Chapter 02

History of gambling regulation in Victoria

Introduction

1. The first casino to open in Australia was Wrest Point Hotel Casino in 1973, located in Hobart, Tasmania. By 1986, eight casinos had opened across Australia.¹ Victoria resisted the introduction of both electronic gaming machines (EGMs) and casinos in the 1970s and early 1980s. But by the late 1980s, changes in the economic fortunes of the State, and public opinion, paved the way for their introduction.² By the time the proposed legislation to legalise casinos and EGMs reached the Victorian Parliament in 1991, both sides of politics generally supported the policy decision to legalise these forms of gambling. The Coalition opposition at the time declared that the Casino Control Bill 1991 (Vic) ‘should be regarded as a coalition initiative’.³

Terms used in this chapter

2. The regulator of the Melbourne Casino has had a number of different names since it was first established. In this Report, the term ‘regulator’ is used to refer to these bodies, unless otherwise required by context. See Acronyms for the names of the regulatory bodies.
3. The Melbourne Casino licence holder has also had a number of different names. In this Report, the casino licence holder will be referred to as the ‘casino operator’ unless otherwise required by context. Appendix E details the different names of the licence holder.

Legalisation and establishment of a casino in Victoria

4. In Victoria, it has been—and continues to be—public policy to prohibit gambling and the conduct of gambling unless they are specifically legalised. Where permitted, legislation has carefully constrained how legal forms of gambling are conducted. Victorian gambling legislation has responded to the need to control gambling markets that were previously illegal and to mitigate or control the negative side effects of gambling activity.
5. During the 1970s and early 1980s, successive Victorian Governments resisted legalising casinos and EGMs, and did not progress various private sector proposals to develop a casino.⁴
6. In October 1982, former Federal Court judge, the Hon. Xavier Connor, QC, was appointed by the Victorian Government to inquire into and recommend whether casinos should be established in Victoria. At this time, a number of casinos had opened across Australia, providing states and territories with a source of tax revenue and helping them create employment and attract tourism. Mr Connor, QC also inquired into, among other matters:

   ...

   3. the legal and administrative measures, if any, which should be adopted to control and supervise the operations of any casino or casinos that may be established in Victoria;
   4. the measures, if any, which should be taken to prevent undesirable persons from having a financial or other connection with or being in a position to influence any aspect of the operations of any casino or casinos which may be established in Victoria; and
   5. whether such a casino or casinos should be established or operated by the Minister, an agency of Government, or private enterprise.⁵

7. In April 1983, Mr Connor, QC, issued his Report of Board of Inquiry into Casinos in the State of Victoria (1983 Report). The 1983 Report recommended against the establishing of casinos in Victoria because of the social and regulatory problems that could result.⁶
8. Mr Connor, QC formed the view that if casinos were to be legalised, they would need to be subject to a very high level of regulatory control. He noted:

   No one disputed the proposition that, if there were to be casinos, their establishment and operation should be strictly controlled by Government. The broad object of such control is to ensure that casinos are properly run. One indispensable requirement for a properly run casino is a proprietor of integrity and ability. Any legislation must provide for adequate machinery for selection of such a proprietor. Another indispensable requirement is a sound system of Government control staffed by honest and capable people. To those unfamiliar with casinos, the degree of control which has been found necessary may seem at first to be somewhat far fetched. Once the dangerous and volatile nature of casino gambling is understood, however, the absolute necessity for competent ongoing strict, even draconian, control becomes clear. The degree and form of control will vary in some respects according to the type of casino which is ultimately introduced; but there are many measures of control and supervision which apply to any casino. Control may be ineffective because it is corrupt; it may also be ineffective because it is incompetent, albeit honest.⁷

9. The government accepted Mr Connor, QC’s 1983 Report findings and announced that Victoria would not proceed with any casino proposal. The Premier at that time, the Hon. John Cain, had argued consistently that EGMs would encourage people to gamble beyond their financial capacity and that they exploited the working class.⁸
10. Mr Cain resigned in August 1990. The State was facing economic challenges and increasing political pressure to increase state revenue. The new government, led by the Hon. Joan Kirner, AC, announced the legalisation of casinos and EGMs.⁹
11. There were a number of factors motivating that decision. These included that:
    • casinos would stimulate a struggling economy by bringing both employment opportunities and tax revenue
    • legalising EGMs and casinos would redirect to Victoria money being spent by Victorians crossing the border into New South Wales to use EGMs
    • community attitudes towards establishing casinos in Victoria were changing.¹⁰
12. While political and community views on developing casinos in Victoria had changed, concern remained that casinos would attract criminal influence and exploitation. Under the gambling reforms announced in December 1990, the Kirner Government reappointed Mr Connor, QC to report on the preferred method for the establishment and control of an ‘open casino’ and ‘[t]he feasibility of establishing an unobtrusive casino prior to and in addition to the open casino’.¹¹
13. In his second report, Report on Casinos, delivered on 14 February 1991 (1991 Report), Mr Connor, QC inquired into, and reported on:

    …

    5. the content of legislation to be introduced which would be designed to provide strict controls over all aspects of the operation of such casinos, including whether or not an independent authority needs to be established to oversee the operations of the casinos and if so the membership, functions and powers of the independent authority;
    6. the measures to be taken to exclude criminal activity and influence from the casinos and criteria/restrictions if any for person/bodies having a financial, ownership or other connections with the establishment or management of the casino.¹²

14. The 1991 Report observed:

    It has now become commonplace to editorialise that since [1983] it has been demonstrated that Australian casinos can be conducted in a way which keeps them free of organised crime. It remains a fact, however, that crime is constantly knocking on the door and the most stringent and sustained measures are required to keep it out.¹³

15. Mr Connor, QC made recommendations regarding the system of regulation and control for casinos. He concluded that he still considered Victoria would be better off without casinos and that he had no real confidence crime would be kept out over the long term.¹⁴
16. When the Victorian Government made the policy decision to authorise the operation of a casino in Victoria, it largely accepted Mr Connor, QC’s recommendations.

Establishing a legislative framework

17. In the 1991 Report, Mr Connor, QC recommended that the Casino Control Act 1983 (Qld) (Queensland Act) be used as the model for casino control legislation in Victoria, subject to the modifications, adaptations and additions he specified in that report.¹⁵
18. Mr Connor, QC noted that the Queensland Act was based substantially on New Jersey legislation. The Queensland Act did, however, differ from the New Jersey legislation in an important respect: the Queensland Act was administered by a Minister. Virtually all decisions of any importance were at the Minister’s discretion. The Queensland Act did not provide for any independent control body. With this important exception, Mr Connor, QC considered the Queensland Act generally to be a good model for Victoria to follow.¹⁶
19. After considering the 1991 Report, the Victorian Government introduced two Bills to facilitate the establishment of a legal gambling industry in Victoria: the Gaming Machine Control Bill 1991 (Vic), to regulate EGMs, and the Casino Control Bill 1991 (Vic), to regulate casinos.
20. During the second reading of the Casino Control Bill, the then Minister for Major Projects said:

    This Bill will enable the establishment of the casinos and is the result of the recommendations of the [1991] Connor report. The government has worked closely with the New South Wales government, which also is preparing casinos legislation based on the Connor report. The Bill mirrors the current New South Wales draft Bill, and indeed the two Bills are almost identical in format and wording. This consistency of approach will be of benefit to prospective tenderers for casino licences and will offer to both States the same high level of stringent control and regulation of casino operations.

    In order to exclude criminal activity and influence from the casinos, legislation designed to provide strict control over all aspects of the operation of casinos is required. The government believes the Bill will achieve the objective, based on the Connor report and the experience of interstate and overseas legislation.¹⁷

21. The Casino Control Bill was passed on 4 June 1991 and received Royal Assent on 25 June 1991. Not all of Mr Connor, QC’s recommendations were adopted. The Casino Control Act 1991 (Vic) was less prescriptive than the Queensland Act in several respects. Further, a number of Mr Connor, QC’s recommended modifications, adaptions and additions to the Queensland Act were not adopted, including modifications relating to the regulation of junkets.

