03/31/2008 11:00PM

Losing bet expands reach


TUCSON, Ariz. - It may be comforting to have the luxury of picking your own poison, but it is hardly a long-term consolation.

American racing has many crises to choose from - medication, declining ontrack attendance, wagering integrity, lack of media coverage - but one it has not yet faced directly, and doesn't want to, raised its head last week half a world away.

It is only a matter of time before the issue of betting exchanges reaches these shores as a major issue.

Betfair, the huge and growing English exchange, lurks out there in the dark, and it is not just a bump in the night. It has the potential, if it gains a foothold, of changing the entire dynamic of racing as we know it.

The reason is simple, if not acknowledged: Bettors apparently enjoy using it.

Betfair is a betting exchange - it matches one bettor against another on opposite sides of a game or horse. The bettors agree on odds and the exchange takes a commission from each bet.

The primary danger of betting exchanges is clear. They contravene the very spirit of horse racing and drive a stake into the heart of the game: Winning. The nature of betting exchanges is that one side is betting a horse to win, the other to lose. Betting on horses to lose is not what horse racing is about, regardless of how popular Betfair may try to make it out to be.

Beyond the dangers of cheating lie the dangers of destroying racing as we know it, by eroding its funding. Betting exchanges are short-changers, paying the established institutions of racing a pittance compared to other income streams.

The issue burst into headlines last week 9,000 miles away, when the High Court of Australia ruled unanimously that when Western Australia amended its 54-year-old Betting Control Act to ban Betfair and block bettors's access to it, it was a restraint of national trade and unconstitutional. The court ruled that technology like the Internet, which enables real-time transactions between people in different geographic locations, outweighs state concerns.

Happily and significantly, the court did not say states could not pass rules, as opposed to laws, to regulate the conduct of betting exchanges within their states. But it said Western Australia could not pass laws that prevented people from other states from betting through a betting exchange in its state. To do so, the court said, "placed a discriminatory burden on interstate trade of a protectionist kind."

The decision sent shock waves throughout the country.

The law firm of Clayton Utz in Sydney, analyzing what the decision meant, said the High Court "is going to focus on the economic reality of what is occurring in the modern economy and not permit state-based protections to undermine the development of a national economy."

Bruce Tobin, a spokesman for Tabcorp, Australia's highly progressive and technologically sophisticated offtrack betting operation, said the High Court decision puts funding for racing in Australia at risk, with "state governments rapidly losing control over their wagering markets."

The decision, mandating equal treatment for all betting entities, also likely means that bookmakers now will be able to advertise their services, which they have not been able to do. That could impact both ontrack and TAB handle, but the main danger comes from Betfair itself, which reportedly has proposed paying New South Wales 27 cents of every $100 bet through it, compared to the bookmakers's $1 and TAB's $5.

Betfair spread from England to the Southern Hemisphere when the premier of the island state of Tasmania endorsed the idea, seeing an opportunity for national economic gain, and the hugely wealthy Australian Packer family invested substantially in the company. Betfair's Down Under headquarters are in the Tasmanian capital of Hobart, across the Tasman Sea from the Australian mainland. When it attempted to make the leap to Western Australia, that state passed three amendments to its racing laws. It made operating a betting exchange illegal, betting with one illegal, and publishing past performances without approval illegal as well. Those were the provisions struck down last week by the High Court.

Betfair has appeared at various racing conferences and gatherings in the United States, pleading its case and explaining its workings. So far, it has gotten nowhere, but Packer money is coming to America - a family-owned company bought The Meadows in western Pennsylvania - and it is reasonable to assume new efforts on behalf of Betfair may be forthcoming somewhere down the line.

If they are, it will be interesting to see how American racing reacts. Predictably, it will vehemently oppose the idea. But before it does, it might consider one response from an Australian racing official last week contemplating the Aussie course of action.

"If it looks like something the public embraces," he said, "we'll set up our own service, similar to Betfair."