exchanges to be licensed, while Italian network operator Microgame has also partnered with Betdaq operator Global Betting Exchange (GBE) in preparation for the opening of the Italian exchange betting market. But Italy’s existing sports betting operators have stood together in staunch opposition, principally on two points. Firstly, Italian operators have been ?ghting to prevent regulatory authority AAMS from allowing operators to pool betting exchange liquidity internationally, which is currently permitted within existing regulation. “This provision was debated and subsequently thrown out in relation to poker, and it is likely the same will occur with exchange betting,” says Christian Tirabassi, a senior advisor at consultancy Ficom Leisure. The second sticking point is taxation. Under current legislation, Betfair and Betdaq – the only two companies to show an interest in setting up there – would be taxed at a lower rate than standard sportsbook operators. Exchanges would be subject to taxation of 20% of gross revenues, whereas ?xed odd sports betting games are subject to a 2% to 5% turnover tax, increasing by a further 0.5% in case of offering of bets on events outside of AAMS official schedule. These two elements are proving to be extremely cumbersome hurdles to remove, and despite Betfair’s desperation to get over the ?nishing line, Italian operators are unlikely to step aside and allow any operators they cannot compete against into the market. Indeed, Luigi Magistro, deputy director general for the newly-formed Customs and Monopolies Agency (Agenzia delle Dogane e dei Monopoli), with direct responsibility for gambling legislation, has publicly said he needs more time to consider the matter, with no decision expected before June at the very earliest, or indeed at all. Better news Regulation across the pond has provided slightly more positive news for exchange betting operators. Both New Jersey and California have approved exchange betting laws, with the latter on course to go live next year after the California Horse Racing Board unanimously approved the relevant rules. The news will come as a welcome boost for Betfair, which has invested heavily in the Golden State, including spending US$10m in its betting exchange product there, as well as paying $50m to acquire horseracing TV and wagering network TVG in 2009 and an undisclosed sum in March 2012 for the ?rst ever US naming rights deal at a racetrack, Betfair Hollywood Park. The push for regulation in the US is somewhat aided by the horseracing business desperately requiring a shot in the arm. Much of the industry has backed the introduction of the product, based on the prospect of enticing younger customers to the sport; Betfair says the average age of race goers
Eduardo Morales-Hermo
Gaming consultant Ficom Leisure
in the US is 56, while it is 36 for its UK horseracing exchange punters. With New Jersey also legalising exchange wagering – Betfair has been in as-of-yet unsuccessful discussions to acquire Monmouth Park racetrack there – and other states with a signi?cant horseracing industry such as New York and Kentucky following suit, the US could be the silver lining Betfair needs. According to H2 Gambling Capital, intrastate exchange wagering in California alone could generate as much as US$5065m in gross commissions per year and increase interactive horseracing gross win by up to 20-25%. Unlike some European jurisdictions, however, where Betfair is the clear market leader, the company is likely to face stiff competition from other household name operators, such as Churchill Downs, launching their own exchange wagering products at the same time. Healthy competition yes, but another sign that the London-based operator will not be getting its own way any time soon.
THE HISTORY OF THE BETTING EXCHANGE
MAY 2000
Peer-to-peer betting, the precursor to a betting exchange, introduced by Flutter.com common-pool parimutuel wagering on its races to customers outside the US
MAY 2012
European Commission approves Ital y’s ministerial decree to introduce exchange betting legislation; Betfair launches ?xed-odds sportsbook site
OCTOBER 2010
Betfair ?oats on Stock Exchange at a share price of £13, valuing the company at £1.4bn
JUNE 2000
Betfair launches product it originally called “openmarket betting”
DECEMBER 2001
Betfair acquires rival Flutter.com for c. £30m
JANUARY 2011
Exchange betting legalised in New Jersey
JULY 2012
Betfair awarded Spanish licence
NOVEMBER 2005
The Tasmanian government announced a deal to licence Betfair in the state
SEPTEMBER 2012 MARCH 2011
Betfair begins operating under Gibraltar licence and moves some of its operations to the jurisdiction Cyprus bans exchange betting
NOVEMBER 2012
Betfair withdraws from Germany and Greece; provisional exchange betting licences awarded in California
JANUARY 2009
Betfair acquires US online wagering businesses TVG
MARCH 2012
Betfair and California’s Hollywood Park Racetrack enter into historic sponsorship and marketing agreement
NOVEMBER 2009
Betfair signs a deal with the New York Racing Association to allow
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