Any lawyer worth his or her salt knows better than to use the ambiguous “by” when specifying a deadline. The CFTC should have said, “Comments must be received before July 8, 2008.” Thanks to its poor drafting, I rushed my comment out the door, missed the chance to get lots of new signatures, and wasted time swapping emails with various people equally confounded about what the CFTC meant.

Sigh. And to think that some people hope the CFTC will assert jurisdiction over prediction markets and clarify their legality under U.S. law! If the CFTC cannot get even something so routine as specifying a deadline right, I shudder to think what sort of confusion it might impose on prediction markets.

[Crossposted at Agoraphilia and Midas Oracle.]

In the Fallon case (an Irish jockey suspected of collusion with some bettors), the British police investigated the incidents. BetFair provided testimony. But the British justice decided that mister Fallon shouldn’t be convicted.

This week, the British police aired an internal report about why they lost the case —their fault, they write. I won’t analyze the full case on Midas Oracle, but I just want to touch 2 things:

1. The Times (of London) says that “any prosecution based on race-reading, that is proving a motive by [analyzing] a jockey’s ride, is doomed because it is open to so many interpretations.”
2. The British Police “had an inadequate understanding of the nature of online betting exchanges and the process of laying a horse to lose, the mechanism by which the defendants were alleged to have attempted to profit from fixed races.”

This second point was very clear during the trial, and the media reported, at the time, that BetFair didn’t do a good job in making sure that the Police would understand all the facts and mechanisms involved. Below are the media excerpts that make that case.

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The Guardian:

[...] [Acting detective inspector Mark Manning] began his investigation by visiting the offices of Betfair, the company through which the bets involved in the case were made. He was told that Fallon’s fellow defendant Miles Rodgers had risked a total of £2m, but Manning misunderstood and left with the belief that Rodgers had made a net profit of that amount. By the time the trial opened more than three years later, it had become clear that Rodgers had made a net loss of over £250,000 on the races concerned. [...]

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The Guardian:

[...] In part, the fault is Betfair’s, for failing to ensure that police investigators understood the meaning of the complex evidence they provided, and for passing pages of irrelevant data to the Crown that provided one of many early embarrassments for the prosecution. [...]

The senior detective in charge of the investigation, Mark Manning, had met [Betfair lawyer David O'Reilly] at Betfair’s offices earlier that year [in 2004]. Manning left with a fundamental misunderstanding – that Rodgers had made a net profit of £2m from his betting activities, when in fact this was the total amount that had been risked. By the time the trial began, it had become clear that the accounts controlled by Rodgers had in fact made a net loss of more than £250,000 on the 27 races investigated.

Betfair provided more than 300 pages of data in evidence, showing the betting activities of Rodgers’ accounts on these 27 races. O’Reilly, the first witness called, claimed in court that this data showed how Rodgers would take bets on certain horses at much bigger odds than were being offered by anyone else. Under cross-examination, however, O’Reilly was led to the realisation that the Betfair data for eight of the 27 races included details of bets made after the race had started, at which point larger odds could be justified by mid-race developments. Observers were shocked that Betfair could have made such a blunder in handling its own data.

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The father of one of the accused (and now cleared) jockey:

The man from Betfair admitted at the start of the trial he had misled police as to the amounts that had been gambled and then they brought in an expert witness from Australia [Ray Murrihy, Racing NSW's chief steward] who doesn’t know how things work here [in the U.K.].

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Daily Mail:

The case highlighted the difficulty of proving, forensically and legally, that a jockey has tried and succeeded in stopping a horse from winning.

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BBC News:

[...] At the end of the day, serious questions will be asked of both City of London Police and the Crown Prosecution Service as to why they agreed to proceed with a case that was so flawed and had little chance of success.

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International Leaders in Sport conference, Auckland, New Zealand. April 3-4th 2008.
Keynote speech, April 4th. Mark Davies, Betfair.

“New Understandings in Sports Betting”

Minister, ladies and gentlemen… Thank you very much for your kind invitation to speak to you today. I have once before been asked by sport to address it, as a member of the bookmaking industry, and it was apparent when I got there that they expected me to tell them that sport was their business, and making money out of it was ours. I can tell you that those who spoke to me afterwards said that they left the conference surprised to hear that a bookmaking operation could hold views so different from what they expected. I hope to be able to break down a few perceptions today.

