After six months of push-and-pull between the Kenyan government and betting firms, the State Wednesday struck at the heart of the firms’ operations, ordering telcos to shut down the paybill numbers and short codes of 27 companies whose licences are yet to be renewed.
The order by Kenya's Betting Control and Licensing Board, contained in a letter dated July 10, effectively seeks to shut down a multibillion-shilling industry that has been on a roll. The letter was signed by BCLB acting Director Liti Wambua.
The list contains the big names in sports betting, including SportPesa, Betin and Betway. Others are Betpawa, Premierbet, Lucky 2 U, 1XBet, Mozzartbet, Dafabet, World Sport Bet, Atari Gaming, Palmsbet and Bet Boss. Also affected are Betyetu, Elitebet, Bungabet, Cysabet, Nestbet, Easybet, Kick Off, Millionaire Sports Bet, Kenya Sports Bet and Eastleighbet.
The betting industry in Kenya depends almost entirely on mobile money transactions by gamblers. To place bets, gamblers load money into virtual wallets run by mobile money companies. Those who win also collect their winnings through the same wallets, unless the amount won is so big that the payment has to be made through a cheque.
Effecting the order would affect at least 12 million people who have wallets for the betting companies, and lock up an unspecified amount of money held in those wallets.
Telcos, among the biggest beneficiaries of the nationwide betting frenzy, are set to be badly hit.
On Wednesday, Safaricom, through TripleOKLaw Advocates, wrote to BCLB, seeking “clarifications with respect to the mechanisms for compliance” with the order.
The telco said the proposed suspension of the paybills, SMS and short codes would affect the ability of gamers to withdraw the money deposited in the gaming wallets of the various gaming companies.
The telco, which controls the bulk of the money that goes to betting companies, argued that it is an important public policy consideration that depositors should not be denied access to their money despite any regulatory action against the licensed entity.
“As the directive to shut down Paybill, SMS and short codes will no doubt deny the gamers access to their funds, we are instructed to propose that gamers or depositors be allowed to access their funds so that there is no prejudice to such persons which may have the unintended consequence of inviting undesirable legal action against our client,” the law firm said.
Instead, it wants to be allowed to block additional deposits to the gaming wallets while allowing gamers to withdraw their money. To do this, the gamers would need access to SMS and short codes.
It also wants BCLB to notify the public and the affected entities through public announcements in the media.
It has also emerged that the move to shut down the gaming companies was also driven by money laundering claims that have rocked the financial sector.
Wednesday’s directive was the culmination of threats and actions by the government against betting companies.
In April, the Interior ministry gave tough conditions that all companies were supposed to meet before getting their new licences. All betting firms were supposed to have renewed their licences by July 1.
The companies had to show that they were tax-compliant. They were also supposed to prove that they had been operating within the law, were sufficiently liquid and had performed financially well for the past four years.
The government argues that betting firms have been making revenues of up to Ksh200 billion ($2 billion) a year but paid only Ksh4 billion ($40 million) in taxes last year. It also argues that the nature of the ownership of most betting companies and existing weak laws had made it easy for the companies to be used as avenues for money laundering.
SportPesa Chief Executive Officer Ronald Karauri, who also chairs the Association of Gaming Operators, disputed the revenue figures cited by government.
He argued that betting companies made way less than what the State was claiming, saying there was confusion over the issue.
“That is a matter that is already in court and the government knows this, but there is a push to show that the industry is not paying its share of taxes, which is not entirely true,” he argued.
Mr Karauri, who runs the biggest company in the industry, showed us part of SportPesa’s financial statements that he had sent to the Kenya Revenue Authority. The documents show that the firm made Ksh15 billion ($150 million) last year and paid Ksh6.2 billion ($62 million) in taxes.