The Tribune

THE gambling debate in the Bahamas has always been surreal - part of a weird fantasy world that is difficult to navigate with logic. And the weirdness continued in Parliament this week.

There are two zones to this strange world – one in which three or four hotel casinos operate legally as tourist amenities, and another populated by hundreds of illegal Numbers sellers catering to tens of thousands of Bahamian gamblers.

The casino zone originated in 1920, when the Bahamian Club began operating seasonally on New Providence, catering to a very restricted upper class clientele.

The Numbers zone has been thriving here since at least the 1800s. It is associated with poor communities worldwide, because punters can bet small sums of money and get credit from their bookies.

Our first anti-gambling law was passed in 1901, and was gradually strengthened to create an absolute ban on the operation of lotteries and gaming houses for profit. But in 1939 the law was amended to allow exceptions to this rule.

According to the 1967 Commission of Inquiry report, “This change ... was prompted by the opening of a small casino on a seasonal basis at Cat Cay and the realisation by those in government at that time that this venture – and a casino which had been openly operated since 1920 at the Bahamian Club on the western outskirts of Nassau – were quite illegal.”

The amendment – piloted by a young lawyer named Stafford Sands – allowed the government to exempt any person, club or charity from the law’s provisions. The effect was to create a licensing regime, and the two small foreign-owned casinos were immediately regularised.

These early certificates of exemption carried few conditions, but they always excluded minors, persons born here, employed residents and civil servants from gambling. Only visitors and non-Bahamian retirees living here could legally gamble in the casinos.

Between 1939 and 1963, there were several applications for casino licences from reputable groups. But all were denied on the basis that the exemption law was not designed to provide for the introduction of casino gambling on a large scale or on a permanent basis.

“It was regarded primarily as a means of permitting lotteries for charitable purposes or to provide for the sort of small lottery or gaming activity which is a feature of specific social functions,” the inquiry report said.

“The discreet seasonal operations of the two existing casinos do not appear to have been regarded as offending the spirit of the 1939 legislation.”

The expansion of casino gambling in the 1960s (in Freeport and on Paradise Island) was a direct result of the Cuban Revolution, which had forced American casino operators to look for new territory. The Bahamas was right next door, and the developers of Freeport were desperate to build a resort industry on the island of Grand Bahama.

The United Bahamian Party government saw this as a chance to earn payoffs from foreign gambling syndicates while boosting the country’s attraction as a tourist destination. But the pro-casino policy promoted by Sands and others was hugely controversial due to intense opposition from the powerful religious community.

When the Progressive Liberal Party took office in 1967, it continued the casino exemptions as well as the ban on residents gambling, but established a new regulatory agency (the Gaming Board) to provide for taxation.

Until now, no efforts to challenge this bizarre status quo have gone anywhere over the past 50 years. Casinos have remained legal but Bahamians cannot use them legally, while the Numbers racket is illegal but patronised by most Bahamians without any consequence whatsoever.

The last Free National Movement administration officially floated the idea of legalising web shop gaming and began scoping out the industry. But in 2010, then Prime Minister Hubert Ingraham backed off in deference to the views of church leaders. He promised a referendum on the issue, should he be re-elected.

The PLP promised the same thing. And a referendum was finally held in January 2013. Although this was widely seen as a payback to the Numbers operators for their funding of the PLP’s 2012 election campaign, most hoped it would finally bring some clarity to a long-running and very peculiar debate.

It appeared that the referendum would produce an easy yes vote, as younger Bahamians do not share the animosity of their parents towards gambling. But the government’s inept handling of the process, the glaring lack of transparency and the confusing official pronouncements gradually shifted opinion.

In the event, and despite the emotion that has always surrounded this issue, less than half the electorate bothered to vote. And that record low turnout was arguably the most significant result. Turnout in Bahamian elections is as high as 90 per cent. In the 2002 constitutional referendum, it was 70 per cent.

Retired assistant police commissioner Paul Thompson told me that one of his first postings as a young officer in 1952 was to a special squad of detectives that raided the Numbers houses. “We did it from time to time, but it never stopped anything, and after a while we considered it more important to focus on serious crime.”

And it has been that way ever since – occasional raids, followed by long spells of non-interference. In fact, at one time, the biggest Numbers boss on the island was the treasurer of the PLP. And it is common knowledge that you can go almost anywhere today and buy numbers easily and painlessly.

Recent estimates of the amount of money turned over by the Numbers houses run as high as $600m. We don’t know how accurate this is or how much of this revenue is retained as profit in the Bahamas, but it is the most realistic figure to date.

