Paul Davis, Managing Director of Counting House, is “not sure whether this move signals an opening of the market, but at least it signifies a willingness to put a toe in the water and test the temperature, something that appeared very unlikely for years”. Davis expects other operators to follow “almost certainly, although the supply of suitable [Chinese] partners may be found very thin indeed”.
Wei Zhang, Partner at Jun He, is more sceptical: “Even though the online sale of two types of lotteries are now permitted, we cannot reach the conclusion that online gambling will be allowed in the near future, as this is against the political and moral guidance that one should get rich through hard work”.
Currently, only welfare lotteries and sports lotteries are legal in China, which boasts the largest and fastest growing number of internet users in the world. “I believe that the authorities will fully understand our structure and will continue and support it, by issuing a sale permit to this JV in due course”, said Pontus Lindwall, CEO of Betsson.
In China, all gambling activities are controlled by the state - that is why “Betsson's choice of partner should be highly scrutinised, it almost certainly brings government involvement in the market with it”, said Nao Matsukata, Senior Policy Advisor at Alston and Bird LLP. Davis thinks this is actually an advantage: “For two decades the route to sustainable business development in China has been through joint ventures with local businesses”, he said. “[Betsson’s] choice of partner is commendable in that closeness to government is one of the best guarantees of continuity.”
Matsukata points out other issues: “Considering Beijing's strict control of the internet, there are bound to be privacy and data security issues for online gamblers of the services that Betsson may come to offer”, he said. “Consumers and service providers will both eagerly wait what model it develops to protect sensitive information.” Betsson did not disclose the name of the Chinese ‘local company’ it has established a relationship with.
Published previously in World Online Gambling Law Report, February 2011, London. Michiel Willems, copyrights apply.