Betfair

Betfair Logo

Betfair is the world's largest Internet betting exchange. The company is based in the borough of Hammersmith and Fulham in London, England.

History

Since Betfair was launched in June 2000 it has become the largest online betting company in the UK and the largest bet exchange in the world. Betfair currently has over 1,000,000 clients and a turnover in excess of £50m/week.

A bet exchange allows punters (gamblers) to bet at odds set and requested by other punters rather than by a bookmaker. Both back and lay bets are allowed.

Betfair uses decimal odds, which are easier to calculate with than fractional odds. Its bookmaking model brings together two counterparties with opposing views, and thus removes the need for a bookmaker's markup or overround. As a result, the odds are up to 20% better than bookmakers' odds, according to the site's operators.^{[citation needed]} Betfair punters are able to offer odds based on their own opinion rather than on a set bookmakers' margin. Betfair charges a commission on all winning bets, which is set at 5% of the net winnings for most markets--though it is possible to earn discounts.

The company has attracted much comment in the British and Australian press. Its co-founders, Andrew Black and Edward Wray, won the Ernst and Young Emerging Entrepreneur of the Year award. More recently the company was recognised by the Department of Trade & Industry when it was given a Queen's Award, the most prestigious business award in the UK.

In October 2005 chief executive Stephen Hill announced his resignation when the board decided not to proceed with plans for a stock market flotation, the investors holding out for a higher valuation [1].

In November 2005 the Tasmanian government announced a deal to licence Betfair in the state. The deal will see Tasmania receive AU$5 million up front and is projected to pay Tasmania about $40 million per year. Now that it has been approved by the Tasmanian Parliament, it will be the second licence Betfair has received outside the UK - the first being in Malta. The deal has infuriated the established monopolistic totalisers and bookmakers (due to loss of revenue) and governments (due to loss of taxes) in the other Australian states. Bans on bet exchanges exist or are proposed throughout Australia.

On 28 February 2006 Betfair launched a new interface, including current live scores of in-play soccer matches, jockey silks and horse form, and an 'express view' in which only the currently available back odds are viewable. Within two days the 'Xpress' idea was copied by BETDAQ, due to a suspected leak from within Betfair. The changes were criticised on the Betfair forums by many members who disliked the smaller fonts and the right-aligned columns, which displayed a large amount of whitespace. On March 1 these display issues were addressed, although many users still felt the site had been dumbed down in order to attract new punters to the exchanges. The gambit worked, however, with a significant increase in membership and deposits during the Cheltenham Festival.

Softbank purchased 23% of Betfair in early April 2006 valuing the company at £1.5 billion.

Controversy

The fact that gamblers can now lay outcomes on the exchanges has caused tremendous criticism from traditional bookmakers with much of the anger coming from the UK's "Big Three" - Gala Coral Group, Ladbrokes and William Hill. These firms argue that granting who they consider to be anonymous punters the ability to bet that an outcome will not happen is causing corruption in sports such as horse racing (since it is much easier to ensure a horse will lose a race, the bookmakers reason).

Betfair has led their defence by countering that while corruption is possible on any gambling platform, the bookies' arguments are motivated not by concern for the integrity of sport but by commercial interests. Betfair also asserts that unlike the high street brokers, who all accept anonymous cash bets, Betfair is well aware of who their customers are. Customers are required to create personal accounts, and Betfair keeps records of each customer's betting history. Betfair in particular has noted that they have signed numerous agreements with governing bodies of sport including the Jockey Club, with whom they insist they will co-operate fully if the latter suspects corruption to have taken place.

Betfair outside the United Kingdom

Although the bulk of its customer base is in the UK, Betfair offers its services in a number of countries. Betfair has never accepted customers and/or credit card numbers from the United States, where online gambling is legally proscribed. Being the leading bet exchange, Betfair has been reluctant to entangle itself in legal trouble and has thus turned away business from countries where its services are likely prohibited. As a result, unlike some other online gambling operations Betfair was not seriously affected when the U.S. Congress passed strict prohibitions affecting Internet gambling in late 2006.

Betfair admits customers from Australia but it has not been marketing its services there. Betfair is well known in Australia because of negative publicity from the racing industry and the bookmakers. With the exception of Tasmania the Australian state governments have not welcomed betting exchanges with open arms. The state racing boards fear that betting on horses to lose will cause corruption whilst reducing revenue especially for the TAB services. The mainland states have warned that Tasmania (which accounts for a fraction of horse racing in Australia) could become a pariah if its deal with Betfair proceeds. Some Australian states (such as Queensland) have banned their citizens from placing bets on exchanges, although gathering evidence to enforce such laws is difficult if not impossible. These states are now considering introducing tougher prohibitions and finding ways to make these bans easier to enforce. As of 2005, the federal government has declined to intervene, stating that gambling policy is a matter for states to deal with under the Constitution of Australia. Betfair launched in Tasmania in 2006.

PokerChamps.com

In late autumn of 2005, Betfair finalised a deal that began in early summer, to purchase the online poker site PokerChamps.com, which the company will integrate into its network, replacing a poker arm that previously used gaming technology software from CryptoLogic. On 30 October 2006, Betfair Poker left the Cryptologic network to move to its new platform.

In a press release the company's poker head, Ben Fried, stated: "Having our own poker software puts us in command of our own destiny. It means we can react quickly to customer feedback and continue to develop an innovative, community-focused product. We are confident that we are laying the foundations of a market leading poker room." [2]

On 21 July 2006, all American accounts were frozen and the return of players' funds were in progress, a move that immediately followed the arrest of David Carruthers, former Chief Executive at BETonSPORTS. Betfair had previously implemented geo-location software in 2004 to deny U.S. residents the ability to place bets on its site.

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