A court ruling in Kenya could provide a route back into the market for Sportpesa — formerly the East African country’s biggest sports betting operator — and others frozen out of the market.
The Kenyan betting industry has been engaged in a spiraling altercation with the government since the latter attempted to impose a tax on bettors stakes, as well as their winnings, separately to the regular corporation tax operators are required to pay.
Sportpesa said this made the market financially unviable for operators and bettors alike, and would discourage gamblers from placing bets.
The row culminated in a dramatic de facto shutdown of the industry by the government in July.
But now the Kenyan Tax Appeals Tribunal has ruled that the betting tax can only be levied on players’ winnings, and it must be collected by the tax authority directly from the player rather than the operator.
In a statement, Sportpesa CEO Ronald Karauri welcomed the ruling.
“We have long advocated for a fair and level playing field and a regulatory and taxation environment that both supports business and inward investment and is in the interests of Kenyan consumers,” he said. “SportPesa will now reconsider the future of its operations in Kenya.
We encourage the authorities to take the Tax Appeals Tribunal’s ruling fully on board and to now apply a reasonable approach to gambling regulation and taxation, in line with international best practice,” Karauri added.
Kenya had become the third-biggest betting market in Africa — after Nigeria and South Africa — thanks largely to uptake of mobile phones and the emergence of domestic e-wallets, like M-pesa.
In a largely unbanked society, this allowed Kenyans to load money onto their phones and deposit and withdraw money to and from gambling sites.
The Kenyan High Court initially blocked the tax on stakes. But on July 1, when betting licenses expired, the Betting Control and Licensing Board took the nuclear option.
It ordered M-Pesa and other payment providers to switch off the pay-bill numbers and short codes that underpinned the Kenyan betting industry by facilitating deposits and withdrawals.
Twenty-seven of the Kenya’s betting operators who had chosen not to pay the levy because of the pending court action were frozen out of the market, and their 12 million customers were given 48 hours to withdraw their funds.
Sportpesa and its closest competitor, Betin, sued to block the order. But the case was thrown out by Kenya’s High Court. According to Justice John Mativo, “Even if the court quashes the decision, there is no basis the petitioner can operate on an expired license.”
In September, urged on by Kenya’s President Uhuru Kenyatta, lawmakers proposed doubling the tax on stakes from 10 to 20 percent, at which point SportPesa ended its soccer sponsorships in the country and placed its 453 employees on leave.