NSW pokies reforms will do much to limit problem gambling and money laundering

The New South Wales government has embraced a sweeping set of reforms to the state’s massive poker machine business. These reforms are centred on a “cashless gaming” system linked to pre-commitment. This system will require those who wish to use pokies in NSW to register for an account, provide high-integrity ID, set a limit for their pokie losses, and link this to a personal bank account.

Why is this needed?

NSW is effectively the heartland of Australia’s pokie business. In 2022, the 89,000 poker machines in NSW’s clubs and pubs are expected to rake in A$7.5 billion.

Much of this money comes from areas of significant disadvantage. In western and south-western Sydney, the local government areas of Fairfield and Canterbury-Bankstown, for example, are on track to contribute over $1.2 billion of that alone, or an average of $2,785 per adult.

Pokies, or gaming machines, are now clearly recognised as Australia’s most harmful gambling form. A recent research paper calculates that pokies are responsible for between 52% and 57% of Australia’s serious gambling harm. Pokies in pubs and clubs are also responsible for 51% of gambling losses overall – $13 billion per year.

Other gambling forms lag far behind this distressing calculus. Wagering on races and on sports, for example, contributes between 20% and 25% of the gambling harm total.

What does pre-commitment do?

Pre-commitment involves a requirement that every person who registers for an account to use pokies in NSW must set a personal limit on their pokie losses, tied to a certain period of time – a day, week, month or year. Limits may be lowered at any time, but only increased once every seven days.

The Tasmanian government recently announced it would roll out such a system from 2024. In Tasmania, there will be pre-set limits. These are $100 per day, $500 per month, and $5,000 per year.

The NSW proposals do not include any pre-set limits, although this is open to consideration. An expert working group and multi-departmental taskforce will fine-tune multiple aspects of the proposal.

In any event, people need to be supported via the system software and venue staff to set reasonable limits. Staff need training and support to do this, and protection from venue managers pushing for maximum profits.

Read more: Government's new gambling taglines are a start, but go nowhere near far enough

Cashless systems, tied to a single bank account and requiring a high standard of identification, will make money laundering via pokies very difficult. The digital trail will ensure any suspicious activity can be red-flagged by law enforcement authorities. Subject to a warrant, police can identify and investigate data for individuals concerned.

This will be the only way such data can be used. Neither government nor venues will have access. Individuals will be able to see their own records. This of itself is an important harm-minimisation initiative.

A cashless system on its own won’t help people with harmful gambling habits better manage, or stop, their gambling. NSW Opposition Leader Chris Minns has repeatedly asserted that cashless gaming will lead to more problems. He has referred to Victorian research that he claims demonstrates this.

However, the research in question was focused on moving to cashless gaming on its own, in the context of Victorian regulators permitting “tokenisation” of gambling credits. It did not consider the merits of linking pre-commitment to such systems. Indeed, the report found:

Many of the benefits of cashless gaming have been conflated with the benefits of other gambling harm-minimisation tools (e.g. player tracking, pre-commitment effects have been confused with the effects of cashless gaming).

However, linking pre-commitment and a cashless system will be a major step towards reducing gambling harm and eliminating this form of money laundering. The system will also require regular breaks in pokie use (for example, a 15-minute break after 90 minutes of use). We know from the first round of tobacco restrictions some years ago that taking a break allows time for reflection. When people are “in the zone” on a poker machine, their rationality is suspended. But away from the machine, reality has a chance of intervening.

Pre-commitment, in effect, gives people a new tool to manage their gambling. It’s important to remember that even those suffering under the influence of a serious gambling addiction have lucid moments – away from the machines.

The new system will allow people to give effect to their best intentions, including includes those who wish to stop gambling. The new system will be linked to a statewide self-exclusion register, meaning those who wish to self-exclude can do so effectively for the first time. This is a major breakthrough in itself.

If the system is “future proofed”, as it should be, it must have capacity to incorporate regular reminders of how much the user has lost over their sessions of pokie use. Where gambling activity demonstrates a likely pattern consistent with increasing harm, that should be flagged, and players should be sent an automated text or email suggesting avenues for assistance.

Regular statements of activity need to be available (as with online gambling) and tailored warning messages may be much more effective than bland requests to “gamble responsibly”. All of these should be available via this system.

There is also $350 million on offer to encourage clubs to diversify their revenue sources and to provide incentives to join the rollout of the new system. Large clubs in NSW often rely on poker machines for 80% or more of their total revenue. This is a major reason clubs are reluctant to embrace reform.

Old machines need to be replaced

The new system is to be rolled out over a five-year time-frame. This is almost certainly longer than needed. The majority of pokies in NSW can be retrofitted with hardware and software to make the system work as intended.

However, there are 30,000 or so machines that are too old. This will include machines that continue to allow $10,000 to be inserted at once – perfect for money laundering. Such machines need to be replaced as a high priority. Unless this is achieved quickly, they will be magnets for money laundering’s last hurrah through pokies.

Pokies in NSW are all linked by a statewide monitoring system. This is used mostly to protect revenue, but can be enhanced as necessary to incorporate the proposed system.

Read more: Pubs and clubs – your friendly neighbourhood money-laundering service, thanks to 86,640 pokies

So … will it work?

The technical issues are serious, but not overly difficult. Victoria has been running a voluntary pre-commitment system for years without technical problems. Unfortunately, because it’s voluntary, it is little used.

A universal system is far preferable. Strong evidence from Norway indicates it will reduce gambling harm. It is almost certain it will produce a dramatic reduction in pokies-based money laundering.

If implemented (a big if, relying on the Perrottet government’s re-election) these reforms will be highly significant. For the first time in NSW since pokies were introduced in 1956, pokie gamblers will be able to manage their gambling effectively. And money laundering at the local pub or club will become a thing of the past.