The New York Racing Association has brought the international war on betting exchanges onto U.S. soil.
Under a plan made public this week, the NYRA will no longer allow U.K.-based
interactive TV wagering network attheraces to carry its racing signal. Although the move directly affects attheraces, NYRA officials said leading exchange betting firm Betfair is the main target.
"It's certainly not attheraces' at fault here," said NYRA Senior Vice President Bill Nadar. "It's the accessibility of our races to Betfair that we find troubling."
Betfair has been the market leader in the burgeoning P2P industry for three years, despite efforts from traditional racing industry representatives in Australia and Europe to curtail its growth.
Detractors of betting exchanges argue that the P2P model gives sites like Betfair.com an unfair advantage over traditional bookmakers under current tax regimes.
Exchange betting is also criticized for allowing punters to lay horses, or bet against them, which opponents say enables jockeys, trainers and owners to throw races.
Critics additionally argue that exchanges drain money from racetracks and betting organizations that support purses from wagers.
Betfair says its willing to pay a portion of its proceeds back to the racing industry, but not more than what traditional bookmakers pay. The bookmakers, because of the suggested unfair advantage, say the exchanges should pay back a higher percentage.
Mark Davies, the communications director for Betfair, said he was surprised to learn of the decision from the NYRA, especially when his company has made offers for the signal.
"They know that we will pay them a fee for their product," he said. "We have told them so in person."
Equally as stunning, in Davies' mind, is the idea that the NYRA is cutting off a valuable means of creating a true international product.
"The people watching attheraces are clearly an international audience to them," he said. "Where will people watching attheraces pictures of U.S. racing otherwise bet on U.S. racing, given that they are all U.K.-based? Clearly not into American pools."
The discontinuation, expected to take place within the next week, is similar to a move made by Magna Entertainment Corp. in late December.
Magna, like the NTRA, cut off attheraces because of Betfair.
Ian Hogg, attheraces' chief operating officer, said that handle through Betfair on Santa Anita Park and Gulfstream Park had dropped dramatically since Magna pulled its signal.
The decisions made by the NYRA and Magna won't hurt only Betfair. Both companies are walking away from extra handle generated from other attheraces punters. That handle is co-mingled with the tracks' main pools, unlike the handle generated from Betfair. The exchange pays no money into the track pools because the punters are betting against each other.
While Betfair doesn't pay into the betting pools, it does pay the same taxes and a licensing fees in the United Kingdom that bookmakers pay. British racetracks also get a fair share of Betfair's business and are required to provide the exchange the same signals and information they supply all other wagering enterprises.
Despite the loss, Hogg was understanding of the NYRA's decision.
"These groups have a right to be cautious about Betfair," he said. "We’re not
particularly happy about Betfair either. Bettors doing so legitimately should continue to do so, but those who aren't paying the proper price should pay a penalty. At this stage, though, everyone is paying the price."
Davies feels that this philosophy is what forces Betfair to operate from the fringes. Demand from exchange bettors is high enough to make Betfair do whatever is necessary to provide it's service legitimately.
"This is the ideal opportunity for them to increase the value of their product by internationalizing it--with a clearly stated willingness by the operator of the betting service to pay an appropriate fee--but they seem, from reports, to prefer to cut the service."
Nadar compared the betting-exchange craze to the file swapping phenomenon in the music industry.
"I applaud Betfair for a great idea, but it fails as a business model," he said. "It's a lot like the music industry; file sharing helped certain segments grow, but that doesn't mean people don't deserve to be compensated for their work. It's a delicate balance--trying to help your business grow while at the same time protecting your brand and horsemen. We want to offer our product, but we want merged-pool agreements."
Davies doesn't agree.
"Cutting the pictures merely means they deprive willing customers of the enjoyment of their high-quality product, for which they have been offered, and can still gain, due compensation," he said.