Grant of the Crown Casino licence

22. In late 1991, the Victorian Government called for parties to express interest in developing and operating a large casino in Melbourne. Expressions of interest were received from Australian and international consortiums. The Hudson Conway consortium involved large Melbourne-based companies and well-known business identities. It was formed by Hudson Conway Limited (HCL) (a listed property construction company, then controlled by Mr Lloyd Williams and the late Mr Ron Walker, AC, CBE),¹⁸ Federal Hotels Ltd and Carlton & United Breweries Ltd (CUB) (collectively the founding shareholders). It was promoted as the only genuinely Melbourne-based bid. The consortium proposed raising capital from the public to establish the casino.¹⁹
23. Following probity investigations by the Victorian Casino Control Authority (VCCA), a casino licence was granted to the Hudson Conway consortium’s Crown Casino Ltd on 19 November 1993 for a term of 40 years.²⁰ The corporate history of the Crown group of companies is detailed in Appendix E.
24. The temporary Melbourne Casino, called the Galleria Casino, opened on 30 June 1994. It was located at the World Trade Centre on the north bank of the Yarra River while the preferred Southbank site was being developed. Operations transferred to the Southbank site on 8 May 1997.²¹
25. In October 2014, the term of the casino licence was extended by 17 years to 2050.²²

Ownership and corporate structure of the casino operator

26. At the time the casino licence was granted, Crown Casino Ltd entered into an agreement with the VCCA under section 142 of the Casino Control Act (Casino Agreement). It also entered into the Management Agreement with the State under section 15 of the Casino Control Act (Management Agreement). The Management Agreement was ratified by the Casino (Management Agreement) Act 1993 (Vic) (Management Agreement Act).
27. The Casino Agreement included a number of obligations regarding the corporate structure of the casino operator, including the need for prior approval by the regulator before a person’s shareholding in the casino operator (other than the founding shareholders) exceeded 5 per cent of the total number of shares on issue.²³
28. Since Crown Casino Ltd was granted the casino licence, there have been a number of changes in the ownership of the casino operator, including the Publishing and Broadcasting Limited (PBL)–Crown merger and a subsequent restructure. Given the importance of these changes, they are dealt with separately in Chapter 17.

Regulation of the casino operator

29. The casino operator is currently regulated by the Victorian Commission for Gambling and Liquor Regulation (VCGLR). Both the regulator and the regulatory framework under which the casino is regulated have changed significantly since the Casino Control Act was first enacted.

Overview of the current framework

30. The casino operator is currently subject to a range of legislative, regulatory and contractual requirements set out in:
    • the Casino Control Act
    • the Management Agreement Act
    • the Gambling Regulation Act 2003 (Vic)
    • the Liquor Control Reform Act 1998 (Vic)
    • relevant regulations and ministerial directions made under those Acts²⁴
    • a suite of commercial agreements concerning the operation of the Melbourne Casino Complex (Transaction Documents).
31. The Transaction Documents set out the details of the relationship between the various participants in the Melbourne Casino, including the State, the VCGLR and financiers. In its Sixth Review of the Casino Operator and Licence (June 2018) (Sixth Review), the VCGLR defined the Transaction Documents to include the Management Agreement, the casino licence, the Casino Agreement and other listed documents setting out financial and quasi-regulatory obligations and privileges of the casino operator and its holding company.²⁵
32. The framework in which the casino operator is regulated today is significantly different from that envisaged when the legislation authorising casinos in Victoria was passed in 1991.

The Casino Control Act

33. The Casino Control Act provides for the licensing and operation of casinos in Victoria. Key features of the Casino Control Act in its original form included:
    • The establishment of a specialist, standalone, independent regulator (the VCCA). This body was responsible for, among other things, licensing the casino operator and approving the casino’s systems of internal controls and procedures, accounting procedures and bank accounts.²⁶
    • The creation of a separate office of the Director of Casino Surveillance, responsible for supervising the day-to-day operations in the casino, investigating complaints and helping to detect offences. The Director of Casino Surveillance was separate from the VCCA, but was required to report to and generally assist the VCCA.²⁷
    • The appointment of inspectors by the Director of Casino Surveillance to supervise the operations of the casino, including handling and counting money in the casino, and helping to detect offences.²⁸
    • The process for licensing casino operators. The Act also outlined the criteria the VCCA had to consider when determining the suitability of an applicant for a casino licence and the suitability of each of that applicant’s associates. More than one casino licence could be issued under the Casino Control Act (with the Minister’s approval), subject to any exclusivity arrangements entered into by the VCCA.²⁹
    • The process for licensing special employees of the casino, including those working in a managerial capacity, those involved in the conduct of gaming, those involved in the counting or movement of money or chips, and those involved in the repair of gaming equipment. The Director of Casino Surveillance was required to investigate and assess each applicant against the specific suitability criteria before granting a special employee licence.³⁰
    • A general power for the VCCA to investigate a casino at any time and a requirement for the VCCA to undertake an investigation at the Minister’s direction. Additionally, the VCCA was required to reassess, at least every three years, the suitability of the casino operator to continue holding the casino licence and to determine whether keeping the casino licence in force remained in the public interest.³¹
    • A requirement for the VCCA to approve certain supply contracts entered into by the casino operator. This required the VCCA to inquire into the operation of each contract and the suitability of each person who was a party to the contract. The VCCA had power to require the termination of a contract if it considered the contract was no longer in the public interest.³²
    • Subject to a limited exception, a prohibition on the casino operator providing credit to patrons.³³
    • The power to make subordinate legislation regulating or prohibiting the promotion and conduct of junkets.³⁴
    • The power for the Director of Casino Surveillance or the casino operator (including on the direction of the Chief Commissioner of Police) to issue exclusion orders to a person, prohibiting them from entering or remaining in the casino.³⁵
    • A requirement for the VCCA to approve a detailed system of internal controls and administrative and accounting procedures governing the day-to-day operations of the casino. The required content of the system of internal controls and administrative and accounting procedures was specified in the Casino Control Act.³⁶
    • The power for the VCCA to issue directions to the casino operator that related to the conduct, supervision or control of casino operations. The casino operator was required to comply with the directions.³⁷
    • The power for the VCCA to require a casino operator, or a person directly or indirectly associated with the operator, to provide information, to produce documents or to attend before the VCCA to be examined. Failure to comply without a reasonable excuse was punishable as if the person was in contempt of court.³⁸
    • The power for the VCCA to take disciplinary action against the casino operator, which could include cancellation, suspension, letter of censure, variation to the terms of the licence or the imposition of a fine not exceeding $1 million.³⁹
    • A provision that no right of compensation was enforceable against the State in relation to the cancellation, suspension or variation of the terms of the licence, or an amendment of the conditions of a licence, under the Casino Control Act.⁴⁰
34. Before a tender process for the award of a casino licence could commence, the Casino Control Act required that regulations be made setting out, among other things:

    …

    4. the maximum permissible number of casinos;
    5. the permissible locations for casinos;
    6. the required style and size of casinos generally or of any particular casino; and
    7. such other matters (if any) as the Minister considers relevant to the expressions of interest, invitations or applications.⁴¹

35. The Casino Control Act has been amended many times over the past 30 years. There have been several substantial changes to elements of the regulatory framework in which the Melbourne Casino operates.

The Casino Agreement

36. Under the Casino Control Act as originally enacted, the VCCA was permitted, subject to the Minister’s approval, to enter into agreements for or in connection with the establishment and operation of casinos. The agreement could provide that the obligations it imposed were to be considered as conditions of the casino licence.⁴²
37. In addition, the Casino Control Act also permitted the VCCA to enter into an agreement with the proposed casino operator as to the exclusivity of the casino licence.⁴³
38. On 21 September 1993, the VCCA entered into the original Casino Agreement with the proposed casino operator in relation to the establishment and operation of the Melbourne Casino and the exclusivity of the casino licence.⁴⁴
39. The Casino Agreement addressed various matters, including the development and completion of the Melbourne Casino, conditions relating to the casino operator’s company structure and disclosure requirements, the grant of the casino licence, the casino games and operating practices, and licence conditions.⁴⁵
40. Under the Casino Agreement, the casino operator was required to:
    • Obtain the VCCA’s approval for the appointment of any director or alternate director.⁴⁶
    • Remove any director or alternate director from office in accordance with the VCCA’s direction.⁴⁷
    • Not knowingly permit any person (other than the founding shareholders) to be entitled to more than 5 per cent of the total number of shares of the casino operator at any time without the VCCA’s approval.⁴⁸
    • Obtain the VCCA’s approval before carrying on or conducting any business other than the businesses authorised under the Casino Agreement and the casino licence or any business incidental to or complementary with those businesses.⁴⁹
    • Obtain the VCCA’s approval before establishing or acquiring a subsidiary unless that subsidiary related to a business incidental to or complementary with those businesses contemplated by or authorised under the Casino Agreement and the casino licence.⁵⁰
41. Other key provisions of the Casino Agreement included that:
    • While the casino licence remained in force, the VCCA undertook not to grant a casino licence to any other person for the operation of a casino anywhere in Victoria for six years from the licensing date under the Casino Agreement and, in those parts of Victoria within a radius of 150 km from the casino site, for 12 years from that licensing date.⁵¹
    • The casino operator was required to strive to obtain the maximum Gross Gaming Revenue (GGR) by conducting its operations in the temporary casino and later at the Melbourne Casino as a discrete business operated in Melbourne in a proper and efficient manner, having regard to the best operating practices in international casinos of a similar size and nature to the Melbourne Casino.⁵²
    • Subject to a specified Transaction Document, it would be a contravention of the casino licence, enabling the VCCA to take disciplinary action against the casino operator under the Casino Control Act, if certain events occurred (including if the casino operator breached the Casino Agreement).⁵³
    • Subject to the Minister’s approval, the parties to the Casino Agreement could vary any provision of the Casino Agreement.⁵⁴
42. Since the Casino Agreement as originally enacted was entered into, it has been the subject of 12 Deeds of Variation.⁵⁵
43. While the amendments in the earlier Deeds of Variation related primarily to the development of the Melbourne Casino and the casino operator’s financial arrangements,⁵⁶ there have been significant changes to, among other things, the conditions relating to the casino operator’s structure.⁵⁷ Some of these changes affect the ongoing regulation of the casino, and are discussed in more detail in other chapters.⁵⁸

