ISRAEL Law and Practice Contributed by: Liran Barak, Herzog Fox & Neeman
Announcement Regarding General Permit for the Con- duct of Lotteries for Commercial Promotion under the Penal Law 5737-1977 (in effect as of 1 January 2010). As previously mentioned, the Penal Law exempts a limited scope of “social gambling” from the general prohibition placed on gambling and betting. For this exemption to apply, the underlying activity: • must be intended for “a particular circle of per- sons”; • “may not exceed the scope of amusement or entertainment”; and • may not be held in “a place of prohibited games or a place for the conduct of lotteries or betting” (see Section 230 of the Penal Law). Israeli courts have set out that this exemption must be narrowly construed. Specifically, when it comes to online gambling, the courts emphasised the first of the three conditions; ie, restriction of a game’s target audience to a particular circle of persons – see Crimi- nal Appeal (Supreme Court) 9140/99 Amos Romano v The State of Israel . Spread betting, contracts for difference, binary options and other types of speculative activities related to financial instruments, securities, currencies, etc, are not considered a form of gambling under Israeli law. These activities are regulated under Securities Law 5728-1968. In 2016, the Tel Aviv district court ruled that binary options are not a form of prohibited gambling – see Class Action 25717-10-13 Bar-Or et al v ETrader Ltd et al . Nonetheless, that same year, the Israeli Securities Authority banned licensed Israeli trading platforms from offering binary options to Israeli retail customers. A 2017 amendment to the Securities Law introduced severely restricted Israeli residents’ involvement in the trading of binary options (and ancillary activities), regardless of where end users resided. In the explan- atory notes that accompanied the amendment, the Israeli Securities Authority reasoned the restriction by stating that it believes that binary-options trading has “gambling-like” characteristics.
The general ban on betting in Israel also encompasses betting placed on the results of lotteries (as opposed to entering the lottery draw directly). 3.3 Definition of Land-Based Gambling Land-based gambling services are prohibited under Israeli law, except for gambling services offered by the National Lottery and the ISBB. 3.4 Definition of Online Gambling Israeli law does not regulate online and land-based gambling separately. In fact, due to the Penal Law pre-dating the internet, it does not specifically contain a reference to online gambling. The application of the prohibitions set out in the Penal Law on remote gam- bling was the result of judicial activism on the part of the courts, which applied a broad interpretation to the law – see, for example: • Special Requests (Jerusalem) 1153/02 The State of Israel v Aberg’il and • Special Requests (Tel Aviv) 908617/07 Carlton v The National Unit for the Investigation of Fraud . In addition, official opinions issued by various govern- ment agencies have also clarified that both the defi- nitions and prohibitions as set out in the Penal Law with respect to land-based gambling apply to online gambling, mutatis mutandis. This was the case with, among others, the Israel police, the Ministry of Justice and the State Comptroller – see, for example, Annual Report 61B for the Year 2010 and the Accounting Year 2009, Jerusalem May 2011, published by the State Comptroller and Ombudsman of Israel. Online gambling services are prohibited under Israeli law, except for online betting services offered by the ISBB. 3.5 Key Offences Offences relating to gambling in Israel are contained in Chapter 12 of the Penal Law. The key offences are: • organising or conducting “a prohibited game or any lottery or betting” (Section 225 of the Penal Law); • playing a prohibited game (Section 226 of the Penal Law – strangely, this section does not con-
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