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Ceasefire, or new combatants?

So, Betfair have signed a 5-year deal with the racing industry which locks in the terms of the current levy deal: they’ll pay 10.75% a year of profit on business from their UK customers.

Martin Cruddace, the company’s Legal Director and an old colleague and good friend of mine, has hailed the deal as “genuinely historic”.  On behalf of Racing, CEO Paul Bittar says, “We are delighted that we have been able to reach an agreement with Betfair, one which represents a landmark for both the racing and betting industries. It brings many benefits, including substantial and increased guaranteed funding as well as importantly providing certainty for the sport in relation to Betfair’s contribution. We hope that similar arrangements with other betting operators will follow.”

I expected lots of different reactions to it: congratulations from some, irritation from others. For my part, without knowing the detail, my reaction was that it seemed to be something of a PR coup, and good news for the certainty of revenues and for the co-operative relationship that it suggested; but it didn’t seem to change any existing terms and therefore was probably more about style than substance.  Probably, therefore, good news for both sides: Messrs. Cruddace and Bittar deserve a round of applause.

The one reaction I didn’t expect at all came from an MP who told me that Betfair had “signed it because they’re up against it”.

So surprised was I by that statement that I had to ask him what he meant.  The answer was that they signed it “because they think that they will lose the fight about who should be paying levy.”

“Really?” I asked.  “Surely not? Surely this is a five-year deal, inked in.  What did I miss?”

“Ah,” came the reply.  “It may be a 5-year deal with the racing industry; but it will not stop challenges from others.”

“Really?” I asked.  “Like who?”

‘The other bookmakers.”

“Really?” said I. “I can see how it will irritate them for its chutzpah, but I thought that William Hill and Betfair were in the High Court this week and that if a Judicial Review went in Betfair’s favour, that was really all over. I may be wrong, but assuming I am right, who will challenge it after that, if neither racing nor the bookies?”

We will!” came the reply. “The MPs and the Legislators! The Treasury made the wrong decision in 2005, and we will correct it!

We decided against arguing the ins and outs of why Treasury decided what they did; and why the argument has only ever gone one way.  I wasn’t interested in having it, and when I said that honestly, I’d worked at Betfair for ten years and knew the reasons for the consistent response, I was told I was therefore biased.

I offered a £100 bet that the legislation would not change inside five years, but was told by my companion that he could never take that because it would mean that if he argued for the change, as he intended to do most vociferously, he would be politically compromised.   I offered to change the bet to 50p, but that didn’t work either.

So there you have it.  Betfair and Racing may make peace, and hoorah for that.  Betfair and the Bookies may make peace, and hoorah for that even more.  But there are others who still want to take up a fight which began in 2002 but which “the Treasury got wrong”, in the absolute and deeply-held belief that they will win it.

Please – please, no.

Posted in Betfair, Betting industry.

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3 Responses

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  1. MD says

    I’ve seen since I wrote this post that it does actually change one set of terms quite fundamentally, in that included in the deal is the BHA pulling out of the Judicial Review being led by William Hill. So there’s a key element of substance which I had not originally appreciated. Even more reason to be cheerful than I originally thought. Well done both!

  2. bigdipper says

    There is still no basis to tax full-time exchange winners when full-time professional punters remain exempt.

    The MP seems a bit wrong-headed. The effect of exchanges is to make markets more nearly efficient, with the result that 1) recreational bettors tend to lose no more on average than their level of commission, and 2) there is less and less profit for any layer on the receiving end of equilibrium prices. Hence the amounts of marginal profits available for marginal taxation by the Treasury get vanishingly small.

    Needless to say, this is also the result of BF’s eye-watering private tax rates of up to 62.5% on consistent winners!

  3. PPBox says


    I agree the thrust of your post, although if I may, can I observe that your last paragraph misses the point somewhat? The “private tax rates” of betting operators, whether Betfair, William Hill, the Tote or Pokerstars are not “up to 62.5%” of consistent winners gross winnings (what they would have won if the operator didn’t charge anything). The average consistently winning customer of all those operators (and every other profitable operator) has more than 100% of their gross profits deducted, leaving them net losers.

    Go down the bookies and find a couple of bets that the bookie correctly estimates each has a 50/50 chance. Lose £45 on one, then back a winner for £50 and you would have won a net £5 if the bookie didn’t build any margin in and gave you evens. But he will build a margin in and he won’t give you evens. If you got 5/6 for both bets you’ll only get paid out £41.67 on the winner and you’ll be £3.33 down. So your bookie has deducted “private tax” of £8.33 on your £5 of winnings. If you think 62.5% is “eye-watering”, I’m not sure how you’d describe the deduction of 167% of gross profits.

    There’s nothing particularly magical about that: on any betting platform there’ll be a distribution of wins and losses among customers before charges. Most customers are near the middle of that normal distribution (obviously), and the operator’s charges then wipe out most or all of the vast majority of the customers’ profits.

    The really eye-watering aspect of Betfair’s charges is that they tell you how much they’ve charged you. Anyone who works in retail will tell you that is commercial suicide. You won’t find William Hill, Ryanair, Apple, Barclays, BP or Tesco telling you how much profit they make out of you over the year. It also allows people like Paul Roy to say “don’t tell me that someone paying 20% commission isn’t in business”, when of course EVERY single consistent winner in the shops or on the Tote will already have shared more than 20% of their winnings with the operator.

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