Pre-Paid Cards and the Online Gambling Industry: Illegal According to an Israeli District Court

Introduction

An Israeli district court rejected an appeal lodged by a person who was involved in providing pre-paid cards used for the purpose of wagering with online gambling websites. The court ruled that such activity amounts to aiding and abetting illegal online gambling activities, as well as contravenes the Israeli Anti-Money Laundering Act.

In this matter, the appellant and his accomplices sold pre-paid cards via numerous kiosks and shops. The cards allowed their purchasers to wager with certain online gambling websites, a method that became quite popular in Israel following the decision of credit card companies and other payment processors to stop providing their services to Israelis in connection with online gambling products and services.

The court ruled that the offering of online gambling products and services to Israeli people from abroad, even if the offering is provided by operators that are licensed and regulated in a foreign jurisdiction, is illegal in Israel. Hence, the fact that the pre-paid cards were used in connection with foreign-licensed online gambling websites does not alter the prohibitive status of the offering of these gambling activities in Israel.

In addition, the court stated that the operation orchestrated by the appellant, of selling pre-paid cards, constituted aiding and abetting online gambling activity. The court rejected the appellant’s contention that since the websites also offered non-gambling products and services on top of the gambling products and services, selling pre-paid cards used in connection with such websites is not illegal. The basis for the court’s decision in respect of this contention was that the code of the pre-paid card was used in connection with wagering activity.

Analysis

The court’s decision concerning the legality of foreign-licensed online gambling activity in Israel follows in the footsteps of another district court’s decision in a separate matter. However, it is important to note that up till now the Israeli Supreme Court has yet to rule in respect of this matter.

But what is more interesting is the manner in which the court analyzed the pre-paid cards’ offering and use. It seems that the court was very much focused on what appears to be the direct link between the cards and the gambling products. However, one cannot rule out that where such a link is broken, the sale of pre-paid cards might not be considered illegal in Israel. Thus, for example, one could argue that where the pre-paid cards are used for various matters, their sale should not be considered illegal just because one of their uses is, or could be, for online gambling. Naturally, this has to be very carefully reviewed on a case by case basis, and proper structuring with the aid of legal advice is absolutely necessary here. Otherwise, the risk of court conviction, as in this case, could very well be in the books.