Betfair Awarded Tasmanian Betting Exchange License

16 January 2006

After months of controversy filled with questions and doubt from members of the Tasmanian government and the Australian racing industry, British betting exchange Betfair was finally granted a license to operate in Tasmania on Monday.

Beginning Feb. 7 punters in Australia will have the ability to create their own odds and bet against each other on horse racing and sporting events in the region. It also means, if forecasts come true, that Betfair's presence in Australia will bring in billions of dollars in revenue for the country and the Australian racing industry.

A December report by an analyst for investment bank Morgan Stanley disputed Tasmanian Premier Paul Lennon's assertion that Betfair would bring in about $50 million per year by 2010. The report said the projections were dangerously overestimated and the company would more likely bring in around half of the Premier's predicted windfall.

Geoff Harper, chairman of the Tasmanian Thoroughbred Council, said he is yet to be convinced that Betfair will be as economically beneficial to Australia as predicted.

Betfair, however, has complete faith is its ability to live up to the expectations of the government.

"We expect to exceed them," said Betfair's Director of Communications Mark Davies. "We've exceeded expectations everywhere since day one in June 2005, despite doomsayers at every turn."

Throughout its bid to obtain a license, Betfair has met with endless objections from the Tasmanian government and certain sectors of the racing industry, and there are no signs that those opposed to Betfair's operations are willing to give up the fight just yet.

The latest manifestation of this conflict comes in the form of threats of a lawsuit from Racing NSW (New South Wales) for copyright infringement if the betting exchange publishes NSW race fields. Racing NSW CEO Peter V'Landys has warned that New South Wales and other states where Betfair is not licensed, such as Victoria, will not give up until Betfair agrees to pay a product fee for bets placed on their respective race fields.

In the meantime, Victoria is relying on its 2004 legislation that prohibits the publication of race fields without approval, and Queensland has enacted legislation to make it illegal for citizens to use a betting exchange.

Australian Racing Board chairman Andrew Ramsden has been quoted in the Australian media today as saying that seven Australian states have heeded the racing industry's integrity concerns and have thus openly opposed betting exchanges. He has also vowed to scrutinize the conditions of the license to ensure it fulfills Tasmania's promise to increase the integrity of the racing industry.

Although the racing industry fears that Betfair will ruin the integrity of a sport that dates back to at least the nineteenth century in Australia, Betfair sees its being licensed as an opportunity to address and assuage concerns that are shaking up the Australian racing industry.

Davies said that the best way for Betfair to do this is to run the business effectively.

"For every day that passes, and then every month, and then every year, without all these terrible things that are talked about actually happening, more and more people will come to realize that we are right when we say that we raise no new issues, and we bring some solutions to existing problems," Davies said. That is how it happened in the UK."

PBL and Betfair--50/50

Back in July, 2004, when news first broke of the deal between Betfair and Publishing and Broadcasting Limited (PBL) to bring a betting exchange to Australia, Davies told IGN that PBL was chosen as a partner because of its enormous presence in Australia.

"They have tremendous means to distribute the product," Davies said. "They have great relationships within sport in Australia and they are totally connected with people all across the sporting world. They also have distribution channels like Nine MSN and television operations that make them capable of getting the Betfair product in front of a large number of Australian punters."

This is not PBL's first foray into the gambling industry. The company already owns Crown Entertainment Complex and its casino in Melbourne, and in March 2005 it began a joint venture with Hong Kong-based Melco International Development Limited to build luxury casinos in the Asian region.

In its joint venture with Betfair, PBL stands to gain 50 percent of the profits generated by Betfair Australia.

PBL may already be reaping the benefits of the partnership. It closed on the ASX Monday at $17.18, up 17cents.

"The issue of this license represents a significant step forward for the wagering industry in Australia," James Packer, Executive Chairman of PBL said in a press release Monday We believe that punters will appreciate having access to an exciting new 21st century product and that racing and sport throughout the country will also benefit."

Pending completion of a few Gaming Commission requirements, including strengthening Internet encryption systems and setting up a separate Betfair Australia Website, the betting exchange is set to launch in Australia.

The Gaming Commission is also requiring that Betfair make it crystal clear to their British and international clients that when they are betting on Australian races and sporting events they will be doing so under the jurisdiction of Tasmanian law.

"We didn't know or expect there would be these additional conditions imposed by the Gaming Commission," Betfair Australia's Andrew Twaits told Australian media Monday. "But we are quite happy and able to comply."

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.