Tasmania Could Be Considering Betting Exchange License

Speculation is rampant in Australia that a joint-venture between Betfair and Kerry Packer's Publishing and Broadcasting Ltd. is close to gaining a betting exchange license in Tasmania.

PBL's executive chairman, James Packer, met on Monday with Tasmania Premier Paul Lennon about what Lennon termed a "range of business opportunities." Some industry insiders believe it's only a matter of time before the state issues a betting exchange license, and despite Australian racing and betting officials' adamant opposition to licensing exchanges, Tasmanian Racing Minister Jim Cox said the state is keeping an open mind.

Andrew Harding chief executive of the Australian Racing Board and a staunch opponent of betting exchanges, said licensing Betfair in Australia would threaten the integrity of the entire industry.

"The idea that people should be encouraged to make money out of horses losing is anathema," Harding told the Australian Associated Press. "It would be cancerous to the integrity of the Australian racing industry."

Betting exchanges have been a topic of debate since Betfair began taking bets from Australians more than two years ago. Last year the federal government left policy pertaining to exchange betting out of its exhaustive review of the Interactive Gambling Act. Rather than address exchanges on a federal level, the government opted to let the individual states and territories decide how to address the industry.

Most of Australia's state governments do not appear willing to legalize exchanges, but that could change if one state takes the plunge. Holding a license in any state or territory would allow the licensee to market its services throughout the country, so any state that has legalized exchange betting would have an advantage over those that don't. Therefore, it is believed that if one state moves forward with such a scheme, the others will follow.

If that happens, the 50-50 joint venture between PBL and Betfair is likely to establish an immediate presence in the Australian markets. The two groups announced plans following the IGA review to launch a co-branded Australian betting exchange--a deal that's contingent on Betfair obtaining an Australian license.

The Northern Territory was rumored to be considering a betting exchange licensing scheme, but the territory's government has gone on record as saying it has no intentions of moving forward with any such plan. That announcement turned speculation to Tasmania as a likely candidate, and Monday's Packer/Lennon meeting could be a sign that policymakers could be getting close to making a move.

Racing spokeswoman Sue Napier was surprised to hear that Tasmania is contemplating legalization.

"Licensing a betting exchange in Tasmania would sound the death knell to the Tasmanian racing industry, and I'm shocked the premier, with his keen racing interest, would even countenance such a move," Napier said. "The risk far outweighs the benefit. Our turf, harness and greyhound racing industries are likely to be thrown out of interstate betting pools and have Sky racing coverage withdrawn."

Betfair, meanwhile, isn't saying much about the Tasmania rumor.

"Our line on it is that we are absolutely confident that we will get a license in Australia, but we will not speculate about where or when we will do so," the company's managing director, Mark Davies, explained. "Current reports are the subject of press speculation based on a meeting between the Tasmanian government and PBL, but PBL has many business interests other than Betfair, and it is purely speculative to suggest that that meeting revolved around our joint venture."

Regardless of what was said at Monday's meeting, Lennon is clearly pleased to have PBL express interest in basing a portion of its business in Tasmania.

"It is a sign of confidence and optimism in the Tasmanian economy that organizations such as PBL and other large corporations want to discuss business opportunities in detail with the Tasmanian Government," Lennon said.

Why Tasmania?

Australia's Betting Exchange Task Force in 2003 issued dire predictions of the impact of betting exchanges on Australian racing, and the Northern Territory was the only dissenting voice in the Task Force's deliberations. That made the Northern Territory the early favorite to issue a betting exchange license, but the territory's position changed after Andrew Ramsden was appointed Chairman of the Australian Racing Board. The territory is home to the majority of Australia's corporate bookmakers--called "parasites" by the Australian racing industry after a row over product fees, of which the cooperate bookmakers pay nothing. Attempts by the bookmakers to negotiate a fee were rebuffed by the racing industry, which seemed determined to litigate an outcome. Ramsden reportedly struck a deal with NT officials late last year that had the ARB going soft on the territory's corporate bookmakers in exchange for the territory blocking exchanges.

While Betfair has gone on record as willing to seek a license in any Australian state or territory willing to issue one, the Northern Territory might not have been an ideal location anyway. The company has made it known that part of its desire to set up operations in Australia is to have a disaster recovery center in place as insurance against a catastrophe affecting its London hub. That would entail having a location close to major global Internet bandwidth--something that would be unobtainable in the Northern Territory.

Tasmania, on the other hand, will be linked to Victoria later this year with the completion of the Basslink undersea power cable, which will also bring a major new broadband communications cable to be laid in the same trench. The new cable will increase Tasmania's Internet connectivity with the mainland to three major cables owned by the Tasmanian government and two cables owned by private company Telstra.

It should be noted, however, that even if Betfair obtains a license in Tasmania, the legality of such a license will most certainly be challenged by the racing industry as well as policymakers from other states.