The Management Agreement Act

44. Under the Casino Control Act as originally enacted, the VCCA was prohibited from granting a casino licence unless a management agreement had been entered into between the State and the proposed casino operator that: (a) identified the casino to be the subject of the licence; and (b) contained any other terms and conditions the Minister thought fit.⁵⁹
45. This management agreement was initially intended to cover matters such as ‘taxation arrangements, design of the development of the casino, and infrastructure provision arrangements with the developer’.⁶⁰ Since then, the scope of matters incorporated into the agreement has expanded.
46. On 16 November 1993, the Management Agreement entered into between the State and the casino operator dated 20 September 1993 was ratified by Parliament and set out in schedule 1 of the Management Agreement Act as originally enacted.
47. The Management Agreement Act, as originally enacted, principally addressed the approvals for, and development of, the casino. Key provisions included:
    • That to the extent that the Management Agreement was inconsistent with a provision of the Casino Control Act, the provisions of the Management Agreement would prevail. This provision allowed any terms in the Casino Control Act to be overridden by any ratified commercial arrangements incorporated into the Management Agreement between the State and the casino operator.⁶¹
    • That the sale, transfer, assignment or other disposal of the licence by the casino operator to another person would be permitted only if the Minister approved the sale, transfer, assignment or other disposal to that person of the casino operator’s rights, liabilities and obligations under the Management Agreement and the person had been approved by the VCCA.⁶²
    • That the casino operator would be obliged to pay the premium payments, fees and taxes to the State.⁶³
    • That the casino operator would have the exclusive right to conduct games approved under the Casino Control Act by the VCCA for a period of six years, extended to 12 years for those parts of the State within a radius of 150 km of the casino, subject to a carve-out for specified EGMs, lottery and club keno games. The Management Agreement also restricted the maximum number of EGMs permitted in venues within 100 km of the casino to 105, and the total number of EGMs in the state to 45,000, for a 12-year period.⁶⁴
48. The Management Agreement Act, as originally enacted, also included:
    • A requirement to obtain the State’s consent before dealing with the casino assets, making changes to the building, or any improvement or fixture forming part of the casino assets, or leasing or acquiring any asset other than in the ordinary course of the casino operator’s business, except as permitted by the Casino Agreement.⁶⁵
    • The processes and procedures for the further development and approval of the design documentation, for the approval of the casino location and for the development of the casino.⁶⁶
    • The process for, and consequences of, the termination of the Management Agreement.⁶⁷
49. The Management Agreement can only be amended by agreement of the State and the casino operator, and any amendment only comes into effect when ratified by Parliament.⁶⁸ Since the enactment of the Management Agreement Act, the Management Agreement has been the subject of 10 Deeds of Variation, each of which Parliament has ratified.⁶⁹
50. While many of the early amendments related to changes to the development phase of the project, there have been some significant changes to the Management Agreement that affect the ongoing regulation of the casino. These are discussed in more detail in other chapters.⁷⁰

The Gaming Machine Control Act

51. The Gaming Machine Control Act 1991 (Vic) was enacted after the Casino Control Act had passed.
52. The Gaming Machine Control Act created the regulatory framework for the introduction of EGMs in Victoria including:
    • their use in hotels, clubs and casinos
    • the activities of persons in the industry, including EGM manufacturers and suppliers.⁷¹
53. The Act provided for:
    • The manufacture, sale, supply, obtaining and possession of EGMs to be regulated.⁷²
    • The Minister to issue directions about the requirements for EGMs. These covered a range of matters, including the maximum number of EGMs permitted in Victoria, how many of these could be located outside the metropolitan area, the maximum number of EGMs allowed in restricted and unrestricted areas, and the bet limits for each class or area.⁷³
    • The casino operator to be authorised, as a licensed venue operator, to obtain and possess EGMs.⁷⁴
    • Technicians to be licensed to service, repair or maintain gaming equipment and to carry out prescribed duties. It further provided for persons listed on the roll of recognised manufacturers and suppliers of EGMs and components (Roll) to manufacture, sell or supply EGMs.⁷⁵ The casino operator was not able to obtain EGMs or components from a person not listed on the Roll.
    • The regulator to approve EGM types, games and linked jackpot arrangements; restrict access to EGM components; and create offences for unlawful interference with gaming equipment.⁷⁶
    • The establishment of the Victorian Gaming Commission. The Victorian Gaming Commission’s objectives included to ensure that gaming on EGMs was conducted honestly and that the management of gaming was free from criminal influence and exploitation; and to regulate the use of EGMs in casinos and approved venues. Its objectives also included to regulate the activities of key operatives in the gaming machine industry, including those who manufactured, supplied, repaired or owned machines, or provided venues for and operated machines.⁷⁷
    • The establishment of the position of the Director of Gaming. The Director of Gaming’s functions included ensuring that the conduct of gaming at approved venues was supervised; detecting offences committed in or in relation to approved venues; and reporting to and assisting the Victorian Gaming Commission with the operation of the Gaming Machine Control Act. The Director of Gaming was authorised to appoint inspectors to enforce the provisions in the Gaming Machine Control Act.⁷⁸
54. Inspectors appointed under the Casino Control Act had all the rights, duties and functions conferred on inspectors by the Gaming Machine Control Act in relation to EGMs on casino premises.⁷⁹
55. Amendments were made by the Casino Control (Amendment) Act 1993 (Vic) and the Casino Control (Further Amendment) Act 1993 (Vic) to the Casino Control Act and the Gaming Machine Control Act to clarify the intended interactions between these Acts. The amendments ensured that the responsibility for the supervision and control of all gaming within the casino rested with the VCCA and the Director of Casino Surveillance, as was originally intended. Further, the amendments gave responsibility for the approval of EGM manufacturers to the Victorian Gaming Commission.

Key changes to the casino regulator

56. In the 1991 Report, Mr Connor, QC identified two basic functions of government in the management of casino gambling: a control function and a regulatory function. He recommended that each function be discharged by separately appointed persons or bodies.⁸⁰
57. The control function related primarily to the licensing of casinos and covered the administrative functions, some of which were described as ‘quasi-judicial’.⁸¹ The regulatory function related primarily to the direct supervision of the operation of casinos and the conduct of gambling in casinos. Mr Connor, QC stated that if this function was to be discharged satisfactorily, there would need to be a Division of Casino Regulation staffed by people with highly developed skills in administration, finance, auditing, policy and surveillance.⁸²
58. The regulatory framework initially established in Victoria to regulate EGMs and casinos comprised two bodies:
    • the Victorian Gaming Commission established under the Gaming Machine Control Act
    • the VCCA established under the Casino Control Act.
59. Consistent with the advice of Mr Connor, QC, the VCCA was established as an independent, standalone specialist regulator, responsible for the control functions in the casino.⁸³ The Director of Casino Surveillance was also established as the entity responsible for the conduct of gambling within, and for the direct supervision of, the casino.⁸⁴
60. After the VCCA had completed the probity assessments of the casino licensee applicants, but before the casino opened, the standalone specialist casino regulator was merged with the Victorian Gaming Commission to create a regulator responsible for both casinos and EGMs: the Victorian Casino and Gaming Authority (VCGA).

