Israel's government bet it could put an end to legalized gambling on horse racing without encountering any legal problems. But it turns out that it could be paying out tens of millions of shekels to the British company that has been providing betting services to the state lottery company.
Finance Minister Moshe Kahlon declared last month that betting on the horses as well as slot machines would be banned starting next year, under legislation contained in the Budget Arrangements Law. He called the 460 million shekels ($121.8 million) generated from betting on horses every year by the Council for Organized Sports Betting, popularly known as Toto, as “tainted money.”
A ministerial committee has already approved the horse-racing provision in the Arrangements Law.
But GBI, a British company that manages race tracks in the UK and offers a platform for overseas joint ventures for betting on horse races on its tracks, has accused the Israeli government of faulty decision-making in rescinding the 2012 authorization of betting through Toto.
GBI also contends that the government committee chaired by treasury Director General Shai Babad that recommended banning betting on horses unfairly tarred the betting industry with exploiting the poor and encouraging addiction.
The issue of betting was studied before legislation legalizing it was approved in 2012, noted Zohar Lande, the attorney representing GBI in Israel.
“No one disputes that the [Babad] committee was not presented with new facts that weren’t known when the program began and that the company was never given the opportunity to present other data on its behalf,” Lande told TheMarker.
Had GBI been able to make a presentation to the committee, it would have been able to present “clear data that the addiction rate is low both in absolute terms and in comparison to other products in the field of gambling,” he said.
“Adopting the committee’s recommendations was a severe and blatant violation of the fundamental principles of natural justice and the right of the company to be heard,” Landa said.
GBI executives met with Babad this week, during which they discussed how much compensation the company would get for the new on ban horse racing. GBI, whose contract with Toto only expires in August 2018, has been generating about 20 million shekels in revenue annually from Israeli betting.
No final number was discussed, but treasury officials who asked not to be named said they are weighing a figure in the tens of millions of shekels. The Finance Ministry itself declined to discuss figures.
“At the meeting it was made clear to GBI representatives that horse racing is expected to be eliminated as of January 2017,” the treasury spokesman said. “Babad explained that further discussions will take place to find an agreed way to prevent a crisis. There was no discussion about these or any other sums.”
Meanwhile, GBI is challenging the decision to end the contract, It said that it had appealed to Justice Minister Ayelet Shaked and Yuli Edelstein, the Knesset speaker, to remove the legislation from the Arrangements Law, which the Knesset Is supposed to approve by the end of the year.
The Babad committee’s final report didn’t raise the issue of any legal obstacle to amending the gambling law or ending Toto’s contract with GBI, prior to the company’s announcement that it would find the decision. Advisers said the finance minister had the right to act in the name of the public good.
But GBI contends that betting on horses doesn’t undermine the public good. It cited data contradicting the committee’s claim that betting increased o the 28th of every month, when the national Insurance Institute pays out allowances. It also said that based on the socio-economic profile of the communities where betters come from, the average Israeli punter is from higher socio-economic groups.
It also challenged critics who dismiss betting on horses as a game of chance, noting that the rate of Israeli betters winning has grown over time, in line with their increasing knowledge of the sport. The average bet ranges from 35 to 45 shekels.
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