Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


APPENDIX 5

Memorandum submitted by Bingonet Limited

ABOUT BINGONET

  Bingonet is a registered UK company that operates the Bananalotto game in the UK. This game is currently being launched throughout Europe. Bingonet was incorporated in May 2000 and the Bananalotto site went live on 19 June 2000.

  Our ambition is to become one of the biggest online games sites in the world. We are committed to long-term development and adhere to the letter and spirit of all current laws regarding both games and privacy. We believe that the best guarantee for longevity is an ethical approach.

  Bingonet welcomes the opportunity to respond to the Committee's inquiry and believe our experience as a recent start-up whose viability is underpinned by new technology gives us a valuable perspective both on the National Lottery's operation and how it impacts on other numbers-based games.

ABOUT BANANALOTTO

  Bananalotto is an Internet-based numbers game. The website address is www.bananalotto.co.uk and we would urge Committee members to visit this site to experience the game first hand.

  Key elements of the game include:

    —  Participation is completely free, with the prize money paid through sponsorship.

    —  Players are invited to select seven numbers including a "banana" number.

    —  There are three scales of prizes:

      —  six correct numbers + the "banana" number: 1 million pounds.

      —  six correct numbers: £100,000.

      —  five correct numbers: £50.

      —  four correct numbers: £5.

      —  three correct numbers: 50 pence.

    —  Draws are made every day and individuals can enter up to three times for each draw.

    —  Personal data is protected to standards that exceed current data protection legislation.

    —  Prize money is guaranteed through insurance.

  Because no payment is required for entry, Bananalotto does not constitute an illegal lottery under Section one of the Lotteries and Amusements Act 1976. Neither is there any other form of mandatory "contribution" towards entry in terms of information, as the straightforward request for permission to pass players' personal details on to third parties is entirely optional.

  Not only is this permission sought at the point of participation, but also can easily be withdrawn at any later stage if the player so wishes.

  Essentially this structure means that Bananalotto is neither gambling nor gaming[26] because there is no stake or financial risk to participants. Rather, it has a similar status to that held by promotional draws popularly used by chocolate, crisps and soft drink manufacturers. Other similarly structured off-line games include the widely publicised Readers Digest draw.

  Bananalotto is therefore without many of the risks that are commonly associated with gaming, gambling or even the National Lottery. While we hope players will return to our site and play regularly, there is no risk that they will become financially indebted as a result. Nevertheless, in order to avoid age-related controversy Bingonet has taken the decision not to allow under-18s to participate and we also limit participation to three games per player per day.

  Bananalotto should therefore be viewed as a game for people wishing to entertain themselves on the Internet, rather than as gaming or gambling.

SPECIFIC ISSUES RAISED BY THE COMMITTEE

  It is clear from the published list of likely issues to be examined that the Committee intends to conduct a wide ranging inquiry, much of which is neither directly relevant nor within Bingonet's experience. Our evidence therefore covers a smaller range of issues:

    —  methods of sale of Lottery tickets;

    —  the enforcement of the age limit for purchase of Lottery tickets; and

    —  the impact of the National Lottery upon the betting and gaming industry.

1.  Methods of sale of Lottery tickets

  To date Lottery tickets are not sold over the Internet. However, we understand that the possibility of Internet-based National Lottery games is already under consideration. As a wholly Internet-based business, we have a clear interest in any such development.

  Bananalotto could not have existed as a viable business without the Internet. The game provides a direct link to sponsors' web sites as part of the entry process to each draw, thus creating a clearly quantifiable commodity for sponsors that is entirely cost free for participants. In short, Bananalotto is an example of a genuine new business model enabled by new technology.

  More broadly, anyone with access to the Internet, be it at home, work or through Internet cafes or mobile telephones can participate in online games. This can range from free games such as Bananalotto through to hard casino-based gaming.

  Moreover, because of the increasing portability of machines that offer Internet access this can take place in the home or pub, regardless of legislative restrictions of gaming in licensed venues. We believe that the best way to respond to these developments would be through clear, practical regulation that is easily understood by players and operators alike and that promotes trust in UK hosted sites by ensuring high operational standards.

  If the National Lottery is to have an Internet presence in the future, we believe that the Lottery should be subject to the same regime of safeguards as the rest of the Internet-based game providers in the UK, proportionate to whatever degree of "soft" or "hard" gaming is involved. The inclusion of the National Lottery under any such regulation would enhance the reputation of the Lottery and raise the profile of those safeguards that protect UK consumers from unregulated disreputable operators. In turn, the UK economy would through increased business opportunities and through enhanced tax revenues.

2.  The enforcement of the age limit for purchase of Lottery tickets

  As stated above, Bingonet believes that there are risks associated with any game that involves a financial stake, particularly where the ratio of stake to return lengthens and as the opportunity to chase losses increases with frequency of play.

  These risks can be reduced simply by reducing the stake—ultimately to zero, as with Bananalotto—and by limiting the frequency of draws. In order to avoid players becoming addicted to the game, Bingonet has just one draw per day with participants only allowed three entries per draw.

