New Zealand is devising new measures to regulate their offshore online gambling market, with changes expected to go through until 2026. The Government’s estimates show that domestic consumers spend over NZ$1.3 billion a year on foreign gambling websites. New Zealand’s authorities plan to incorporate licensing, taxation, and consumer protection within a regulated domestic system. This is due to a combination of factors, causing concern due to insufficient control over the market and the rapid increase in online gambling.
New Zealand is now taking action on one of the most significant gaps in their online gambling legislation. Operators of overseas gambling websites that have little to no restrictions online have been able to evade and ignore the legal and financial obligations of the jurisdictions in which their players are located. New Zealand’s policymakers have now committed to a transparent control system to regulate such operators. It is clear that this also captures the New Zealand government’s desire to control where and how their citizens spend their money in this digital age.
The concern is not solely confined to gambling. The digital economy is already reliant on the same architecture for digitally distributed video games and massive multiplayer online (MMO) games, which will also be increasingly affected as regulations tighten in gambling.
Government Targets Offshore Operators in Major Regulatory Shift
New Zealand is the first country to target foreign online gambling sites. The New Zealand Department of Internal Affairs confirmed that New Zealand is the first country to legislate for gambling sites to legally serve New Zealand users. This means that each country that New Zealand is the first country to target new consumer protections, taxation, and transparency for gambling operators. This means that other foreign gambling sites’ regulations will no longer exist.
Without a centralized regulatory framework, players have split the cost of assessing offshore platforms using third-party resources. One example is the New Zealand gambling guide Kiwislots, which consolidates data on online casinos accessible to local users. Kiwislots includes payment options, licensing jurisdictions, and other relevant platform information. Its creation symbolizes the fragmented structure of the regulatory process, and the dispersed, unstructured, and unregulated market users have to deal with in the absence of governmental oversight.
Offshore operators do not contribute a significant amount of tax to New Zealand’s tax system, while they generate substantial revenue from New Zealand-based customers. This inequity has fueled much of the justification for reform, especially in the context of growing digital expenditures.
Billion-Dollar Market Draws Long-Awaited Oversight Efforts
The offshore gambling market’s size and activity have led to increased regulatory activity. Government estimates of annual spending on offshore gambling sites are in excess of NZ$1.3 billion, a number cited in 2024 policy briefs prepared by the Department of Internal Affairs. The estimate reflects spending for over a decade and captures the growth brought about by the increasing availability of money and payment systems.
The online gambling market has grown consistently around the world. Statista reports that the revenue generated through online gambling is around $95 billion, which has led to the market being projected to grow through the end of the decade. New Zealand has a low market share for online gambling, but the high participation in online gambling from New Zealand has proved the high market potential.
Concerns regarding offshore operations are raising fiscal issues. Without local licensing obligations, foreign providers are not subject to any domestic tax obligations with respect to revenue derived from New Zealand users. This has been described by officials as a limitation to the funding opportunities available to the public, particularly for the funding of healthcare and community services.
New Licensing Framework Aims to Level the Playing Field
The proposed new licensing system aims to create a market where participants, who obtain a license under New Zealand’s law, are allowed to provide services legally. As for the first policy initial drafts, it is anticipated that the licenses will be limited, and licensees will be subjected to a high level of compliance, which may include, but not be limited to: identity checks, the establishment of systems to prevent and report money laundering, and compliance with specific reporting requirements.
For years, local gambling operators have claimed that foreign competitors are able to take advantage of the absence of regulation. While domestic operators are subject to a regime where they are obligated to comply with a revenue-generating regime, and offshore operators have a far lighter regulatory burden, the establishment of a licensing regime is aimed at reducing this imbalance.
The ongoing economic conditions caused by the COVID-19 pandemic and Stats NZ’s data that report increasing household expenditure on digital services demonstrate the imperative of regulation. Increased use of online digital services that are not bound by geographical restrictions requires regulation.
The licensing of services, while potentially reducing the accessibility of services that are not subject to regulation, is unlikely to eliminate such services. Adapting to changing domain names or payment systems will enable offshore operators to circumvent regulatory restrictions. Therefore, establishing regulatory control will remain a challenge.