It is no wonder that punters are using the exchanges more and more as an alternative to the traditional betting mediums.
Another attraction that the betting exchanges have over the traditional bookmakers is that punters can ‘lock in’ profits on the exchange. For example if a punter backs an event early at odds of 10/1, but then nearer the start of the event the odds have shortened to 5/1, the punter can lay the bet at 5/1 guaranteeing a profit.
(iii) The Legality of Exchange Betting:
(a) The Bookmakers view.
There has been an ongoing debate between the major bookmakers and the betting exchanges over the legality of the exchanges. William Hill chief executive David Harding complained to the Department of Media, Culture and Sport in the summer of last year claiming that Betfair’s business was contrary to the provisions under the Betting, Gaming and Lotteries Act 1963.
He claimed that punters were acting as unlicensed bookmakers because they were able to lay bets on the exchange. William Hill’s executive chairman John Brown, who claims that the current state of legislation is ‘ridiculous’, echoes his concerns.
Under s.2 of the 1963 Act “no person shall act as a bookmaker on his own account unless he is the holder of a permit authorising him so to act (in this Act referred to a “bookmakers permit”) which is for the time being in force; and if any person acts as a bookmaker in contravention of this subsection he shall be guilty of an offence.” It is clear that acting as a bookmaker without a permit is an offence, but what exactly does ‘acting as a bookmaker’ mean?
Under s.55(1) of the 1963 Act a “bookmaker means any person other than the Totalisor Board who-
- whether on his own account or as servant or agent to any other person, carries on, whether occasionally or regularly, the business of receiving or negotiating bets or conducting pool betting operations; or
- by way of business in any manner holds himself out, or permits himself to be held out, as a person who receives or negotiates bets or conducts such operations.”
The rationale behind the argument that David Harding has put forward is that punters, by laying events (such as horse racing) on an exchange, are acting as illegal bookmakers i.e. without the required permit.
The exchanges are providing the medium for these bets to be placed and it is argued that they are aiding and abetting a criminal offence. William Hill are not the only people to put forward the case against betting exchanges, Rodney Brack the chief executive of the Levy Board also agrees.
“On the assumption that any person laying a bet requires a bookmakers permit, and all permit holders are liable to make a levy contribution, that would cover betting exchanges. If they don’t obtain a bookmaker’s permit, they must be betting illegally.”
It is possible for punters to ‘lay’ an event without using an exchange. As we have said to ‘lay’ an event is to back it ‘not to win’. You can do this with an ordinary bookmaker. In an event where there are only two outcomes such as a tennis match, if you back player A to win you are effectively saying that player B will not win. There is nothing illegal about this.
The same is true in an event where there is more than one outcome such as a football match. If you think team A will not win, you can back team B and also back the draw, this is the same as ‘laying’ team A on an exchange.
The Government rejected the complaint made by William Hill until the new Gambling Commission was in place and then the matter would be looked at again. The Government did not want to take the step of ensuring that all participants of betting exchanges should become licensed bookmakers.
The issue has not been tested in the courts so it is unclear as to what the outcome would be. John O’Reilly, the managing director of Ladbrokes is also unsure as to the legality of person-to-person betting but the problem for the traditional bookmakers will not go away “even if it was ruled illegal, UK based exchanges would simply go offshore.” This is exactly what the major bookmakers have done in the past to avoid the wrath of the Government as we have seen above.
PART 5
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