P2P Debate Heats up in Australia

Betfair's Mark Davies spent last week in Australia promoting his company and meeting with racing industry officials. Although he went with peaceful intentions--to open up channels of communication between Betfair and racing officials in Australia--his presence created a bit of a stir.

Wagering businesses are upset that Betfair is profiting off Australian racing without paying a turnover tax or a licensing fee. The site, which enables bettors to wager against each other instead of against the house, became the subject of similar concerns in the United Kingdom around two years ago when it began to gain popularity among U.K. bettors.

The fire was put out in England by a new policy calling for betting exchanges to pay 10 percent of its profits to British racing regulators.

In an effort to sustain its presence in Australia, the company has proposed a similar payment structure in that country and even offered to pay the fee retroactively.

The gesture did not satisfy Michael Piggot, the general manager of wagering for Australia's Tabcorp, who referred to betting exchanges as "rogue, dangerous forms of gambling."

"It will be diabolical for our racing," he said of Betfair's possible inclusion among licensed operators. "It is inviting the ingress of rampant criminality."

Betting exchanges are also seen as a threat to the TAB's business. A traditional TAB structure would have the company taking a 14 percent commission on a winning bet, while Betfair and other exchanges take a 3 to 5 percent commission.

With more than 90 percent of the global P2P market and turnover of over £1 million on popular races like the Breeders' Cup and Cheltenham Festival, Betfair has caught the ire of Australian regulators as well, which is one of the main reasons Davies set out to meet with racing officials.

During his trip, Davies met with the heads of the Racing Victoria board and the Australian Racing Board. He also met with several members of the Australian press in an effort to diffuse what he called erroneous reports about the company and its policies. He said the meetings were positive and he's confident that a solution is in sight.

"I think once all the parties study the various sides of the issue we can reach a solution that everyone will be happy with," he said. "They have a lot of things to consider, but I am sure once everything is considered a solution can be reached."

But the argument doesn't stop at fair competition. A major point of contention in England has been the possibility of jockeys and trainers betting on horses to lose. Betfair has been working with the British Racing Board and the Jockey Club to address this, but Piggott has his doubts.

"It is inviting criminals to knee-cap a footballer, or noble a horse with a guarantee of making money," Piggott said.

As a solution, Piggott suggested setting up an Australian betting exchange to be run by Tabcorp. He said the company could operate its own exchange if proper approval was granted from regulators.

"If we pay a 1 percent product fee and no tax, we could run it," he said. "We have the probity to run it." He also suggested outlawing international operators for running exchanges or impose a blanket ban on them altogether.

Bookmaker Michael Eskander argued, however, that simply handing the exchange over to the TABs isn't a viable option. Eskander agrees that betting exchanges need to be addressed, but not through outright prohibition.

"Banning these exchanges is not the answer," he said. "It's time for us all to wake up. We banned Alan Tripp. We forced Mark Read out of Victoria. Did they simply go away? Of course not."

Eskander has proposed a solution of his own.

"I will offer the Australian racing industry whatever Betfair has," he said. "And I am prepared to take brokerage fees as low as 0.25 percent if I have to."

Eskander said he would like to see a working committee in which members of the racing industry, betting officials and racing regulators would conduct a study to seek the best approach.

Davies feels any such study would result in a willingness to accept Betfair's role in the industry.

"They have an international product, and we have the ability to help it grow exponentially," he said.

Overall, Davies is happy with his Australian tour.

"I think it was successful in getting our message out and dispelling some of the myths that were out there about us and the things that we stand for," he said on Wednesday from his office after returning.

Despite having no partnerships or marketing campaigns in Australia, Betfair has established itself as the leading brand there. It has a sizable Australian client base, all amassed with zero marketing and partnership agreements in the country, and Australian racing is popular in England.

Davies said Australian racing has an allure to British punters, who can match odds with other bettors through Betfair's person-to-person betting exchange instead of getting odds with a traditional bookmaker. Australian racing is popular on the site, he said, because of a lack of live coverage of races from Down Under in the British media.