Victorian Casino and Gaming Authority

61. In September 1993, the Victorian Government commissioned a review of EGMs in Victoria. The review included a consideration of the effectiveness and efficiency of the regulatory and managerial framework governing the introduction and operation of EGMs. The recommendations of the review stressed the importance of having one Minister responsible for all aspects of gambling.⁸⁵
62. On 3 June 1994, by part 8 of the Gaming and Betting Act 1994 (Vic), the VCCA was merged with the Victorian Gaming Commission to form the VCGA.⁸⁶ The VCGA was an independent statutory body for monitoring and controlling all forms of gambling in Victoria, and had powers under a number of Acts.⁸⁷
63. The merger of the VCCA and the Victorian Gaming Commission was said to be a logical step because they had similar regulatory roles. It was intended to ensure a consistent approach to the regulation of all aspects of gaming. It was also intended to help pool existing regulatory expertise and carry out similar functions more efficiently. In addition, the new authority assumed responsibility for the regulation of wagering and approved betting competitions.⁸⁸
64. At this time, the office of the Director of Gaming and Betting was also established. It was given the power to investigate compliance under the Gaming and Betting Act, including with betting rules and licences, and to generally assist the VCGA in relation to the operation of the Gaming and Betting Act.⁸⁹

Victorian Commission for Gambling Regulation

65. Some eight years later, in 2002, the Victorian Government commissioned a high-level review of the governance arrangements for gambling regulation. The review found that gambling regulation in Victoria was confusing, with responsibilities spread across a number of Acts and regulators. It recommended simplifying and streamlining the regulatory regime through the creation of the VCGR. It also recommended a consolidation of existing legislation.⁹⁰
66. On 1 July 2004, the VCGR was established under chapter 10 of the Gambling Regulation Act. The Gambling Regulation Act repealed the Gaming and Betting Act, and replaced the VCGA and the two statutory positions (Director of Gaming and Betting and Director of Casino Surveillance) with the VCGR.⁹¹
67. The Gambling Regulation Act consolidated eight of Victoria’s 10 principal gaming statutes into a single Act.⁹² The Casino Control Act and the Management Agreement Act were excluded from the consolidation as they related solely to a standalone casino, to which ‘more onerous inspection and control requirements appl[ied]’.⁹³ However, the responsible gambling provisions in the consolidated Gambling Regulation Act applied to the casino.

Victorian Commission for Gambling and Liquor Regulation

68. On 6 February 2012, the VCGLR was established by the Victorian Commission for Gambling and Liquor Regulation Act 2011 (Vic).⁹⁴ The VCGLR assumed all regulatory functions, duties and powers of the VCGR, the Director of Liquor Licensing and the Liquor Licensing Panel.
69. The establishment of the VCGLR was said to be a reform; not a merger, rebranding or restructure. The reform sought to create a ‘new, modern, world-class regulator for liquor and gambling in Victoria’.⁹⁵ The government expected that the natural synergies between liquor and gambling regulation would enable better use of regulatory resources, which would lead to ‘improved education and compliance outcomes for the Victorian community, as well as industry’.⁹⁶

Scope of functions

70. The VCGLR is a very different regulator to the one created by the Casino Control Act. The VCCA was set up to regulate casinos, with three objectives:

    …

    1. ensuring that the management and operation of casinos remains free from criminal influence or exploitation; and
    2. ensuring that gaming in casinos is conducted honestly; and
    3. promoting tourism, employment and economic development generally in the State.⁹⁷

71. The objectives of the VCGLR today are significantly broader. Its responsibilities include regulating the compliance of all Victorian gambling and liquor licences, and educating the public and the relevant industries on issues of compliance, as well as advising the Minister on liquor and gambling-related matters.⁹⁸

Independence of the regulator

72. The VCCA, VCGA and VCGR had each been established as an independent regulator and were not subject to the general direction of the Minister. When the VCGLR was established however, it was required, when performing functions or duties or exercising its powers, to have regard to any decision making guidelines issued by the Minister.⁹⁹ This provision was intended to enable the Minister to provide general policy guidance to the VCGLR. It does not, however, give the Minister the power to direct the VCGLR on how it should determine any individual matter. In addition, one of the VCGLR’s functions is to ensure that government policy in relation to gambling and liquor is implemented.¹⁰⁰ These obligations indicate that the VCGLR may not be as independent as its predecessors.

Funding arrangements

73. When the VCCA was established, the Casino Control Act provided that the VCCA and the Director of Casino Surveillance were to be funded out of the Consolidated Fund for expenses incurred in carrying out their respective functions.¹⁰¹ When established, the VCGA was funded in a similar way.¹⁰² The VCGR was funded differently: the Gambling Regulation Act made it budget-funded.¹⁰³ The VCGLR is also budget-funded. Its Corporate Plan 2020–23 states that the annual budget is provided by the Department of Justice and Community Safety and its recurrent funding is subject to annual government budget decisions. The VCGLR has indicated that it is ‘responsible for the management of all resources [it has] at [its] disposal within the constraints of its operating budget’.¹⁰⁴ The VCGLR’s Corporate Plan identifies as a key strategic risk that the current funding model is incompatible with operational requirements.¹⁰⁵

Persons appointed to the regulator

74. The 1991 Report recommended that the president of the regulator be someone who had at least 10 years’ experience as a barrister or solicitor. This was so that the president would have experience with the quasi-judicial and administrative functions of the regulator—for example, conducting hearings—and be able to manage proceedings so as to ensure that they adhered to principles of natural justice.¹⁰⁶
75. When the VCCA was first established, its Chair was required to be a legal practitioner or a magistrate with at least 10 years’ experience.¹⁰⁷ The Chair of the VCGLR is, however, no longer required to be a legal practitioner or magistrate. A person is qualified if the Minister is satisfied that they have the appropriate knowledge, experience and expertise to be a member of the VCGLR.¹⁰⁸

Staff

76. The VCCA was entitled to employ staff and engage consultants on terms it determined itself.¹⁰⁹ When the VCGA was established, its staff became employees under the Public Sector Management Act 1992 (Vic).¹¹⁰ VCGLR staff are now engaged under the Public Administration Act 2004 (Vic).¹¹¹

Victorian Gambling and Casino Control Commission

77. On 3 August 2021, the Victorian Government announced the establishment of a new regulator, the Victorian Gambling and Casino Control Commission (VGCCC). Unlike the VCGLR, the VGCCC will focus solely on regulating the casino and gambling operators, with a dedicated casino regulation division.
78. Prior to the establishment of the VCGLR, liquor and gambling were regulated by two standalone agencies. The Victorian Government has described the combined regulation of liquor and gaming as a ‘failed experiment’.¹¹² The introduction of the VGCCC will see ‘governance return to a model that has a specific and separate focus on liquor and gambling regulation’.¹¹³

Changes to key aspects of casino regulation

79. Since 1991, substantive changes have been made to key aspects of casino regulation. The most relevant of these changes are summarised below.

Periodic suitability reviews

80. In 2005, the maximum number of years between periodic reviews of the casino operator was changed from at least every three years to at least every five years.¹¹⁴ The scope of the reviews was also expanded. In addition to considering the casino licensee’s suitability and the public interest in the licence continuing, the regulator has to consider:
    • whether or not the casino operator was complying with the Casino Control Act, the Management Agreement Act, the Gambling Regulation Act and the regulations made under any of those Acts
    • whether or not the casino operator was complying with the Transaction Documents and any other agreements between the casino operator and the State, or a body representing the State, that impose obligations on the casino operator in relation to gaming.¹¹⁵
81. The extended period of time between reviews was intended to enable a ‘more rigorous and detailed review of the casino operator’, noting that a review could still be conducted more frequently if the regulator considered it necessary.¹¹⁶
82. While the matters required to be addressed in the periodic review of the casino operator and its licence were expanded to include these additional considerations, the VCGLR observed in the Sixth Review that these matters had previously been considered under the general heading of ‘suitability’.¹¹⁷
83. The Report of the Inquiry under Section 143 of the Casino Control Act 1992 (NSW) (Bergin Report) noted that in New South Wales, there had been proposals that the periodic reviews be abandoned altogether. The Bergin Report also noted that the Casino Control Act 1992 (NSW) was amended (in March 2018) so that the timing of these reviews in New South Wales can be altered by the making of regulations.118 In the Sixth Review, the VCGLR stated:

    One other Australian jurisdiction, New South Wales, mandates periodic licence reviews by the regulator in very similar terms. Other jurisdictions provide for ad hoc reviews. While the regulatory regime of Singapore (expressly benchmarked for the purposes of this review) does not specifically mandate a periodic review, its two casinos operate under three-year renewable licences, meaning that a very similar outcome is achieved.

    The New South Wales Government recently considered its policy position on periodic reviews, as part of a process of alignment of the regulatory regimes for the present Sydney Casino and a new restricted gaming facility licensed to commence operations from 2019 (Crown Sydney).

    Those considerations canvassed the role of a review and a particular paradox associated with the activity: that, if such a review could conclude that the casino operator was no longer suitable, that same state of affairs would already have been apparent to the regulator and a licence removal process would have been initiated. Noting this paradox, and the fact that the most recent review of the present Sydney Casino licence had been completed in 2016, the NSW Government determined that the periodic review requirement should remain in place at least until the first review following the opening of Crown Sydney.

