in sports betting and online casino games suggest that a well-regulated online gambling sector could be a significant economic driver for South Africa. By addressing the legal and regulatory gaps, South Africa has the opportunity to establish a thriving and responsible online gambling industry that balances player protection, tax revenue generation, and economic growth.

Lessons for the South African Gambling Market

Drawing from the experience of the USA, here are recommendations for online gambling legislation and regulation in South Africa:

1. Comprehensive Regulatory Framework: there should be a comprehensive regulatory framework that clearly defines the legality of online gambling activities, including licensing requirements, player protection measures, and responsible gambling initiatives. Learn from the patchwork of regulations in the USA to create a unified approach that fosters industry growth while ensuring consumer safety.
2. State-Level Regulation: It’s necessary to consider adopting a state-level regulatory approach similar to the USA, allowing provinces in South Africa to regulate online gambling within their jurisdictions. This decentralized system can promote innovation, competition, and tailored regulations to meet the unique needs of different regions.
3. Taxation and Revenue Allocation: It’s important to Implement a transparent taxation system for online gambling revenues, ensuring that taxes are collected efficiently and allocated towards public services, infrastructure development, and initiatives to address problem gambling. Learn from the USA's experience in using tax revenue from online gambling to benefit society.
4. Player Protection and Responsible Gambling: Prioritize player protection measures, such as age verification, self-exclusion programs, and support for problem gamblers.
5. Technological Innovation: Embrace technological advancements like virtual reality and mobile gaming to enhance the online gambling experience for players.
6. Collaboration with Stakeholders: Engage with industry stakeholders, including operators, regulatory bodies, and advocacy groups, to gather insights, address concerns, and foster collaboration in shaping effective online gambling regulations.

Summary

The comparison of online gambling in the USA and South Africa offers essential lessons for South Africa's approach to regulating and taxing online gambling activities.

By closely examining regulatory frameworks, economic impacts, and legal challenges, South Africa can establish a well-defined landscape for online gambling that ensures both economic benefits and responsible engagement.

Thanks to JackpotSounds and Vlad Lazurchenko, the project’s Product Manager, it became clear that when comparing the gambling markets of the USA and South Africa, it becomes evident that South Africa has significant room for improvement in its online gambling legislation and regulation.

While the USA has demonstrated the benefits of a comprehensive regulatory framework, clear taxation policies, and robust player protection measures, South Africa's legal ambiguity and fragmented regulatory landscape pose challenges for the industry's growth and consumer safety.

South Africa should prioritize enhancing its regulatory framework to provide legal clarity, promote innovation, and protect players from potential risks associated with online gambling.

By learning from the USA's experience and implementing best practices, South Africa can establish a more sustainable and thriving online gambling market that maximizes economic benefits, ensures responsible gambling practices, and fosters a safe and fair gaming environment for all stakeholders involved.

Understanding the regulations in South Africa, learning from successful revenue distribution models in the USA, and being mindful of legal complexities can guide South Africa toward implementing effective measures that promote a thriving yet socially responsible online gambling industry.

References

1. Remote Gambling Bill
2. National Gambling Board (NGB)
3. National Gambling Amendment Act
4. Provincial Licensing Authorities (PLAs)
5. Unlawful Internet Gambling Enforcement Act (UIGEA)