Supplementary memorandum from Betfair
(DGB 112)
I am writing, as requested, to reiterate
in writing a point made to you privately.
Profits of our customers
Lord Brooke had enquired how many of our customers
make more than the current Capital Gains Tax threshold in a given
year.
Looking at 2003, 1.09 per cent of our active
users made more than £7,900 in profit, including betting
on outcomes to happen and not to happen. Of those who bet exclusively
on outcomes not to happen (that is, the `layers' in the Betfair
sense), only one customer made more than the CGT threshold.
It is important to note that almost all users
regularly bet both on outcomes to happen and not to happen. Just
as you would expect from a competitive market, there is no inherent
advantage on either side. If a user considers the odds available
on a particular outcome occurring to be too generous, he
will take them (ie "back" that outcome in Betfair terminology).
And if a user considers the odds available on that same outcome
not to occur to be too generous, he will take them instead
(ie "lay" that outcome in Betfair terminology). Neither
type of bet can possibly make a user either a "bookmaker"
or a threat to the licensing objectives, and therefore require
him to undergo a fit and proper test, any more than a punter betting
on England not to win with Ladbrokes poses a threat to
the licensing objectives and needs to undergo a fit and proper
test. If this were not the case, and all those opposing an outcome
were deemed to represent a threat and require licensing, then
any two-outcome event would require all backers to be licensed
as well: anyone betting that one of the outcomes will happen is
also by definition betting that the other outcome won't.
One thing we cannot determine, of course, is
what the overall profit and loss of customers is, taking into
account the fact that we are often used as a hedging tool. A customer
who is profitable with us may have a net loss on his betting activity,
just as one who appears to be losing money to us may be very successful.
Many of our customers will look to arbitrage prices between bookmakers,
and may bet with William Hill that an outcome happens, and with
us that it does not—or vice-versa. In that instance, the
customer might show a profit with us and a loss elsewhere, but
it is obviously the net position that is of interest to you. It
also goes without saying that one year's performance is not an
indication of future profit.
Inside knowledge
On a separate point, I enclose a clipping from
the Racing Post from Tuesday 10th February. It relates
to the concern that some have that the public might bet with people
`in the know' when they bet on an exchange.
You will obviously be aware of our view that
there is no bigger insider than a bookmaker: it is a bookmaker's
business to make sure he is finding out information which
is not available to the general public, and all the exchange does
is allow everyone to seek the best information possible in the
most transparent environment. The quote from SkyBet's rugby-odds
compiler, Mike Triffitt, illustrates that point clearly. After
making one player the heavy odds-on favourite for the outcome
of a bet (and, unfortunately for his company, being proved wrong),
he says: "I thought Barkley was an absolute certainty.
I will have to have a word with my contacts."
February 2004
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