Is there an element of hysteria about the opposition to the establishment of betting exchanges for Aussie punters? I think there is.

For starters, I believe the importance of exchange betting is being over-emphasised. It won't hit TAB betting to any great extent, and bookmakers and even the totes should get into exchange betting themselves and offer the same service as organisations like Betfair.

A ban on betting exchanges would be a stupid move, not that we are short of stupidity in Australian governments these days. But in this instance, emotions should not rule the roost.

On Sky TV, the NSW TAB has used its position to argue strongly against betting exchanges, with the Racing Retro programme, chaired by Graham McNeice, at the forefront of the "ban Betfair" campaign.

Okay, then, what are the various TABS, led by NSW, putting forward as the case for banning exchange betting (and remember that exchanges offer punters the chance to secure value prices).

Let's have a look at some of the material the NSW TAB has been circulating.

  1. TAB Limited has the lowest pari-mutuel commission rate in the world.
  2. It contributes a significant proportion of revenues to racing and government.
  3. It funds some 80 per cent of the total cost of running racing and is a highly regulated business operating to a high integrity standard.
  4. It caters for 50 cent customers via almost 2000 retail outlets and electronic channels such as PhoneTAB and NetTAB.
  5. It has wide-ranging responsible gambling initiatives together with funding problem gambling counselling services.
  6. It is also active in sponsorships including the Children's Cancer Institute, Australian Paralympic team, etc. and is actively involved in community fund raising for items such as the Bushfire Appeal Drought Appeal and RSL, etc.


  1. No betting exchanges are currently licensed in Australia.
  2. Most betting exchanges are licensed in the UK, where private bookmakers have dominated the wagering market and revenue returns to the racing industry have been poor.
  3. Betting exchanges are likely to have short-term benefits for some punters but longer-term detriment to the whole racing and wagering industry.
  4. Jurisdictions such as Hong Kong and Japan have enacted legislation that makes betting exchanges illegal both from the perspective of the resident of the country and also for the foreign operator.


  1. Without doubt, the single most significant issue facing the industry since inception.
  2. Existing offshore betting exchanges are "parasitic" by nature.
  3. Unless positively managed, racing as we know it will be severely damaged due to a massive reduction in revenues and perceived integrity problems.
  4. Individuals can be either a punter or bookmaker. This enables unlicensed persons to lay a particular horse and benefit from it not winning. The ability to trace these types of transactions is low.
  5. Betting exchanges will almost certainly mean the end for existing bookmakers.
  6. As "win" bets are the majority of betting exchange transactions at a very low margin, bookmakers will not be able to compete.
  7. The demise of bookmakers is likely to have a negative effect on racing attendances.
  8. For every $100 million in turnover that transfers from TAB Limited to betting exchanges, the racing industry is $4.75 million worse off.

The NSW TAB adds:

It is estimated that total revenues from exchanges is between 1 and 2 per cent. On this basis they would be returning only $100,000 (10 per cent of revenue) to the racing industry for every $100 million in turnover versus $4.3 million to the industry by TAB Limited.

If TAB Limited lost significant turnover to betting exchanges it will not be able to service the small customer. This will decimate racing's customer base.


  1. Betfair is the trading name of The Sporting Exchange Ltd, a UK registered company founded in August 1999. Betfair operates its betting exchange website under the UK Betting, Gaming and Lotteries Act and holds a bookmaking licence in England and Wales.
  2. Within four years of inception Betfair has grown into one of the largest wagering organisations in the world. The firm currently handles around $A130 million per week in matched bets on racing and sport.
  3. Betfair's current business model involves the targeting of foreign jurisdictions (including Australia) whereby a "locally attractive" offering of racing and sports betting events are made available to wagering customers via the website. Australian event options currently include major Australian racing events, NRL rugby league and AFL football games.
  4. Customers from around the globe are invited to deposit funds (via credit card, bank transfer and other options) and subsequently make bets on the outcome of racing or sports events with other customers via sophisticated Internet and back end technology. Such transactions are "matched" at agreed odds.
  5. Betfair does not currently hold a gambling licence within Australia. It therefore does not pay any local betting taxes on Australian sourced bets, nor any product fees or contributions to the Australian racing industry. This lack of financial obligation in turn allows the firm to offer betting returns (odds) that are more attractive than locally provided alternatives such as TAB Limited.
  6. Betfair (and similar offshore wagering operators) provide a serious threat to the Australian wagering environment, and its stakeholders such as the Australian racing industry and State/Territory governments. As an unlicensed emerging force in the Australian gambling industry it also provides a number of public policy dilemmas for Australian governments.
  7. Betfair's Australian operations are largely exempt from the Interactive Gambling Act, 2001. It is deemed to be an excluded wagering service under section 8A of the Act.


  1. The footprint of thoroughbred racing spans the Australian continent. A total of 22,000 races are held around Australia each year. These are staged by 428 race clubs, of which thirteen are metropolitan and 415 are in country or provincial areas. Of the 22,000 races conducted each year, 23 per cent take place in cities - 77 per cent take place in the bush or regional areas of Australia.
  2. Australian racing is a major agribusiness which is one of the mainstays of the economic base of regional Australia. Racing currently contributes some $6 billion per annum to GDP, 40 per cent of which is generated in regional areas.
  3. Approximately  100,000 Australians derive their employment from racing. Breeding and racing are labour-intensive activities providing employment in a wide range of jobs as jockeys, trainers, strappers, farriers, stable hands, trackwork riders, stud masters, racecourse curators, barrier attendants, starters, judges and stewards. Much of the employment racing provides consists of jobs in regional Australia.
  4. Racing and breeding provide irreplaceable jobs in regional Australia. Reduced employment opportunities in gaming-related activities are replaceable as employment in other sectors benefits from reduced expenditure on gaming. However, if Australian racing declines, then people employed in racing-related callings, particularly in regional areas, are highly unlikely to find replacement jobs in substitute industries.

By Jon Hudson