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Betfair gains first exchange-wagering license in U.S.
Betfair, the British-based owner of Television Games Network, has been granted a conditional license by New Jersey regulators to launch the first exchange-wagering platform in the U.S., a development that could have a dramatic impact on the racing industry if its supporters' goals are fully realized.
The approval of the license could usher in a new era for Thoroughbred racing in the U.S. if the proposition of exchange wagering survives what is expected to be close scrutiny by state and federal legal authorities and myriad hurdles to its widespread adoption in U.S. states. Exchange wagering, which has been embraced in the United Kingdom but has drawn criticism in many other countries, allows bettors to post prices and accept bets from other customers of the betting platform. The practice is closely akin to bookmaking, which is illegal in nearly every state in the U.S. under strict interpretations of federal law.
The license granted by the New Jersey Racing Commission is subject to the expiration of veto periods granted to both New Jersey Gov. Chris Christie and the New Jersey attorney general. Both periods expire in early December. Christie has never shown any interest in preventing the establishment of exchange wagering in the state, but the approval of the license and the eventual launch of the system is likely to draw attention from the federal Department of Justice, which has not yet issued an opinion on the legality of exchange wagering.
Under current rules in New Jersey, only New Jersey residents would be able to open accounts on the platform, though residents of the United Kingdom would be allowed to bet against those New Jersey customers. Bets will only be allowed to be posted and matched on races from tracks that have explicitly granted approval to Betfair to offer the service, according to Frank Zanzuccki, the executive director of the state racing commission.
Technically, Betfair received the license through Darby Development, a horsemen-led group that operates Monmouth Park in Oceanport, N.J., under a lease from the state. Dennis Drazin, the head of Darby, has pushed for approval of the exchange-wagering platform, so if successfully launched it will at the very least offer bettors the opportunity to make and accept bets on races from Monmouth, which is expected to hold live races this year from May until the end of September.
"We're fully on board," Drazin said.
Drazin said that Betfair officials have stated they expect to launch the platform in March. He deferred to Betfair on questions about the availability of signals, but said that he believed some Standardbred tracks have expressed interest in being offered on the site. Handle on Standardbred racing in the U.S. is roughly a tenth of handle on U.S. Thoroughbred racing.
Betfair officials did not immediately respond to requests for comment.
The approval of the license is the culmination of years of effort by Betfair to gain regulatory approval in a U.S. state. Only two states, New Jersey and California, have passed bills approving exchange-wagering since Betfair began lobbying state legislatures to endorse the practice after buying Television Games Network, a U.S. account-wagering provider and horserace broadcasting network, in 2009.
The effort in California to launch a platform has been bogged down by disagreement among Betfair, horsemen, and racetracks over the amount of money the racing industry would receive from the operation's revenue. As currently negotiated, the splits are far lower than the industry receives from bets placed through parimutuel pools. Drazin declined to discuss the business arrangement between Monmouth and Betfair.
Supporters of exchange wagering contend that the practice will reinvigorate interest in racing by offering players a new way to wager on the game, at a price to the player of approximately 5 percent of winnings, compared to existing takeout rates in the parimutuel pools that hover around 20 percent. The service has proved very popular in Britain and Ireland, where bookmaking was an established part of horserace betting markets hundreds of years prior to the advent of exchange wagering.
In addition to matching bets prior to a race being run, the service also allows its customers to post propositions during the running of a race. In the United Kingdom, those propositions can be offered at any time up until the race is declared official, but New Jersey rules will prohibit any in-race betting once the first horse crosses the finish line, Zanzuccki said.
U.S. critics have said they fear the practice could cannibalize the industry's existing parimutuel revenue streams. But Drazin said he believes new gamblers will be drawn to in-race betting, while reserving judgment on the impact of the platform on existing betting through parimutuel win pools and other simple bets.
"The in-race betting, that's something that appeals to young players, to arbitrage types, to Wall Street types," he said. "That's all new money, and that's a good thing. We're going to have to wait for some time to figure out whether the other stuff is cannibalizing the existing revenue streams."
Critics have also said that exchange wagering will introduce widespread suspicion from gamblers over the results of races due to concerns over wagering by insiders on horses that are held in races to cash bets on the platform. Unlike parimutuel betting, exchange wagering allows a person to bet on a single horse to lose, an infinitely easier race-fixing proposition than conspiring to get a single horse to win. The U.S. betting public is far more vocal in voicing suspicions of race rides than gamblers in other countries, and critics contend that even if the suspicions are unfounded, the outcry about race results may do significant damage to U.S. racing's already fragile reputation and stagnant growth rates.
