The new Ethiopian Sport Betting Directive: Investment implications, gaps and foreword

In the 21st Century there began a gradual, albeit, irregular, shift in the official attitude towards gambling, from considering it a sin to considering it a vice and a human weakness and, finally, to seeing it as a mostly harmless and even entertaining activity. Additionally, the internet has made many forms of gambling accessible on an unheard-of scale. By the beginning of the 21st century, approximately four out of five people in Western nations gambled at least occasionally. A rough estimate of the amount of money legally wagered annually in the world is about $10 trillion (illegal gambling may exceed even this figure).

The United Kingdom sports betting industry has the most developed laws in the international gaming community; The UK has a well-established culture of sports betting. Many of the online sports books are publicly-traded companies on the London Stock Exchange. The UK sports gambling community also produced the world’s first sports betting exchange, where gamblers do not bet against fixed-odds, but instead wager in a betting pool.

Betting shops dominate the landscape in England, with over 9,000 in total throughout the United Kingdom. All of the best payment methods are allowed in the UK. Visa, MasterCard, PayPal etc..UK sports bettors have the best opportunities, because competition between bookmakers is so fierce. Bookmakers make a substantial contribution to the UK economy, generating over 700 million pounds in taxes annually and employing tens thousands of people

The main objects of sports betting

The main object of sports betting is to beat the ‘Odds makers’ or the ‘Odds Compilers’ and win some money. Additionally, placing a bet on your favorite sport event makes the game exciting and more enjoyable. You need to state what you are betting on by making a selection, the type of bet and the amount you are wagering. Your selection will obviously depend on the odds offered, so you will want to examine the range of odds available before you make a decision. There are many types of bets you can place. Some may offer more betting varieties and combinations than others. The common bets mainly include: Straight bet or Single; Point Spread; Buy Points; The Money line; Total score; over/under; Parlay or Accumulator; Teaser; If-wager; Open Wager; Future; Exotic Bets; Proposition Bet or Prop Bet.

The main purpose and goal of regulating sport betting lottery

The main goal of regulating betting are: ensuring that gambling operators treat their clients fairly and that individuals under age 21 are shielded from gambling activities. Hence, operating sport betting without a betting license and participation of a person under the age of 21 is a serious violation of betting regulatory rules.

Ethiopia: Overview of Sport betting lottery Administration Directives

In Ethiopia, based on Article 4(26) of Council of ministers Investment Regulation No. 474/2020, lottery and sport betting investment is reserved for Domestic Investors. The definition of “domestic investor” is provided under Ethiopian investment proclamation No. 1180/2020 as follows: Ethiopian national; company wholly owned by Ethiopian national; government and public enterprise.

Also read: The rise of online betting in Africa

Sport lottery betting activities were widely practiced, and licensing was on the boom, in the first quarter of 2019. However, after a year and licensing 22 Sport betting companies until the end of March 2020, betting come under wider public criticism. The growing concerns and recent media criticisms has forced both betting firms and the government, to call a press conference at the end of March 2020. The concerns include: violating age restrictions, with students being witnessed wearing school uniforms, in betting shops; concern on betting is becoming a bad habit and addictive, that could cause psychological harm. However, within one year of licensed 22 betting companies, National lottery generated six million birr from betting while 20% is said to be contributed to social donations and 15% lottery income tax is deductible from the winners. After much criticism, the national lottery has invited research institutions and universities to conduct research on the concern areas.

The Ethiopian Management Institute held a research and presented a paper with scientific finding with a recommendation for the administration and Revenue minister. Based on the findings and recommendations, the revenue minister has issued a directive, effective 1 September 2021, cited as “Sport Betting lottery Directive No. 172/2021”. On this day, 42 sport betting lottery companies are licensed and operational. The National Lottery Administration earned ETB 107 million birr (around 2.3 million dollar) in 2013 Ethiopia budget year (from 7 July 2020 to 06 August 2021).

The main new developments (rules), included under the new directive, mainly include:

• Unconditional bank guarantee of ETB 1,5000,000 shall be provided to apply for a new betting license or renewal of license;
• New sport betting lottery licensing fee amount is set at ETB 500,000; Betting license renewal fee is set at ETB 100,000;
• Every ticket sale shall be immediately be made known by the administration;
• Licensee shall deduct 15% of commission from total ticket revenue and 15% of the winning prize amount and pay to the national lottery Administration at the end of every month;
• The licensee shall provide bank statement every month to the administration;
• 0.5% total revenue shall be allocated for social contributions;
• A single contest sport betting prize shall not exceed ETB 1,000,000;
• Winning prize shall be claimed within a month of the lottery winning sport event day and claimed prize shall be paid to the winner within 15 days of the appearance of the winner;
• The licensee can’t provide a system problem to deny or decline winning prize money. The licensee shall provide system access code whenever the administration found it necessary to resolve a specific issue;
• The minimum age for a person to participate in lottery shall be age of 21 and above;
• Lottery activity shall be conducted 500 meter away from school and religious institution;
• It is prohibited to conduct the lottery in grocery; restaurant; chat chewing place or any entertainment place;
• Participating student in a betting while wearing a school uniform is prohibited irrespective of his age;

Sport betting other than a branch permitted by the administration or in contrary of office requirements (standards) issued by the administration is prohibited.