  We also recognise that young players are more likely to misunderstand the financial, social and psychological implications of gambling. To minimise these concerns we have erred on the side of caution by adopting a minimum age to play of 18. Should a lower single minimum age be introduced more widely, commercial imperative might force us to lower our limit to that age. However, the lower minimum age operated by the National Lottery has not had any noticeable impact on our business to date. We believe this is because players see our game as a complement to the National Lottery rather than as an alternative.

  Nevertheless, this means that in practice we apply an age limit significantly higher than that operated by the National Lottery, but for a game that on any generally accepted measure would be classified as significantly "softer" than those operated by the National Lottery.

  The introduction of a single minimum age would create a simpler system for customers and operators alike. Conceivably this would also enable simpler enforcement. However, should a sliding scale be introduced we would urge that it is clearly linked to the degree of risk as defined previously by the ratio of stake to return and the opportunity to chase losses determined by frequency of play.

  Whatever system is eventually adopted, we would request clear operational guidance. Bingonet would also urge that any system of sanctions for transgressors should be proportionate to their ability to determine participants' age. Moreover, consideration could be given to introducing an offence for those minors who knowingly attempt to deceive operators into believing that they are of legal age. We believe that a common approach across the betting, gaming and National Lottery sectors would aid the enforcement of age limits.

3.  The impact of the National Lottery upon the betting and gaming industry

  For the reasons outlined above, neither current English law nor Bingonet consider Bananalotto to be gaming. Nevertheless, we recognise that similarities exist on the basis that there is an opportunity for a significant cash prize to be won entirely on the basis of luck.

  Unlike much of the betting and gaming industry, we cannot compare how the introduction of the National Lottery in 1994 impacted on our business because Bingonet only began trading this year. However, it is our view that the introduction of the National Lottery represented one of the most fundamental changes in the culture surrounding gambling and gaming. Not only did this provide industry with a much-needed incentive to re-examine its offerings, but it also facilitated a sea change of opinion amongst the British public. The notion of a small flutter became widely accepted with well over 90 per cent of the UK population having played the Lottery.

  As previously stated, both Bingonet and our players see Bananalotto as complementary to the National Lottery on the basis that there is no stake and the prizes are generally smaller. Therefore, we are not particularly concerned about the National Lottery moving online provided that the Lottery is subject to regulation that is proportionate to that which applies to other online games.

  Should the National Lottery become available online, we would anticipate two new effects which would contribute to the cultural acceptability of online games hosted in the UK:

    —  expanding accessibility; and

    —  overseas capability.

  Expanding accessibility. Allowing the sale of tickets online will directly increase players' access to the National Lottery. However, the question of accessibility should also be considered within the context both of easier access by players to more forms of gambling and access to operators who are based overseas and therefore not subject to UK regulation.

  Easier access to increased forms and varieties will inevitably result in increased participation. It is therefore important to ensure that participants have access to a wide range of scrupulously operated games spanning a broad range of risk. The Lottery, more traditional providers of gaming facilities and new economy providers such as Bingonet all have a role to play here.

  Clearly, the UK Government can only ensure high operational standards on sites that are hosted in the UK. Bingonet believes that regulation would best be achieved by providing an appropriate level of regulation that balances the need to minimise bureaucracy with the safeguards and reassurances that stem from playing on a UK-hosted site.

  Overseas capability.  Playing the Lottery online will inevitably bring the attention of players to online lotteries operated in other countries. While this is clearly an opportunity for the National Lottery to attract overseas players, it also represents a risk that UK participants may seek out operators based overseas either through the Internet or via the telephone if they offer terms that are more competitive than those offered in the UK. For this reason, any regulation should be geared towards maximising levels of trust that UK players have in UK operated sites while avoiding imposing bureaucratic burdens that will adversely impact on the returns available to participants.

  The most successful game on similar lines to Bananalotto to date is Freelotto (www.freelotto.com) based in the US, but targeted more widely including at UK residents. This site was launched in July 1999 and by May 2000 was ranked as the 14th most popular site in the UK in terms of monthly unique visitors. To the best of our knowledge, the dramatic growth of this site has neither been accompanied by a loss of revenue for the traditional gaming, gambling or State Lotteries, nor has it led to any substantiated evidence of increased problem gambling.

CONCLUSION

  Bingonet welcomes the Committee's inquiry into the operation of the National Lottery which comes at a time when technology increasingly allows the development of new forms of electronic games.

  Through Bananalotto, we have been able to create a new business model enabled by new technologies that operate ethically and responsibly. Participants have the opportunity to play an exciting risk-free game, sponsors benefit from increased flows of visitors to their web sites and the e-economy is stimulated. Because we do not require an initial stake, we have the potential to co-exist with the Lottery particularly if a proportionate and balanced regulatory approach is adopted that does not stifle new innovation.

  We would be pleased to expand on any of the areas covered in our submission by giving oral evidence should the Committee so wish.

October 2000


26   For the purposes of this submission we have used the terms "gaming" and "gambling" interchangeably unless otherwise indicated. Back


 
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