    To the VCGLR, this review has presented the opportunity to assess and reflect, overall, on the casino operator’s past and ongoing conduct of the licensed business, with the benefit of input from stakeholders and comparison with other jurisdictions, and with the transparency arising from the obligation to report to the responsible Minister.¹¹⁹

‘Single purpose’ restriction

84. In 2005, following a review of the commercial agreements between the State, the regulator and the casino operator, the Victorian Government agreed to the removal of the restriction on the casino operator owning and operating other casino businesses (‘single purpose’ restriction).¹²⁰ Consequently, the Casino Control (Amendment) Act 2005 (Vic) was passed and a suite of new and amended agreements were entered into between the regulator, the casino operator and PBL (the new and amended arrangements and agreements are discussed in more detail in another chapter).¹²¹
85. The following amendments were made to the Casino Agreement to facilitate the removal of the ‘single purpose’ restriction:
    • The removal of the restriction that the casino operator must not:
      • conduct any business other than the business authorised under the Casino Agreement and the casino licence or any business incidental or complementary with those businesses without the prior written approval of the regulator
      • establish or acquire a subsidiary unless it relates to an incidental or complementary business without the prior written approval of the regulator
      • take on or under a lease, or acquire for consideration, any asset other than in the ordinary course of the casino operator’s business, without the prior consent of the State.¹²²
    • A requirement that the casino operator must conduct its operations in the Melbourne Casino in a manner that has regard to the best operating practices in casinos of a similar size and nature to the Melbourne Casino.¹²³
86. The Management Agreement was also amended to remove the obligation on the casino operator to obtain the prior written consent of the State to take on or under a lease, or acquire for consideration, any asset other than in the ordinary course of the casino operator’s business.¹²⁴
87. These amendments allowed the casino operator to own or operate businesses in addition to the Melbourne Casino. The change was intended to benefit Victoria by providing for ‘increased tourism and export income’.¹²⁵ In the second reading of the Casino Control (Amendment) Bill 2005 (Vic), which gave effect to the suite of agreements, the then Attorney-General stated:

    This review of the casino agreement has resulted in a package of agreements between the [VCGR], the government, Crown and Crown’s parent company, [PBL].

    These agreements will provide significant benefits for Victoria, including:

    • increased transparency and accountability through the improved provision of information by Crown to the [VCGR];
    • the expenditure by Crown of at least $170 million over the next five years on the Melbourne Casino complex. This will maintain the value of the complex which is leased by the state to Crown;
    • increased tourism and export income as a result of the removal of the single-purpose restriction. Crown will be able to compete for interstate and international casino business and for other non-gaming business;
    • the promotion of tourism to Victoria by Crown; and
    • employment and other economic benefits that will result from Melbourne being the headquarters for the gaming business of [PBL] and the Melbourne casino remaining the flagship gaming business for [PBL] in Australia.¹²⁶

Prohibition on providing credit

88. The Casino Control Act as originally enacted prohibited a casino operator from providing credit to patrons, subject to a limited exception. The casino operator was, in certain circumstances, permitted to issue chips in exchange for a cheque, without waiting for the funds to clear.¹²⁷ Amendments to the Casino Control Act were passed in 1996 to introduce a further exception—to permit the casino operator to provide credit to players not ordinarily residing in Australia when participating in a ‘premium player arrangement’ or a junket. To be able to use this exception, the casino operator and the player needed to satisfy the requirements of any relevant controls and procedures approved by the regulator.¹²⁸
89. The ability to offer credit directly (to premium and junket players) or indirectly (to players by cashing cheques before they had cleared) resulted in the casino operator having to manage unpaid debts. The casino operator is required to seek the regulator’s approval before discharging any debts accrued by players.¹²⁹

Oversight of controlled contracts

90. The Casino Control Act defines certain categories of contracts that the casino operator enters into as ‘controlled contracts’. From its commencement, the Casino Control Act established a process for the regulator to regulate controlled contracts, subject to limited exceptions.¹³⁰ This measure was intended to prevent criminal elements from obtaining a financial interest in the casino ‘by the back door’.¹³¹
91. The regulatory oversight of controlled contracts has shifted over time and moved towards a model where the casino operator, rather than the regulator, undertakes due diligence in relation to its contractors.
92. The Casino Control Act was amended in 1993, before the Melbourne Casino opened, to provide the regulator with greater flexibility as to the types of contracts it needed to approve and to adopt an approach to controlled contracts that was considered ‘commercially practical’.¹³² The amendments:
    • Authorised the regulator to exempt any specified classes of contract or particular matters from the definition of ‘controlled contracts’.¹³³
    • Required the regulator to publish an annual report on the classes of exempt contracts.¹³⁴
    • Removed the requirement that the regulator investigate the operation of, and suitability of parties to, all controlled contracts before the casino operator could enter such contracts. In its place, the casino operator was required to provide notice of the controlled contract to the regulator, which could object to the contract or notify the casino operator that it required more time to conduct investigations.¹³⁵
93. Further changes to the regulation of controlled contracts were made:
    • To allow the casino operator to develop a system of self-regulation for controlled contracts. The regulator needed to be satisfied that the casino operator’s system of internal controls and administrative and accounting procedures—approved by the regulator—enabled an adequate assessment of the suitability of the supplier and ensured that the requirements of the controlled contract were met.¹³⁶ The intent of this amendment was to reduce the administrative burden on the regulator. Instead of investigating every controlled contract, it could focus its investigations as required. The regulator retained the power to require the termination of a controlled contract on public interest grounds.¹³⁷
    • To exempt from the controlled contract provisions any contracts between the casino operator and a person listed on the Roll.¹³⁸
94. The regulator advised in its Fifth Review of the Casino Operator and Licence (June 2013) (Fifth Review) that it had categorised the level of risk associated with the types of contracts entered into by the casino operator. Category A was considered to be the highest risk, Category B to be medium risk and Category C to be low risk. At the time of the Fifth Review, Category A and B contracts were considered to be ‘controlled contracts’ for the purposes of the Casino Control Act.¹³⁹

Oversight of junkets

95. In the 1991 Report, Mr Connor, QC noted that the Queensland Act did not deal with junkets but left them to be dealt with by regulation. He considered junkets to be ‘of such importance that they should be dealt with in the Act’ and that a modified version of the junket provisions included in the Queensland regulations should appear in the Victorian Act.¹⁴⁰ This recommendation was not adopted in the Casino Control Act as originally enacted where, consistent with the Queensland Act, the details for the oversight of junkets were left to regulations.¹⁴¹
96. The Casino Control Act as originally enacted authorised regulations to be made that regulated or prohibited the promotion and conduct of junkets.¹⁴² Regulations could be made that:
    • imposed restrictions on those who may organise or promote a junket
    • required the organiser or promoter of a junket, or the casino operator concerned, to give the regulator advance notice of the junket and to provide to the regulator detailed information about the conduct of, and the arrangements for, any junkets
    • required any contract or other agreement that related to the conduct of a junket to be in a form the regulator approved
    • required the organiser or promoter of a junket, or the casino operator concerned, to give specified information about the conduct of the junket to participants in that junket.¹⁴³
97. The regulation-making power was amended in 1994 to allow regulations also to be made relating to premium player arrangements, and to require the casino operator to give the regulator advance notice of a ‘premium player arrangement’.¹⁴⁴
98. In 1996, the Casino Control Act was amended to include new provisions that prohibited a person from organising or promoting a junket without the approval of the Director of Casino Surveillance. The amendment also prohibited the Director of Casino Surveillance from granting an approval to a junket organiser or promoter unless satisfied that the criteria specified in the regulations had been met.¹⁴⁵ This amendment meant that the Director of Casino Surveillance became responsible for approving junket organisers and promoters.
99. On 20 October 1998, the Casino Control (Junkets and Premium Players) (Interim) Regulations 1998 (Vic) came into effect. On 31 March 1999, those regulations were superseded by the Casino Control (Junkets and Premium Players) Regulations 1999 (Vic).
100. The 1999 regulations had as their objective to provide for: ‘(a) the approval of junket organisers and promotors; (b) [the form and minimum content of] junket agreements; [and] (c) information to be given to the [regulator] about junkets and premium player arrangements’.¹⁴⁶
101. Specific relevant regulations included:
     • Regulation 6, which permitted a person to apply to the Director of Casino Surveillance for approval to organise or promote one or more junkets and the Director of Casino Surveillance to require an applicant to provide any information relevant to their investigation of the application.
     • Regulation 7, which required the Director of Casino Surveillance to refer a copy of each application to the Chief Commissioner of Police and the Chief Commissioner to inquire into and report to the Director of Casino Surveillance on any matters concerning the application that the Director of Casino Surveillance requested.
     • Regulation 9, which specified the criteria for approval of applications for the purposes of section 69(1AB) of the Casino Control Act as it then stood. The test was whether the applicant was of good repute. In the case of natural person applicants, regulation 9 required the applicant and each agent of the applicant who would accompany the junket to Australia to be of good repute, having regard to character, honesty and integrity. In the case of body corporate applicants, each agent who would accompany the junket, as well as each person who, in the opinion of the Director of Casino Surveillance, was able to exercise ‘a significant influence over or with respect to the management or operation of the applicant’s junket business’, similarly had to be of good repute, having regard to those same matters.
     • Regulation 10(3), which provided that if the Director of Casino Surveillance gave approval, it remained in force for the period specified in the approval, which could not exceed three years.
     • Regulation 16, which required junket arrangements to be in writing in a form approved by the regulator and to contain prescribed content, including the names and countries of origin of junket players.
102. The Casino Control Act was further amended in 2002 to permit casino operators to accept gaming wagers, and pay wagers won, in foreign currencies for commission-based players. This arrangement was required to be in accordance with any relevant controls and procedures approved by the regulator in respect of foreign currency.¹⁴⁷
103. In 2003, by amendments to the Casino Control Act, the regulation of junkets in Victoria changed significantly. Regulatory oversight of junkets and premium player arrangements was replaced with a system of self-regulation. Under the new system, the casino operator’s system of internal controls and administrative and accounting procedures (approved by the regulator) included procedures for the promotion and conduct of junkets or premium player arrangements.¹⁴⁸
104. In the second reading speech for the Gambling Regulation Bill 2003 (Vic), which would introduce this change, the then Minister for Sport and Recreation stated:

