An on-screen game of Snake was about as sophisticated as the mobile phone got in 2005, the year Matthew Tripp flew into Darwin to buy Sportsbet.

For a quarter of a million dollars, the bookmaking entrepreneur acquired the relatively obscure company trying to turn on Australians to betting online.

If it seemed like a long shot, then it was one that paid off handsomely. When he sold Sportsbet a few years later, to Irish betting giant Paddy Power, there was a smartphone in nearly every hand or pocket and the company was worth $380 million.

The reason they’re in Darwin is not for the lifestyle. It’s because of the relatively low tax regime.

And it was no longer a pioneering start-up. From Sportsbet and Tripp’s new venture, CrownBet, to international brands such as William Hill and Bet365, a total of 15 online betting companies are now licensed through the Northern Territory. Even niche services such as the Weather Lottery have a licence and post office box in Darwin, the city that has fast become the gambling industry’s Australian capital.

It’s been a case of everything coming together at the right time for the industry. In 2008 – a year after Apple released its first iPhone, the technology in which online betting is easier than ever – a ruling in the High Court cleared the path for gambling houses to operate and advertise across state borders.

With territory governments willing to work with the industry, a betting tax haven emerged.

“The reason they’re in Darwin is not for the lifestyle,” gambling researcher Dr Charles Livingstone tells The Saturday Paper. “It’s because of the relatively low tax regime.”

Thanks to legislation that caps money owed to the NT Treasury at $550,000 per operator, per year, the multibillion-dollar industry pumps just a few million dollars in tax into territory coffers each financial year.

When I contact the territory’s Department of Business for details of the industry’s broader contribution to the local economy, I am told those figures are under review. But sports bookmakers, of both the online and traditional shopfront variety, employ about 300 Territorians throughout the year, whether casual, part-time or permanently, the department said.

Sportsbet, which employs about 70 Territorians – about 10 per cent of the company’s national workforce – is the online industry’s biggest contributor to the local jobs market.

A recent search for betting jobs on sites such as Seek produced seven pages of results, from which just four ads were for positions in the territory. One was for a hospitality role at the Darwin Cup. The remainder were for positions at call centres run by Sportsbet and Bet365 at the Fannie Bay racetrack.

“You can have your head office anywhere, as long as the server taking bets is located in Darwin,” Livingstone says. “They can set their markets and have all their high-flying staff in Sydney or Melbourne or wherever.”

For such relatively small economic gains, the territory is facilitating an industry whose social costs run deep, and all without having to clean up the mess, its critics say.

“While we recognise the territory is keen on accessing income, it also is a citizen of Australia, and would be looking, we would hope, to protect the interests of all Australians,” says Ross Womersley, CEO of the South Australian Council of Social Service (SACOSS).

At a time when the federal government has been targeting the evils of the unregulated offshore betting market, via the O’Farrell review, SACOSS believes something similar is being allowed to flourish in the north of Australia.

SACOSS calls the NT a virtual tax haven and, as the O’Farrell review makes clear, the emergence of this local online betting market has largely stopped Australians from punting in the actual offshore betting market.

Womersley wants the current system to be changed, and SACOSS is campaigning for bets to be taxed in the state they are laid, rather than in the territory where the operator is licensed.

“If one jurisdiction is taking all the income and the others are missing out, then we’re not going to be in a situation where we can provide [assistance for problem gamblers] equally,” he says.

Livingstone is unconvinced taxing gamblers does anything more than increase government’s reliance on said revenue, though he does agree with the general sentiment of SACOSS’s position.

“The cost is being externalised to other jurisdictions,” he says. “It’s not plaguing their people, by and large.”

Tabcorp – Australia’s largest wagering operation, with a monopoly on walk-in betting shops in New South Wales and Victoria – is also concerned.