According to the Ministry of Tourism, hotel casinos in the Bahamas netted just over 14 per cent on revenues of more than $1bn in 2011. So Numbers houses are clearly a hugely profitable business with no regulatory oversight other than the occasional fine or political contribution.

In recent years, the webshop gaming industry has been transformed from a shadowy racket to an open industry operated by Bahamian entrepreneurs. And we have come to the belated recognition that by licensing web shops every year since the Business Licence law was introduced, we have effectively legitimised their operations.

After a plurality of voters opposed the regularisation of webshops in the 2013 referendum, the question of what to do with the illegal Numbers industry remained, with no easy solution. So now the government has introduced legislation to legalise and regulate this business, which will provide a new revenue stream for the public sector – something that responsible commentators have been advocating for years.

Predictably, the opposition FNM says it stands with those who voted ‘no’ in the referendum, and insists that, if it had been in office today, it would have heeded the result. And the FNM also says that if elected it will amend the referendum act to ensure that the result of any future non-constitutional vote becomes binding on the government of the day.

One of the opposition’s chief complaints is a supposed lack of transparency. The proposed rules say that only those who are ”invited” can apply for a webshop gaming licence. And the invitation will come ultimately from the cabinet. This fits into the popular perception that the webshops are being legalised as payback for political funding.

But according to Financial Service Minister Ryan Pinder, the legislation “causes the domestic gaming industry to be brought into the scope of the anti-money laundering requirements of the Financial Action Task Force that is prescribed for in our laws”.

Besides the tax regime – a rate of 11 per cent of gross revenues or 25 per cent of profits, whichever is greater – the proposed legislation says that taxes are to be paid monthly to the Gaming Board, which will transfer the funds to the Treasury. The Gaming Board must include a lawyer, an accountant and at least two other members with relevant expertise.

These individuals, the prime minister said on Monday, must uphold “the highest possible standards of personal probity and integrity”. And, he said, the licencing process will include public disclosure of the nature of the applicants, and any concerns which may arise. It will be “as administratively fair, as legally defensible and as transparent as possible,” he said.

The package of legislation includes regulations for both casinos and webshops, a new comprehensive gaming law, and amendments to bring webshops under the provisions of the Financial Transactions Reporting Act, and making an offence under the gaming law a “relevant offence” under the Proceeds of Crime Act.

Despite all the feigned outrage expressed by politicians on both sides in the House over the past few days, the reality is that unregulated gaming is a complex and convoluted issue that can have serious negative consequences for the country one way or the other.

On Monday, the prime minister pointed out what we already know – an unregulated gaming sector generating huge sums outside of the formal banking system is dangerous. “So we decided we had better take the steps to ensure that this industry is properly regulated. We combined the legislation so we could have one Bill on gaming, because it was all about regulating what exists.”

There may indeed be other motives, but this alone is sufficient in my view. And the plain fact is that both FNM and PLP governments knowingly allowed the webshop gaming industry to flourish without any oversight for a very long time. So there is no point in anyone trying to play holier than thou. Most reasonable people would have preferred a more bi-partisan approach.

Clearly, a lot of effort has gone into formulating the compendium of Bills dealing with the gaming issue. And I agree wholeheartedly with B J Nottage that the parliamentary debate failed to deal substantively with the actual contents of those Bills. Rather, MPs from both sides garrulously impunged the motives of their opponents.

In fact, the prime minister’s speech on Monday closely resembled in its force and sense of urgency the Ingraham government’s move to enact the controversial financial sector reforms in 2000, under heavy pressure from the international community. Christie pleaded for understanding of the pressures he and the country were under, completely overlooking how irresponsible his party was in its criticisms a decade or more ago.

This issue, the equal rights amendments and the ongoing deterioration of our national security in terms of crime and poaching, are the absolute worst examples of irresponsible Bahamian political tribalism. Surely, there must be at least one or two political leaders who can rise above this BS?

My personal preference would have been for a public-private partnership to operate a national lottery, incorporating the existing web shop operators, with proceeds earmarked for specific social initiatives. Sadly that is not to be.

But I am certain that most MPs on both sides would agree that, despite what religious fundamentalists have to say, the bottom line is which approach - prohibition or regulation of gaming - will provide the most benefits to the most Bahamians at the least cost. The answer is clear to me. And either way, gambling will continue.

• What do you think? Send comments to larry@tribunemedia.net or visit www.bahamapundit.com.