China's two official lotteries were the big winners on Tuesday when legislators brought in the first rules to govern the previously unregulated lottery industry.

The rules dealt a heavy blow to the rampant underground lottery market by banning the issue and sale of unauthorized or foreign tickets.

The new rules take effect on July 1 and mean would-be lotteries must now obtain the endorsement of the State Council.

At present, only two lotteries are authorized, one that raises money for China's welfare system and one that fundraises for sports development.

People selling illegal and foreign lottery tickets in China will be subject to as-yet unspecified criminal charges.

The Legislative Affairs Office of the State Council said the rules aim to regulate the rapidly growing industry, while experts said they finally legalize certain lotteries 20 years after they first appeared.

Last year, revenue from the country's authorized lotteries reached 105.9 billion yuan (US$15.5 billion), an increase of 4.3 billion yuan on 2007, or about 0.35 percent of the country's GDP, according to the Ministry of Finance.

However, those figures are significantly lower than China's illegal gambling revenues.

Wang Xuehong, director of China Center for Lottery Studies, estimates that illegal wagers may be 10 times the country's legal lottery take.

To put that number in perspective, total illegal gambling revenue in 2007, according to Wang, was close to the GDP of Beijing, a number that is also roughly equivalent to the annual revenue of China's tourism industry.

Illegal lottery tickets, online betting and underground casinos are the three main types of illegal gambling.

"It's crucial to ban illegal lotteries, and such a regulation will definitely play a role," said Wang, who helped draft the rule.

She said it is common practice around the world for countries to ban the sale of foreign lottery tickets.

"But it's a pity that the rule fails to make it clear what kind of criminal charges illegal lottery issuers should face. It may need further explanation in the criminal law." Wang said people are drawn to illegal gambling because of the potential high returns.

She said the government should consider regulating other forms of illegal gambling. Other critics have called for more effort to be placed on fighting gambling, which they say leads to addiction among millions of young people, as well as corruption among government officials.

Wang said the government can play an important role by developing mechanisms to prevent addiction. "But there isn't any. And that's the biggest pity of the rule," she said.

(China Daily May 13, 2009)