     [P]robity requirements for junket operators will now be the responsibility of the casino operator, but overseen by the [regulator] through its supervision of the casino’s internal controls and procedures ...¹⁴⁹

Oversight of associates

105. The Casino Control Act as originally enacted did not include any process for assessing the suitability of new associates or for the casino operator to separate from an associate considered to be unsuitable.
106. In 1996, a new provision was inserted into the Casino Control Act, permitting the regulator to investigate an associate of a casino operator, or a person likely to become an associate of a casino operator. The casino operator was obliged to notify the regulator in writing, and as soon as practicable, that a person was likely to become an associate, and to take all reasonable steps to ensure that a person did not become an associate except with the regulator’s prior approval. The regulator was required to consider whether the associate:

     …

     1. [was] of good repute, having regard to character, honesty and integrity;
     2. [was] of sound and stable financial background;
     3. [had] any business association with any person, body or association who or which, in the opinion of the regulator, [was] not of good repute having regard to character, honesty and integrity, or [had] undesirable or unsatisfactory financial resources.¹⁵⁰

107. If the regulator determined that an associate was unsuitable, the regulator could require the associate to terminate the association with the casino operator. If the association was not terminated within a certain timeframe, the regulator could direct the casino operator to take all reasonable steps to do so. The casino operator was required to comply with the direction, and the regulator could take disciplinary action if the casino operator failed to comply.¹⁵¹
108. In 2000, the Casino Control Act was further amended to empower the regulator to:
     • issue a warning to an associate or require an associate to give a written undertaking to the regulator regarding the associate’s future conduct. The regulator could do this if it determined that the associate had engaged, or was engaging in, conduct that it considered to be unacceptable
     • give notice to the associate to require it to terminate the association with the casino operator. The regulator could do this if the associate failed to give an undertaking the regulator required or if the associate breached an undertaking.¹⁵²
109. The obligation on the casino operator to separate from unsuitable associates was also amended in 2000 to require the casino operator ‘take all reasonable steps’ to terminate an association.¹⁵³

Recognising gambling harm

110. Along with the key aspects of casino regulation discussed above, the legislated objectives of casino regulation have changed over time. The main changes to the legislated objectives, discussed below, relate to responsible gambling.
111. In 2000, the objectives of the regulator under the Casino Control Act were amended. The objective of ‘promoting tourism, employment and economic development generally in the State’ was replaced with:

     fostering responsible gambling in casinos in order to:

     2. minimise harm caused by problem gambling; and
     3. accommodate those who gamble without harming themselves or others.¹⁵⁴

112. The purpose of the Gaming Machine Control Act was also amended, adding the same objective.¹⁵⁵
113. During the second reading of the Gambling Legislation (Responsible Gambling) Bill 2000 (Vic), which would also make a number of amendments to the Gaming Machine Control Act in relation to EGMs in pubs and clubs outside the casino, the then Minister for Sport and Recreation said:

     The government is very much focused on its election commitment to policies that swing the pendulum back to better gaming regulation that will ameliorate the adverse impacts of gambling on all communities.

     For its part, the government is not opposed to the gaming or casino industries in Victoria. But we want an industry that is acutely aware of its special place in the community and committed to fulfilling its obligations to the people of Victoria.

     The bill introduces key areas of our election commitments relating to the better regulation of gambling in order to secure a better balanced approach to gambling and better protect the community from the adverse effects of gambling.¹⁵⁶

114. Although the purpose of ‘promoting tourism, employment and economic development generally in the State’ is no longer a purpose of the regulator, it remains one of the purposes of the Casino Control Act.¹⁵⁷
115. In June 2000, in the Second Triennial Review of the Casino Operator and Licence (Second Review), the regulator observed that ‘[w]hile the Casino Control Act still has an economic purpose, the amendments make it clear that the [regulator] no longer has a responsibility to manage its licensing systems for an economic purpose’.¹⁵⁸ Nevertheless, the regulator considered the Second Review should still address the impact of the casino on tourism, employment and economic development generally in Melbourne and Victoria. The regulator noted that the casino operator had several obligations, under the Transaction Documents, with respect to tourism, employment and economic development. It further noted that performance of those obligations was relevant to the general suitability of the casino operator, and that therefore a general examination of economic impact would have relevance to the review.¹⁵⁹
116. When the regulator came to conduct the Third Triennial Review of the Casino Operator and Licence (June 2003) (Third Review), it sought legal advice about how the amendment to its statutory objectives affected its obligation to conduct periodic reviews of the casino operator.¹⁶⁰
117. Mr Peter Hanks, QC advised that while the amendment to the regulator’s statutory objectives had the effect of reorienting the regulator away from economic development issues and towards social issues, the requirement to conduct regular reviews of the casino operator remained focused on issues of reputation, integrity, stability, honesty and efficacy of the casino operator and its operations. Mr Hanks, QC noted that, in this context, it was significant that the definition of ‘public interest’ in the Casino Control Act had not been changed in any substantial way in 2000, and the definition continued to define that term as ‘public interest or interest of the public ... having regard to the creation and maintenance of public confidence and trust in the credibility, integrity and stability of casino operations’.¹⁶¹
118. The regulator considered that advice in the context of the terms of reference that it had prepared for the Third Review. It decided to remove an item from the terms of reference relating to the impact of the Melbourne Casino on tourism, employment and economic development generally in Melbourne and in Victoria on the basis that:
     • the statutory powers of the regulator did not extend to this area
     • these issues did not impact on the activities of the regulator
     • the then Minister for Gaming received advice on these issues from the then Gaming Policy Unit within the Department of Justice.¹⁶²

The introduction of the Gambling Regulation Act

119. As has been mentioned, the Gaming Machine Control Act was repealed on 1 July 2004 by the Gambling Regulation Act, which consolidated eight of the 10 principal gaming Acts into a single Act.¹⁶³
120. While the Casino Control Act and the Management Agreement Act were not consolidated into the Gambling Regulation Act, the matters relating to casino regulation that were previously addressed under the Gaming Machine Control Act were, subject to some exceptions, re-enacted in the Gambling Regulation Act. These included responsible gambling measures.¹⁶⁴
121. Two purposes of the amended Gambling Regulation Act are to:
     • foster responsible gambling in order to minimise harm caused by problem gambling and to accommodate those who gamble without harming themselves or others
     • ensure that minors are neither encouraged to gamble nor allowed to do so.¹⁶⁵
122. While there are no corresponding purposes in the Casino Control Act,¹⁶⁶ parts of the Gambling Regulation Act that incorporate responsible gambling measures are imposed on a casino operator.¹⁶⁷

Changing responsible gambling obligations

123. The purpose of the Casino Control Act as originally enacted was to establish a system for the licensing, supervision and control of casinos, with the aims of:

     …

     1. ensuring that the management and operation of casinos remains free from criminal influence or exploitation; and
     2. ensuring that gaming in casinos is conducted honestly; and
     3. promoting tourism, employment and economic development generally in the State.¹⁶⁸