Betfair has countered that it closely monitors wagering on its platforms for suspicious betting patterns and complies with all investigations into possible race-fixing. Zanzuccki said that New Jersey's rules require the company to cooperate with regulators investigating suspicious bets and alert regulators to any activity on the site that could point to race-fixing schemes.
"The Betfair system in Europe is highly scrutinized, and it's probably a more effective system to catch cheaters than we have here," Drazin said.
Zanzuccki said that the New Jersey license prohibits betting on the exchange by robotic programs that are designed to scour the propositions offered on the site and quickly match or propose wagers. Betfair officials have told the commission that 70 percent of its business is generated by the programs, and Zanzuccki said the racing commission may reconsider the prohibition after a study of the robotic programs' existing practices are conducted by an independent consulting group that conducts audits of gambling operations on behalf of state gambling agencies.
Other countries already use exchange wagering to bet our races daily! Screw these guys who say it will cause cheating because cheating is always a possibility and the dummies who think this will make it worse are SUPER STUPID. Volume is the key to making it work!
I am surprised everyone on here is so negative. Even when this style of betting is available you won't have to bet it unless you want to. Also, the takeout will only be 5% instead of 20+% - where's the harm in that. Also, it could make for some awesome public betting opportunities between people who post on here. You know that idiot tommy who posts on his C02 theories? Well I for one would love to be able to give him juicy odds on his pathetic picks. If he wants to advance me his whole paycheck each week why stop him? Change is not bad just because it is new. Why would you not want the chance to earn more $ doing what you love?
race tracks are crazy if they allow BF
If the cut is equal to, or less than existing pari-mutual percentages to Racing then this thing is a loser.
"Zanzuccki said that the New Jersey license prohibits betting on the exchange by robotic programs" that is interesting because Betfair run their own bot....It's called the "cross-bet matching bot". It works under the guise of "helping match bets", but I'd venture to guess it is the ultimate skimmer. If they are given permission to run their own bot, will they pay the tracks a portion of the profits their bot skims? Will Betfair pay tracks a percentage on the "premium charge", a commission that takes up to 60% of gross profits made by winning bettors? I'm guessing the bureaucrats and horsemen in NJ didn't do their due diligence too well. The commission paid to NJ horsemen will be peanuts to the money Betfair take out of circulation via their hidden charges and their bots. I'm all for betting exchanges but this company is nothing more than a wolf in sheep's clothing. They are detested by most of their customers....but unfortunately for those customers, a viable alternative has not come along, yet.
Interesting that 70% of the Betfair betting is from robotic programs. Computers have not just taken over Wall Street, but also high value and volume wagering on racing.
It will be interesting to see the commission levels Betfair charge, and whether successful punters/traders have to pay the 'Premium Charge; , which ranges from 40%-60% of weekly winnings, once u have won a certain amount. Presumably the US exchange will only allow betting on the designated horse racing - but, its not a major stretch, that sports betting might also be added. If this is the case, reems of negotiations will be needed, with each US sports body, and I imagine, some casinos/sportsbooks, will be pretty upset.
Regarding the susceptibility to fixed races.... current North American style trifectas and superfectas already afford more profitability to "stop" a horse than exchange style betting. I don't think people realize that if you take a horse that is, say 5 to 2 odds and have him not win, your return is only 40 cents on each dollar bet against. Take the same "investment" and have the horse stop badly and miss the superfecta, and you will easily double your money if you played a prudent array of tickets that put extra emphasis on other favored horses. Bottom line.... there is always going to be a payoff for fixing horse races if you allow people to bet on them.
This is the death knell for horse racing. In Europe it basically made racing more dishonest. And here with the jockey and trainers colony we have it will be a disaster. Not only will races be fixed but every position will be planed prior .with a strong incentive to have logical horses not hit the board. This sport is already bad enough right now the last thing we need is for jockeys to have an opportunity to bet to loose .
"In addition to matching bets prior to a race being run, the service also allows its customers to post propositions during the running of a race. In the United Kingdom, those propositions can be offered at any time up until the race is declared official, but New Jersey rules will prohibit any in-race betting once the first horse crosses the finish line, Zanzuccki said" Incorrect, Mr Zanzuccki. In the UK, betting is suspended once the first horse crosses the wire. The betting market may be reopend if there is a photo or an inquiry.