McIntosh, ABB at Odds over Betting Exchange Issue

21 January 2004

UK Gambling Minister Lord McIntosh on Monday delivered a discouraging verbal blow to the Association of British Bookmakers (ABB) in its quest to dismantle the current operating model of betting exchanges. But Yesterday the bookmakers, in conjunction with the British Horseracing Board (BHB) and other key figures in the exchanges debate, were given the opportunity to present their case before the joint parliamentary committee that has been appointed to scrutinize the draft Gambling Bill.

Monday's meeting of the ABB was highlighted by Chief Executive Tom Kelly's speech. "There has been an underpayment of tax and levy with the exchanges paying only a commission income, the rates of which they set themselves and which they can reduce as low as they like--and a reduction in betting margins due to the ability of racecourse bookmakers to hedge through exchanges, which impacts on the margins inherent in the Starting Price," Kelly said. "We are not demanding exchanges to be banned, but we think they need to be properly regulated and licensed."

He also mentioned that exchanges could also serve as a haven for criminals. "It doesn't seem to matter that the unsuspecting punter may be dealing with anyone from his local vicar to a money launderer or the head of an overseas crime syndicate," he said.

Lord McIntosh, who also spoke at the bookmakers' meeting, respectfully dissented.

"We know your views and you know ours," said McIntosh. "We don't seem to have found any common ground, but I can assure you that it is not for the lack of any forceful representation on the part of the Association of British Bookmakers."

The bookmakers launched another front yesterday with the help of the BHB, arguing their cases before the committee that has been charged with listening to all opinions and suggestions for the draft Gambling Bill before re-evaluating the draft and recommending its findings to both houses of Parliament in April.

Peter Savill, Chairman of the BHB, emphasized the threat that betting exchanges pose to the integrity of racing as well as the argument that exchanges enjoy an unfair tax level. He offered his oral arguments as a complement to the BHB's earlier written submission to the committee in December.

Among some of the claims issued in that report:

  • "The scale and international nature of betting exchanges represent an unprecedented and substantial threat to the integrity of racing, which lies at the heart of the racing product, as the number of reports of alleged irregular betting patterns, focused on losing horses, accelerate on an almost daily basis."

  • "Betting exchanges create the possibility that any unlicensed person can make substantial profits by the laying of a horse to lose and that an unlicensed bookmaker can make substantial profits without paying the appropriate amount of tax or levy or to racing."

  • "The taxation of betting exchanges creates an un-level playing field which distorts the market, gives betting exchanges an unfair advantage and results in less money flowing to government and to racing."

With those complaints in mind, the BHB has recommended ways to alleviate the problem. For example, "Recreational layers on a betting exchange should be distinguished from non recreational layers by the volume of their laying over a specified time period whereby non recreational layers would be deemed to be in the business of betting and would require an appropriate license, awarded on the basis of a 'fit and proper' test."

The BHB also suggests that the proposed Gambling Commission that would be created by the Gambling Bill receive the authority to investigate and audit in cases of suspicious betting, in addition to being given the sufficient power to deter any violation of the rules.

Chris Bell, chief executive of Ladbrokes, was also in attendance and offered his view of the best way to regulate exchanges. "It should be possible to strike a balance between punting and paying," he said. "One way forward could be to take the current capital gains measure, so that if a layer goes over £7,900, he is a trader."

The ABB, like the BHB, stressed that the Gambling Commission must play a large part in monitoring exchanges, but the current draft of the Gambling Bill does not do enough. According to the ABB's Kelly, "Legislation needs to back it up with clear definitions, especially since the draft bill does not define what constitutes bookmaking, or being a bookmaker. It also does not clearly establish what is betting and what is gaming.

"You could have someone turned down for a betting license on "fit and proper" grounds one day, and he starts the same operation, just as if he had got a license, the next day from his front room."

Rupert Arnold, chief executive of the National Trainers Federation, also presented evidence for the committee yesterday.

"I have first-hand knowledge of inside information being used improperly, and have passed it to the Jockey Club, but the actual problem is not large, though the opportunity is greater than it was and the temptation stronger," Arnold said.

Representatives from Betfair will be on hand to deliver their stance to the committee this morning.

Click here to view the BHB's response to the Gambling Bill.