124. The Casino Control Act as originally enacted included no express reference to harm minimisation or responsible gambling, and neither did the second reading speech that introduced the Casino Control Bill to Parliament.¹⁶⁹ At the time the Casino Control Bill was debated, the main harm envisaged was criminal activity and influence in casinos.¹⁷⁰ While this concern remains a focus of the Casino Control Act in its current form,¹⁷¹ later amendments to the Act and its supporting legislation, including the Gaming Machine Control Act and later the Gambling Regulation Act, included a focus on the harms associated with gambling.
125. The Casino Control Act as originally enacted did, however, include a number of harm minimisation and responsible gambling measures, although they were not described as such in the Act. These included:
     • Casino operator agents or employees being prohibited from inducing patrons to enter the casino or to take part in gaming in the casino.¹⁷²
     • The casino operator being required to provide copies of the rules of games; display advice and information in relation to gaming rules, including odds; and display minimum and maximum odds.¹⁷³
     • Subject to certain exceptions, the casino operator being prohibited from providing credit to patrons.¹⁷⁴
     • Minors being prohibited from entering the casino.¹⁷⁵
     • The Director of Casino Surveillance or casino operator having the power to exclude persons from entering or remaining in the casino.¹⁷⁶
126. These harm minimisation and responsible gambling measures have been added to and amended, responding to changing community expectations and the government’s approach to regulating responsible gambling.
127. Further changes relating to harm minimisation and responsible gambling in the Casino Control Act have included:
     • Prohibiting the casino operator from knowingly sending or directing advertisements to a person subject to an exclusion order.¹⁷⁷
     • Permitting the Minister to make directions about bet limits on EGMs in casinos.¹⁷⁸
     • Subject to certain exceptions, prohibiting the casino operator from accepting large-denomination banknotes, and prohibiting games from being played on an EGM unless each spin could be initiated only by a distinct and separate activation of the machine by the player.¹⁷⁹
     • Requiring the casino operator to limit withdrawals, and prohibit cash advances from credit accounts, from cash facilities within 50 m of the casino entrance.¹⁸⁰
     • Subject to certain exceptions, requiring the casino operator to pay out EGM winnings over $2,000 by cheque, and to prohibit cheques drawn by the casino operator from being cashed at the casino or exchanged for gaming tokens.¹⁸¹
     • Requiring a person subject to an exclusion order to forfeit winnings to the State.¹⁸²
     • Prohibiting the casino operator from allowing a person to gamble or bet while intoxicated.¹⁸³
     • Requiring the casino operator, as a condition of its licence, to implement a Responsible Gambling Code of Conduct (Gambling Code).¹⁸⁴
128. The Gaming Machine Control Act, and later the Gambling Regulation Act, have also imposed additional harm minimisation and responsible gambling obligations on the casino operator, including:
     • Regulating the use of loyalty programs.¹⁸⁵
     • Requiring the regulator to approve types of EGMs, or specific EGM games, having regard to a range of matters, including the game fairness and security, and responsible gambling.¹⁸⁶
     • Regulating the content of, and compliance with, Gambling Codes.¹⁸⁷
     • Requiring pre-commitment systems to be installed on all EGMs in Victoria.¹⁸⁸

Responsible Gambling Codes of Conduct

129. The Casino Control Act and the Gambling Regulation Act were amended in 2007 to require the casino operator to implement a Gambling Code approved by the regulator.¹⁸⁹
130. Prior to the introduction of mandatory Gambling Codes, the casino operator was part of the Victorian Gaming Machine Industry Accord and was a signatory to the Victorian Gaming Machine Industry Code of Practice. This was a voluntary responsible gambling code.¹⁹⁰
131. It was intended that gambling industry participants would be required to develop codes that were appropriate for the nature of their business and the type of gaming that they provided. This approach acknowledged that ‘there can be more than one means of achieving the objective of responsible gambling and that a degree of flexibility is appropriate’.¹⁹¹
132. When mandatory Gambling Codes were first introduced, the Minister could issue directions under the Gambling Regulation Act to the regulator. This included directions in relation to:

     …

     1. the standards and requirements that a Responsible Gambling Code of Conduct, approved by the [regulator], and implemented by [the casino operator], must meet;
     2. guidelines in respect of Responsible Gambling Codes of Conduct;
     3. the content, monitoring and enforcement of Responsible Gambling Codes of Conduct.¹⁹²

133. In addition to any directions given by the Minister, a Gambling Code was required to:
     • demonstrate a commitment to foster responsible gambling
     • be appropriate for, and relevant to, the nature and type of gambling provided
     • set out a review process by which the casino operator would assess the operation and effectiveness of the Gambling Code.¹⁹³
134. The regulator was required to approve all Gambling Codes¹⁹⁴ and the casino operator was required to implement an approved Gambling Code.¹⁹⁵ The Casino Control Act was amended to empower the regulator to take disciplinary action against the casino operator for ‘repeated breaches by the casino operator of the casino operator’s [Gambling Code]’.¹⁹⁶
135. In addition, the regulator was required to report at least annually to the Minister on:
     • the effectiveness of the Gambling Codes
     • the casino operator’s level of compliance
     • whether any disciplinary action had been taken against the casino operator because of repeated breaches of the Gambling Codes
     • whether the regulator had conducted any programs, such as educational programs, for the benefit of the casino operator in order to increase compliance with, and the effectiveness of, the Gambling Codes.¹⁹⁷
136. The regulator approved the casino operator’s first Gambling Code in May 2009, which was implemented by the casino operator on 1 June 2009.¹⁹⁸
137. The requirement in the Casino Control Act that a Gambling Code be approved by the regulator was removed in 2018. It was replaced with a requirement that the casino operator implement a Gambling Code that complies with:
     • relevant regulations made under the Gambling Regulation Act
     • ministerial directions under the Gambling Regulation Act that applied to the casino operator.¹⁹⁹
138. The Gambling Regulation Act was amended to:
     • Authorise the Minister to issue directions about the standards and requirements that a Gambling Code must meet.²⁰⁰
     • Replace the requirement for annual reviews of Gambling Codes by the regulator with the requirement that the Minister undertake a review every five years.²⁰¹ This amendment was intended to allow a more meaningful evaluation to take place at regular intervals and to reduce the burden on the regulator.²⁰²
139. The requirement for a Minister’s review every five years is still in force. The reviews must consider how effectively Gambling Codes:
     • ensure that gambling products are supplied responsibly
     • promote practices that support and encourage responsible gambling
     • help minimise harm caused by gambling.²⁰³
140. The 2018 changes were intended to improve the enforceability of the Gambling Codes and enable the ministerial directions to be more prescriptive about a range of matters, including how venue operators can better identify and respond to problematic gambling behaviour.²⁰⁴
141. With these changes, the casino operator became responsible for ensuring that its Gambling Codes complied with the applicable ministerial directions. The regulator continued to have a compliance and enforcement role. All the 2018 changes are still in force.

Pre-commitment and loyalty schemes

142. In 2003, a new regulatory framework for player loyalty schemes came into effect under the Gaming Machine Control Act.²⁰⁵ The framework was designed to address the ‘increasing use of card technology and the emergence of databases that collect and manage consumer information on the spending and playing patterns of players’.²⁰⁶
143. Among other things, the new framework required loyalty scheme providers, including the casino operator, to:
     • Provide loyalty scheme participants with written ‘player activity statements’ containing prescribed information.
     • Allow loyalty scheme participants to set limits on the time they could play games under the scheme and on their net loss in a 24-hour period and over a year. The participants could change the limits but, under the framework, the change could not take effect for at least 24 hours. When a participant’s limits were reached, the loyalty scheme provider was prohibited from allowing the participant to continue playing under the loyalty scheme.²⁰⁷
144. Excluded persons were not permitted to participate in loyalty schemes.²⁰⁸
145. Under this regime, in June 2003, the casino operator introduced the ‘Play Safe Limits’ program to allow members of its loyalty program to voluntarily pre-set limits on time or spending for each session before playing EGMs and fully-automated table games (FATGs).²⁰⁹
146. When the Gaming Machine Control Act was repealed by the Gambling Regulation Act in 2004, the regulatory framework for loyalty schemes was incorporated into the Gambling Regulation Act.²¹⁰
147. The loyalty scheme requirements in the Gambling Regulation Act were subsequently amended in 2015, when it became mandatory for the new statewide pre-commitment system to be used by venue operators, including the casino operator, as the limit-setting mechanism on EGMs.²¹¹ The system allows a person to set a time limit or net loss limit before that person gambles on an EGM in any venue in Victoria with EGMs.²¹² From 1 December 2015, it became mandatory for all EGMs at all gaming venues in Victoria, including the casino, to be linked to the statewide pre-commitment system.²¹³
148. In the second reading of the Gambling Regulation Amendment (Pre-commitment) Bill 2013 (Vic) that implemented the statewide pre-commitment system, the then Treasurer stated:

