VODOne Jumping The Gun?

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VODOne may have been a little premature on Chinese Internet lottery contract

Hong Kong publicly listed company VODOne may have jumped the gun last week by announcing that it had won official approval from the Chinese social workers’ association to sell welfare lottery tickets online. The head of the China Association of Social Workers, Xu Ruixin says that the Chinese government has not yet given its approval.

Xu Ruixin told the Financial Times that his association has not issued an approval and could not do so because China lacked the necessary regulatory framework.

While a number of websites already offer online welfare lottery ticket sales, “none of them have clear permission”, Xu said.

The FT reports that the confusion highlights the regulatory ambiguity and complexity that surrounds businesses working with the government’s welfare and sports lotteries, China’s only forms of legal gambling.

Analysts say conflicting institutional interests have helped stall efforts to pass a lottery law for more than a decade.

The social workers’ association is controlled by the Ministry of Civil Affairs, which has given it a voice in developing welfare lottery regulation, however, direct responsibility for lottery management lies with another arm of the ministry.

Clarifying his association's position, Xu said it had approved the launch of a VODOne internet video channel that would publicise the welfare lottery and its goals, but that the approval did not mention internet sales. However, he did not offer any objection to VODOne selling lottery tickets through the new channel.

Zhang Lijun, chairman of the Hong Kong-listed venture and himself a vice-chairman of the social workers’ association, seemed to have a different view, saying  it expected to begin internet lottery sales by early June. ”We have the approval for setting up the lottery channel...(and) by my understanding that approval allows me to do many things,” Zhang said. ”I am able to provide the online lottery ticket sales as well.”

Lack of regulatory clarity has not prevented other companies from seeking to tap the internet lottery market, relying on the support or tolerance of city or provincial lottery centres.

With lottery sales growing an average of more than 37 percent a year over the past decade and reaching $10.5 billion last year, companies are keen to provide technology or act as distributors for a cut of sales.

Hong Kong-listed Kantone Holdings in 2005 took control of Shenzhen Helper Science Development, a lottery systems supplier.

Shenzhen Helper has a lottery sales website that serves Shanghai and this month launched another in the western city of Chongqing in cooperation with an online arm of state news agency Xinhua.