Betfair Could Face Huge Fines Down Under

Despite a round of positive talks between Betfair and officials from the Australian racing industry, the Australian Broadcasting Authority said Wednesday that the popular P2P betting site could face fines of up to $1 million a day for targeting Australian bettors.

The ABA made the policy decision upon learning that the site's content was prohibited under Australian broadcasting laws.

As reported by the Sydney Morning Herald, the ABA felt "there was sufficient evidence of possible breaches of sections 15 and 61EA of the IGA [Interactive Gambling Act] to warrant the referral of the matter to a law enforcement agency."

Under the New South Wales Unlawful Gambling Act of 1998, punters in the state can be prosecuted for betting with an overseas operator not licensed in Australia.

The news caught Mark Davies, Betfair's communications director, by surprise. Davies had just returned from Australia, where he met with the Australian Racing Board and other racing groups.

"We have no idea where this has come from or what it is about," said Davies, who also said the company would be in contact with the ABA to get the issue resolved.

Equally shocking to Davies was that Tim Ryan, a member of the Australian Bookmakers' Association Internet betting committee, was aware of the findings and was familiar with a complaint filed by a "respected racing" individual against Betfair. The Herald didn't name the individual who filed the complaint, but Davies said he had met with Ryan during his visit to Australia.

Ryan told the Herald that he was "not surprised in the least" about the ABA's findings. He also had sharp criticism for Betfair operating in what he felt is a clear violation of the IGA.

"Any idiot who has read the legislation knows that betting exchanges can't do what they are doing in Australia," he said. Betfair Could Face Huge Fines Down Under

Davies said bets placed on Australian racing came about because of user demand. He also pointed out that the company never marketed specifically to Australian bettors and added that the company is willing to pay the Australian racing industry part of its 5 percent deductions from winnings.

"We have never done any marketing in Australia or signed any partnerships with Australian companies to further our market share in the country," Davies said. "I think that says a lot about our brand, and the Betfair system, that this kind of demand and the success of the site came about because of punters' desire to bet in new and different ways."

Despite the backlash, not everyone in the Australian racing business is opposed to P2P betting. Chief among potential allies is Racing Victoria's chief executive, Neville Fielke, who along with ARB chief Andrew Harding, met Davies last week. Fielke was later quoted as saying Betfair was an "opportunity rather than a problem".

"The danger to Australian racing comes not from Betfair, but from the people that follow us," Davies said. "Smaller companies, who have already shown themselves to be hell-bent on using every possible tool to break into our share of the market, will see a huge opportunity if the dominant global player withdraws."

Davies is fearful that if Australian regulators follow through with penalizing Betfair, the wrong message would be sent to other betting exchanges.

"They will decide, after seeing us knocked on the head, that the way to succeed is not to bother opening discussions with anyone in Australia," he said. "They will set up in a Third World jurisdiction, where no one knows exactly where they are, and say, 'Stuff you, come and find us.'"

If such a system were in place, Davies argued, then the whole of racing would suffer.

"The commercial position [in Australia] will be much worse for Australian racing because they will never get a penny back for their product and will never be able to have any cooperation in fighting corruption," he said. "That's the real threat."

Betfair began taking action on Australian meetings during the 2002 Melbourne Cup carnival and now offers its service on every Australian capital city meeting and some provincial races.

Its international turnover for Australian racing is approximately $4 million a week.

The company has been in operation for three years, and its customer base worldwide is approaching 100,000.