     The coalition government has led the way by committing to introducing a voluntary precommitment scheme. Precommitment is a vital harm minimisation and consumer protection measure that will help players control their gambling and avoid it escalating to harmful levels. Precommitment is not just for problem gamblers; it is for everyone who makes the decision to play a gaming machine. Players can decide what they want to spend or how long they want to spend playing a gaming machine, and precommitment provides the tools to enable the player to keep track of the time and costs of their gaming machine play and the tools to enable the player to stick to the limits they have set.²¹⁴

149. Intralot Gaming Services Pty Ltd (Intralot) was authorised under the Gambling Regulation Act to provide, operate and maintain a pre-commitment system and associated services.²¹⁵
150. While it is mandatory for all EGMs to be linked to Intralot’s pre-commitment system, players may use the scheme on a voluntary basis and the limits imposed by the player are not binding.
151. The Intralot pre-commitment system for players in Victoria is called ‘YourPlay’.²¹⁶ When a player reaches their pre-determined time or spending limit, the EGM is disabled and informs the player that the limit has been reached. The player can then elect to continue gambling by clicking through the screen or can exit the system by removing their card. As such, the system acts as an information cue, reminding the player of the pre-determined limit, rather than as a protective measure preventing continued play beyond the set limits.²¹⁷
152. At the time YourPlay was implemented on EGMs at the Melbourne Casino, the Play Safe Limits program operated through the casino operator’s loyalty scheme was required to be disabled on EGMs, as only the statewide pre-commitment system could be used to offer limit-setting mechanisms.²¹⁸ The Play Safe Limits program continues to be used by the casino operator to provide a pre-commitment system to players of FATGs.
153. To encourage participation in the YourPlay scheme, when it was introduced, the loyalty scheme requirements under the Gambling Regulation Act were amended to provide that players had to use one card for both pre-commitment and loyalty schemes. This meant that if a venue operator, including the casino operator, wished to have a loyalty scheme, the same player card, card reader, display screen and kiosk would be used for both the loyalty scheme and the pre-commitment system.²¹⁹ These new requirements created one means of obtaining access to information at a gaming venue about both schemes.²²⁰ This approach was intended to remove the stigma of using a card designed solely for pre-commitment.²²¹

Provision of regulatory certainty to Crown

154. In 2014, amendments were made to the Management Agreement, which were ratified by Parliament, to provide ‘regulatory certainty’ to the casino operator. The then Minister for Liquor and Gaming Regulation stated that the amendments were intended to support continued investment and jobs for Victoria ‘in an increasingly competitive environment’, where the Melbourne Casino faced a sharp increase in competition from casinos in Australia and the region, ‘while delivering substantial financial benefits to the State’.²²²
155. The agreement negotiated between the State and the casino operator provided for:
     • an extension of the casino licence term by 17 years to 18 November 2050
     • an increase in the number of gaming tables in the casino from 400 to 440 and an increase in the number of FATG terminals from 200 to 250
     • an increase in the number of EGMs from 2,500 to 2,628
     • the receipt by the State of payments up to $910 million from Crown
     • the provision to the casino operator of ‘enhanced’ regulatory certainty.²²³
156. The ‘regulatory certainty’ acquired by Crown Melbourne is of such importance, it is the subject of a separate chapter (Chapter 9).

Current approach to casino regulation: risk based regulation

157. Since its establishment in 2012, the VCGLR has aimed to transform itself into a ‘modern, risk-based regulator’.²²⁴
158. The VCGLR describes its regulatory approach as being risk based, and has indicated that an understanding of risk guides its decision-making priorities and use of resources in discharging its statutory functions in licensing, information and education, monitoring and enforcement. The VCGLR also indicates that under this risk based approach, it considers the risks associated with activities, such as particular types of gambling, as well as the risk presented by individuals and businesses in the gambling and liquor industries. By adopting a risk based approach, the VCGLR acknowledges that a tolerance of risk is necessary to properly meet its regulatory objectives.²²⁵
159. Mr Peter Cohen, a former executive commissioner of the VCGR,²²⁶ conducted the Casino Modernisation Review for the New South Wales Office of Liquor, Gaming and Racing in 2016. Mr Cohen advised the New South Wales Government that risk based regulation allowed risk to be transferred from the government sector to the operators. He stated:

     Regulators unnecessarily involved in day-to-day operations of casinos, which prescriptive models engender, assume a level of liability which should not be the State’s responsibility. These risks come in many forms but are generally in place where the regulator is asked to approve something in advance rather than allow the operator to decide the correct course of action.²²⁷

160. The risk based approach adopted by the VCGLR today is a significant change from the prescriptive regulatory oversight approach under the Casino Control Act as first enacted.²²⁸ Some of the changes to the regulatory framework in Victoria over time reflecting this shift include:
     • Significant changes to junket oversight. Probity assessments for junket operators have shifted from being the responsibility of the regulator to that of the casino operator, with the regulator now only overseeing junket operations through its supervision of the casino’s internal controls and procedures. Mr Cohen noted that the Victorian approach to junket regulation is an example of permissive, risk based regulation. While junkets are no longer required to be approved by the regulator, that does not mean that the casino operator has no responsibility to ensure, among other things, that junket operations comply with its approved systems of administrative and internal controls. Mr Cohen also noted that the regulator retains a general power to issue binding directions to the casino operator in relation to the conduct, supervision or control of operations in the casino.²²⁹
     • Changes to oversight of contracts for the supply of goods and services (controlled contracts). These changes allow the casino operator to develop a system of self-regulation, provided that the regulator is satisfied that the casino operator’s systems of internal controls and accounting procedures adequately enable the assessment of suppliers’ suitability, and that the casino operator has complied with the requirements for controlled contracts imposed under the Casino Control Act.²³⁰
     • Replacing the requirement that the regulator approve Responsible Gambling Codes of Conduct with a requirement that the casino operator is responsible for ensuring that its Responsible Gambling Code of Conduct complies with the Casino Control Act.²³¹
161. When comparing the Victorian and Singaporean regulatory practices, Mr Cohen stated that even though the legislation in these jurisdictions is similar, the methodology for regulating is vastly different. Victoria has shifted its focus from the highly prescriptive approach implemented in the early days of casino regulation in the 1990s to the essentially risk based approach of today. Conversely, Singapore started with a heavily prescriptive approach and has continued in that form.²³²

Auditor-General’s reports on the regulation of gambling

162. The Victorian Auditor-General’s Report entitled Regulating Gambling and Liquor, released in February 2017, identified a number of issues with the VCGLR’s implementation of a risk based approach.
163. The Auditor-General recognised that a risk based approach helps the VCGLR to allocate its finite resources to areas that have the greatest impact on limiting the negative effects of gambling and alcohol. It also provides the VCGLR with a transparent, defensible approach to its regulatory work.²³³
164. The Auditor-General observed, however, that ‘some audits of key areas of risk for the casino operator had not been performed consistently, or at all, since 2012’.²³⁴ The Auditor-General further noted that the Casino Control Act prohibits the casino operator from running the casino unless the VCGLR has approved its system of internal controls and administrative and accounting procedures. While the Casino Control Act requires the casino operator to implement the approved controls and procedures, the Auditor-General indicated that the VCGLR should regularly assess whether this is happening.²³⁵
165. The Auditor-General also noted that regular reviews of the internal audit activities of the casino could provide assurance about the adequacy of the internal controls and oversight of the casino. However, the Auditor-General observed that while the VCGLR planned to undertake a quarterly audit on the internal audit function of the operator, this would have been the first occasion since August 2012 that it had undertaken any such review. The Auditor-General stated:

     [The] VCGLR obtains information on the casino operator’s annual internal audit program and copies of the agenda and minutes of the operator’s audit and compliance committee meetings. However, [the] VCGLR could not demonstrate that it systematically reviews this material. In addition, the information the operator provides is not sufficient to give assurance that its internal controls and oversight are robust or adequate, because it does not adequately demonstrate the risk assessments, resources, processes or quality assurance used in these activities.

     [The] VCGLR can request complete documentation of the operator’s audit and compliance committee meetings but has not done so since 2013. This is a gap in its approach because this information could be used to improve its understanding of the effectiveness of the operator’s internal controls and to inform the targeting of [the] VCGLR’s compliance activities.²³⁶

166. The Auditor-General recommended that the VCGLR continue to revise the risk based approach to compliance to ensure better targeting of compliance activities.²³⁷
167. When the Auditor-General followed up on the recommendations in 2019, it noted that the VCGLR was still finalising implementation of its risk based model for gambling licensing.²³⁸

Suitability and public interest

168. The notions of suitability and public interest are central to the Casino Control Act and the Terms of Reference of this Commission. Given their importance, they are dealt with separately in Chapter 18 and Appendix H.