“Why is the community getting so little out of the Northern Territory-licensed corporate bookmakers?” Tabcorp chairman Paula Dwyer asked at October’s AGM, adding that her company pays – dollar for dollar – 28 times what those based in the territory do. “There has to be a more equitable structure in relation to the payment of wagering taxes.”

But these are comparisons Sportsbet rejects emphatically.

“Any suggestion that the NT is a tax haven is completely false and ill-informed,” a spokesman for the operator said. “[Taxes for companies such as Tabcorp] are paid in return for operating retail monopolies … No such monopoly is available online.”

The NT’s director-general of licensing, Cindy Bravos, said the territory’s tax rates recognise that sports bookmaking is a “high-turnover, big-risk business with narrow operating margins”.

“Accordingly, the NT government has set realistic tax rates to enable the bookmakers to offer fair prices to punters whilst encouraging and keeping businesses in the territory.”

And gaming minister Peter Styles denies accusations the territory is a soft touch when it comes to regulation.

“[We offer] quicker response to operational issues,” he said in April, after legislation to attract betting exchanges such as BetFair to the Top End was introduced to the NT parliament.

“This does not mean the Northern territory is a pushover when it comes to approval process, but our smaller size allows us to move with greater speed.”

Sportsbet also stands behind the territory’s regulations, saying it “is at the forefront of harm minimisation and responsible gambling measures” with the country’s “highest standards of probity, responsible gambling, advertising and consumer protection”.

The territory is still considered the wild west by its detractors, however, even after the introduction of a stricter code of conduct for online wagering operators this year.

Punters have told of credit being offered without the most basic risk assessments being made. Betting houses have bought or swapped lists of clients who’ve walked away, with the intention of luring them back into the game.

Then there are the inducements. One high-spending problem gambler said he was given free tickets to a corporate suite at a major racing event in Sydney, where he was wined and dined by the operator he punted with. “It was as if

I was a business client.”

While the federal government does have the power to regulate online gambling, it has so far appeared reluctant to assert itself too strongly in the area. Its key piece of legislation, 2001’s Interactive Gambling Act, is widely considered to be out of date. Yet Canberra’s interest was piqued after Norfolk Island – another Australian territory offering cheap licences – cosied up with Citibet, the world’s biggest illegal bookmaker.

Norfolk Island has an even more attractive tax set-up than the NT, charging operators a maximum of $300,000. While that has drawn criticism from the likes of SACOSS, it was the island’s dealings with Citibet that earned the ire of the racing industry.

“It is beyond belief that an island 1400 kilometres off the coast of Australia … can make decisions that affect a multimillion-dollar business with 200,000 employees,” Racing Australia chief Peter McGauran told The Australian in April.

“Norfolk Island has done something that no one else in the world has done, and that is effectively license the world’s biggest illegal bookmaker.”

It must now get Australia’s approval before giving out any more licenses.

With Nick Xenophon’s growing influence, this new parliament may be forced to tackle online sports betting head-on. The South Australian senator has already renewed his call for a ban on gambling advertising.

He’s previously labelled the territory’s tax regime “an absolute gift” to bookmakers who “must be laughing all the way to their offshore bank accounts”, and has called for tighter regulations, such as a ban on credit for punters, saying online sports betting has “turbocharged the risks of problem gambling”.

Without movement in Canberra, however, the issue is unlikely to cause a ripple in the lead-up to next month’s territory election. The longest-serving independent in the NT parliament, Gerry Wood, told The Saturday Paper he’s more concerned about the grip of the pokies industry on the territory government.

The amount spent on pokies around the country does dwarf that spent on sports betting, and by a considerable margin. Despite its high profile, just 2.3 per cent of Australia’s gambling spending goes towards sports betting, the Australian Wagering Council says. More than half goes into the pokies.

But what Livingstone fears is that this will change as a younger generation – who wouldn’t be seen dead at a pokies venue, but for whom sports betting has been normalised – gets older.

“Once they’ve got their hooks into you, they will not let go,” he says. And unlike on the pokies, you can lose the home in one foul punt.