|The spread betting firm IG index is facing legal action in Australia, which could go to the high court. What is at stake is whether or not the firm is governed by state or federal laws.|
The New South Wales (NSW) Government claims that IG Index, which is licensed by the Securities and Investments Commission, has flouted NSW gaming laws by operating in the state.
A spokesperson for NSW Gaming Minister Richard Face said IG had illegally advertised its site in the state. Because IG is not a licensed bookmaker, it has not received approval to offer financial spread betting.
'We have no doubt it is illegal and we have told ASIC,' the spokesman said.
A spokesman for Victorian Gaming Minister John Pandazopoulos said legal advice was being sought from the Solicitor-General.
'It is still uncertain as to how it should be dealt with,' he said.
'We are treating it with the seriousness it deserves.'
However, IG is confident of its legal position, relying on a provision of the Corporations Law, section 1101I, which states that gaming and wagering laws 'do not affect validity of contracts relating to financial products'.
IG Australia executive director Peter Richards said the firm had received 'extremely highly qualified' advice that the Commonwealth laws overrode state requirements. Under state rules, all activities are deemed illegal unless specific permission is given.
IG is promoting its betting as a financial tool for sophisticated traders, akin to warrants or futures products.
However, the firm also stresses the gambling nature of its products and has stressed the tax-free status of capital gains resulting from betting.