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Gambling's interlopers have racing over a barrel

By Robbie Waterhouse
May 14, 2004
I don't envy Australian racing administrators the problem posed by Northern Territory-based corporate bookies such as International Allsports, Centrebet and Sportingbet, and their TAB-based products. The quandary is made worse by the latest TAB, Norfolk Island TAB (, and Betfair (

It's a huge problem because the racing industry is effectively dependent on TAB subsidies to keep going. Reductions in the monopoly position of the three mainstream TABs impact negatively on racing's revenue, which provides prizemoney and makes everything work.

Administrators would like to see the interlopers gone or at least paying substantial fees to racing. While they are operating, on-course punters and bookies are the losers.

Our administrators are trying to extract a fair product fee from these renegades, who contribute nothing to the source of their main products: Sydney and Melbourne racing. Austote and Betfair also pay nothing.

It would be in the interests of all on-course punters and bookmakers, of which I am one, for the administrators to succeed. If we don't control them, the Sydney betting ring and, in turn, Sydney racing, will be the big losers.

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It concerns me that it may well be impossible to stop or fully harness these renegades. They may prove a bit like King Canute's tide by not obeying the king's orders. In my view, racing should decide quickly whether they can be stopped and, if not, find a best-case position.

Difficulties are many.

Take Betfair: owned by Sporting Exchange Ltd, fully licensed and legal in the UK, it operates in about two dozen markets around the world. Australian racing administrators would like the Communications Minister, Daryl Williams,

to make it illegal for Australians to use Betfair, and he is reviewing this. But it is unlikely he will answer racing's call.

Firstly, the Federal Government is committed to National Competition Policy, which demands full competition in virtually all areas. The National Competition Council has criticised governments with exclusive TAB licences for not addressing their obligations in this area.

Moreover, the World Trade Organisation recently made an important decision with probable far-reaching effects for Australia. Two Caribbean countries took the US to court claiming that, by not allowing its citizens to use internet gambling, it was guilty of violating its commitments under the General Agreement on Tariffs and Trade. Canada, the European Union, Japan, Mexico and Chinese Taipei all participated in the hearings. The WTO ruled against the US. No doubt this will make the Australian Government reluctant to pass laws banning betting on Betfair.

The NSW Government has purported to make it illegal for NSW citizens to bet with Betfair. But there will probably never be a prosecution because the law may not hold water as the states can't control activities which partly occur outside their jurisdiction. Lawyers tell me it would be impossible to obtain a conviction.

Racing's best chance to succeed may be under copyright law. Racing intends claiming the field lists and results are original works and are, as such, copyrighted, with unlicensed operators forbidden to use them. But my father, Bill Waterhouse, a retired barrister, quotes a 1937 High Court case (Victoria Park Racing and Recreation Grounds Company Limited v Taylor) which said, in effect, there was no copyright in race fields or results. In that case, Victoria Park couldn't stop Cyril Angles broadcasting on 2UW the races from the roof of a neighbouring property. He was also not stopped from giving official results, scratchings, jockeys etc. So the question is not straightforward.

In the short term, Racing NSW has cracked down on Betfair as best it can, declaring that no licensed person or commission-room punter can access Betfair's internet site. As a direct result Sean Bartholomew, Australia's biggest and most successful punter, has left the racecourse and set up offices off-course. The Sydney betting ring is no longer the focus of his attention. Another top punter is considering his position. This is a big loss for our Sydney betting ring.

Of course, Betfair isn't that easy to ban. Even without using a PC with internet connections, a punter standing in the betting ring with a hand-held Personal Digital Assistant and logged on to (Betfair's Lite site) will receive all the fluctuations in real time. And a call to a Betfair trader will put into effect the punter's instructions.

For my own part, I'd like Betfair to be represented in the Sydney betting ring. I have no doubt that having access to its turnover would be an advantage for punters and track bookmakers. Betfair would not be an overly effective competitor - its net prices (after commissions) are always in excess of 110 per cent.

Similarly, the new Norfolk Island TAB, Austote, is a headache for the mainstream TABs. It is exclusively internet-based, with low costs, charging a takeout rate of less than 5 per cent, compared with the mainstream TABs' 16 per cent or thereabouts. It pays higher dividends and its turnover is already up to about $1 million a week since it started two weeks ago.

This TAB is Australian-based and licensed under the Norfolk Island Assembly. I can't see how it can be stopped unless a copyright argument holds.

The corporate bookmakers are a complex issue. They'd like to be licensed in NSW and would be happy to pay more tax. But they would like to operate as they do in the Territories: 1. Be incorporated as a company; 2. Be able to offer the same odds as or better than the NSW TAB; 3. Have a normal phone system; 4. Bet over the internet.

These seem sensible demands and I agree with them. The Sydney ring would like them, too!

It is interesting to look at other countries faced with similar racing problems.

The UK Government inquired into problems posed by the internet and decided there was no way around the problem. In March 2001 Britain legalised sports betting on the internet to embrace internet gambling. It also abolished the 9 per cent tax on wagers paid by bettors, replacing it with a 15 per cent tax on gross profits to be absorbed by off-site bookmakers in Britain, betting either by internet or telephone. William Hill and other offshore businesses closed and reopened in the UK. Betfair is one of the results. The general consensus is that racing in the UK has improved since this radical move.

Things have evolved differently in the US. Faced with internet and non-internet competition from offshore, individual tracks have chosen to do extraordinary deals resulting in large players receiving huge rebates (up to 14 per cent) from their tote transactions. One Australian-based group is reportedly turning over $200 million annually on US racing, capitalising on these huge rebates. It's said US racing couldn't survive without the rebate players.

The question is: what will optimise racing's position? The clues are here to embrace competition and gain revenue. I hope the punters and the on-course bookmakers aren't forgotten and the Sydney ring is kept at the forefront.

It would be a tragedy for racing to sit on its hands, blaming the non-action of the governments and inadequacy of copyright law, and losing revenue. It should have a plan B, where racing retains its on-course punters and the Sydney betting ring returns to being the betting centre for Sydney racing.