P2P Growing Pains

As the person-to-person betting industry continues to grow with leaps and bounds, flaws in the basic principle of the system are making themselves known.

A handful of operators in the past months have closed, with Play 121 being the most notable among them, and serious questions of fixing have arisen. Industry experts, though, feel the recent hiccups in the P2P market are more learning experiences than long-term problems.

At the forefront of the latest problems for the P2P sector is a recent BBC program that claimed that jockeys and trainers were using P2P sites to bet on horses that they knew had no chance of winning.

Most of the betting action, according to the report, was conducted through Betfair.com, the leading P2P site on the Internet. It garners more than 90 percent of the P2P market.

Punters' ability to bet against a horse, instead of betting for him to win as in traditional betting arenas, has been a major concern for Mark Blandford and other online bookmakers.

Blandford, the executive vice chairman of sportingbet.com, said that in P2P sites and systems that take the bookmaker out of the betting equation, which is what happens with Betfair and Play 121, problems can arise.

"If you are in a properly regulated environment, for example you only let licensed bookmakers lay the bets, this probably wouldn't happen," he said. "You would still get the P2P platform, but it is more like P2B."

Betfair has asked the Jockey Club to impose a ban on trainers and jockeys betting on horse races through its site. A decision is expected by the end of the month, said Betfair spokesman Mark Davies.

Davies said Betfair is doing more than talking to the Jockey Club, though. He said Betfair is in negotiations with government officials to encourage them to create an effective licensing and regulatory model for the P2P industry.

"We welcome the idea of regulation," Davies said. "In fact, I think we are the only operator out there that is in talks with the government to create an effective way of regulating the P2P industry."

Before getting an indication from governments, though, the P2P industry is already taking some of the burden on itself. New betting exchanges are aimed at individual bookmakers and will pull their resources together to form a giant P2P exchange, although each individual bookmaker will have its own branding capability.

Blandford said using such a system would be ideal for a place like the United Kingdom, where literally hundreds of bookmakers would be able to bring liquidity to the system.

Sportingbet has inked a deal with one such exchange, TradingSports.com, and will join the ranks of World Wide TeleSports, SBG Global and other leading online sports books. The TradingSports system, though, comes without a horseracing feature.

TradingSports CEO Joe Tighe feels there are too many unresolved issues with horseracing right now for the new exchange to risk its resources. Tighe said he hopes horseracing will be added by fall, but only after getting input from licensed bookmakers.

Although the P2P market is going through tough times right now, many feel that the issues can be resolved. The sector is still a small portion of the overall betting industry, but Ed Pownall, spokesman for betting platform developer Blue Square in the United Kingdom, feels that any type of system that gets punters betting is good for the marketplace.

"Every time a new market comes into play, existing companies naturally worry about loss of margins and turnover but evidence rarely supports this," he said.

The recent success of the William Hill public float and the introduction of the National Lottery, Pownall said, are perfect examples of the buzz that still is prevalent in the betting industry.

"Contrary to opinion at the time, this was one of the best things to happen to the U.K. betting industry," he said. "Suddenly it was quite the norm to bet a couple of pounds a week and punters quickly evolved from numbers to other markets."

Most operators agree that the clouds passing through the P2P sector are short term and are part of the growing pains for an emerging industry. Blandford shares the sentiments of many operators who feel there is plenty of room for growth in the marketplace.

"This is a winner-take-all market," he said. "The punters are going to go where the greatest number of bets are."