New Statesman: Fair play for the betting exchanges

Betfair, a Queen's Award recipient in 2003, and the CBI Company of the Year in 2004, is being threatened by potential amendments to the Gambling Bill. Traditional bookmakers, unhappy to be facing proper competition for the first time, are hoping to get the Bill amended during its passage through Parliament. They claim that some exchange users are 'betting in the course of business' and therefore should be licensed. The arguments in support of this are completely bogus and are borne out of the desire of bookmakers to use the legislative process to kill off legitimate competition from exchanges.

There are three reasons why betting exchange users should not be licensed:

1. It is impossible to run a business on Betfair

The only way to ensure that your price is taken on an exchange is to offer the best price. While a bookmaker works to a theoretical margin of between 12-20% on most events, a betting exchange makes it impossible to work to a theoretical margin greater than 1% and would usually require someone to work off a negative margin.

Those bookmakers who use the betting exchanges (as they do other betting outlets) to hedge their risk are already licensed. They run a business and they use the exchanges as an extra window onto the world, to run that business more efficiently.

2. Confusing taxation and regulation

Exchange users are not bookmakers, however often they trade and in whatever size--just as day traders are not stockbrokers. The Treasury is considering whether there is an argument to tax punters across the board, but whatever the Treasury decides, there is no argument to require them to be licensed any more than an active share day trader needs FSA registration.

Saying that 'people on exchanges look like bookmakers, so license them as bookmakers' is as absurd as saying that someone who trades shares looks like a stockbroker. A betting exchange user does nothing that a bookmaker needs a licence for: paying out, holding stakes, advertising for business, offering incentives, resolving disputes, protecting the vulnerable, keeping out crime and preventing minors from betting.

3. Undermining the social policy aims of the Gambling Bill

Licensing a section of the betting exchange customer base adds nothing to the three aims of the Gambling Bill: protecting the vulnerable, keeping out crime and ensuring fairness. Such an amendment will actively work against the aims of the Bill, by encouraging people to seek out alternative platforms on which to bet, outside the regulatory framework. This will fundamentally undermine the legislation, and damage the ability to run an effective exchange model in the UK.

For further information contact Mark Davies at Betfair--020 8834 8000