The Implications and way forward

• The Ethiopian betting directive gives unconditional right for regulatory authority to get a system access code of the licensee whenever it needs. This rule is against the main goal and purpose of betting regulation mentioned above and undermines business secrets and competition (may be a unique business secrets) of the bookmark (licensee). For instance, UK gambling legislation attempts to regulate the behavior of individual betters where it is believed that betting activity is related to, or may constitute, criminal activity. The most serious crime is operating without a license and inviting/participating persons under the age of 21. Hence, the right to get system access code of the operator shall be allowed when there is only suspicion of crime.

• The Ethiopian betting directive gives the regulator, unconditional power or right to receive bank statement of the licensee. This is unnecessary as the licensee is prohibited from claiming any system problem to deny or decline winning prize money. In addition, the regulatory body controls every tickets sale in digital online system. Moreover, the licensee has the obligation to provide to the regulator the bank agreement concluded for online betting ticket payment and winning prize payment arrangements.

• In relation to unconditional bank guarantee of ETB 1,500,000 (one million five hundred thousand birr), for licensing and renewal of betting license, the directive fail to indicate what particulars should be included in the unconditional bank guarantee. This is mainly because of the fact that the applicant may take its first license in any month of the year and renew the license after the expiry and/or on the final renewal deadline (paying administrative penalty of ETB 10,000 on Ethiopian month of Tir 30). The validity (the extent of applicability) of the guarantee after expiry and until renewal should be indicated for clarity as well as to save betting company from administrative penalty in the pretext of violation of rules.

• The directive enshrined a rule that reads “Any person interested to run a business of sport betting shall apply in writing for issuance of license”. Any person includes natural person and juridical person. Hence, based on this definition, the sport betting license could be given to any natural or juridical person. In addition, Article 4 of the directive obliges submission of authenticated memorandum of association and articles of association only for license application received from P.L.C Company. However; any person applying for license will be forced to have the structure of P.L.C or Share Company (establish or revise the business type) in order to fulfill the requirements and documents requested by the regulatory authority, under article 4 of the licensing regulation No. 172/2021. For instance, bank statement requirements and unconditional bank guarantee can only be issued by any bank for P.L.C or Share company Bank account holders. The obligation to notify the regulatory authority when opening, relocating and closing branch or main office also forces the licensee to have structure of a limited liability company than sole proprietorship or limited/general/ordinary partnership. Hence, the directive shall either specifically oblige license applicant to have a P.L.C structure or clearly define who shall apply for license in the specific definition part of the directive.

• The directive, on the definition section, defined “Sport betting lottery” and “license”. However, based on the meaning assigned for “lottery” and listed requirements for license, the definition section didn’t include the general or specific definition of “Bookmarkers” or “Licensee”. The rule “Any person can apply for license” cannot define Ethiopian bookmarkers or licensee very well.

• Under Article 4(2) (e) of the licensing directive, the license applicant has the obligation to provide proposal containing betting rules and websites used to identify winning during the application for a new license or renewal application. Any license taker, during business operation, may opt to introduce and compete offering additional bet stakes winnings not included in earlier application proposal or any other betting sites. Since license is renewed after a year of operation, this is indirectly a restriction on the menu of gaming available or to be offered during betting operation. Betting is making a variety selection, the type of bet and the amount. The selection will obviously depend on the odds offered, so betters shall get the wider range or menu of odds available before making a decision. Hence, this is against the main goal of regulating betting: fair betting and ensuring betters winning prize payment. Therefore, the licensee shall have the full right to include new bet stakes/odds/ menus that are not submitted in the earlier new license or renewal application proposal with the only obligation of notifying the regulatory authority in advance.

The way forward

While the Ethiopian investment regulation No.474/2020, reserved the betting industry to domestic investors, Ethiopian investment board chaired by the Prime Minister, has the full power to decide on the opening of any sector reserved for domestic investor to foreign investors either fully or partially (in partnership with government or domestic investor). In addition, National lottery administration re-establishment Council of Ministers regulation No.160/2009, allows the regulator to engage in joint venture business activities. Hence, I strongly believe, upon the current higher economic slash, amid higher exchange devaluation and stagnant import performance, the government will consider opening the sector with perquisite of setting minimum capital and partnership arrangement with domestic investor including National lottery administration (with higher probability of licensing other lottery types).