A number of perceptions have grown in recent years in relation to betting and sport which I believe are completely false and misleading, the first of which is that sport suddenly has a new problem as a result of sports betting on the internet.

Betfair is at the forefront of this debate for one very good reason. When we launched the business back in 2000, we did so under the bold slogan “revolutionizing betting”. By that, we meant not just that we planned to revolutionise the experience for the customer, by allowing him better choice, better value, and – for the first time – control over what he did; but, crucially, that we were going to transform the way that betting worked with regulators, both in the sport and government sphere.

The basis of our model was the business that the founding team had come from, in the main, which was the business of finance. I used to trade bonds at JPMorgan, and I can tell you that what our customers do is exactly the same as what I used to do in my previous life, with the single exception that where I had to pore over balance sheets and income statements, they pore over form and team-sheets. It could be argued – indeed, it has been – that they will therefore know a great deal more about the underlying mechanics of their markets than I ever knew of mine; but the principles are exactly the same. You express a view of value about a given outcome or a given currently-traded market price about an outcome. The extent to which this is true was really brought home to me when I was asked to speak at the Swiss Futures and Options Association’s annual gathering at Birkenstock – you can see I get all the good gigs – which was attended by all the leading exchanges of the world: The Chicago Board of Trade; the Swedish stock exchange, whose platform powers another eleven stock exchanges worldwide, the London Clearing House and representatives of the LSE, Nasdaq, and many more. My presence there was an irritation to many: what place had a sports betting exchange at such an event, people wanted to know. But by the end, they were so ready to accept that what happens in the sports betting world and what happens in their world is actually identical that they wanted to know why we weren’t taxed on the same basis.

So we came to the sports betting market saying this: why is it so opaque? And by that, we didn’t mean just, “why is it not clear what the customer is charged?” but “why doesn’t anyone know who is betting? The City had gone through the Big Bang in 1987: the sports betting market was continuing to exist as it had done for most of its legal history: with the power in the hands of a few, and everyone else ignorant of what was going on.

We sought to change that, and at first, people welcomed it. But the more successful we became as a company, the more people – led to a large extent by our commercial competitors – started to change their tune, for a very simple reason: that with transparency came issues which people had never been able to see clearly, and so had always wanted to believe didn’t really exist.

Before I go on, I want to give you a couple of analogies.

The first is perhaps a little high-brow. In his philosophical work Being and Nothingness, the French author Jean-Paul Sartre debates whether anything actually happens if we aren’t there to see it. The example he gives is of a tree falling in a forest. How can we know, he says, that the tree actually fell, unless we saw it happen? Just by virtue of seeing it lying down rather than standing up, he says, we assume it has fallen over. It is an absurdist argument which exists to enable philosophical theorising; but everyone would accept that in reality, you don’t need to witness something to be able to acknowledge that it has happened.

The second analogy is rather closer to home. As I understand it, the speed limit in this country is 100km/h. I would imagine that it was long-suspected that people broke this limit, particularly on the main highway. People observing cars drive past would have had a perception of this, but no evidence for it. Then, one day, someone came up with the idea of a speed camera, and a number were installed. The following week, a number of cars would have been recorded as speeding. Would anyone seriously suggest that what caused the cars to speed was the camera? It is self-evident that the camera did nothing but produce the proof of an existing fact.

The reason for these analogies is this: in recent years, there has been a growing clamour from the media and from sport that there is more corruption today than there ever was, and the cause of it is betting. In same cases, they even claim that the cause of it is Betfair, on the grounds that you will find very few corruption stories in the last seven years that do not mention Betfair, which has led some to argue that if the words ‘Betfair’ and ‘corruption’ appear in the same paragraph, that must somehow be evidence of the fact that Betfair is the cause, and corruption the effect.

Betfair takes a very different view. Our view is that we are the speed camera, showing you something that you never knew was there. We are shining a light into the darkness, and people give us a hard time for having a torch.

Why do we think that? Because the level of transparency which Betfair has brought to the sports industry is unprecedented. Every single bet placed on Betfair is recorded, to the second. Every click of your mouse; every movement of funds in and out of your account – we know where it has come from, and we know where it is going. As I mentioned, we brought financial markets best practice to the sports betting market. We came into a world that was entirely opaque, and made it entirely transparent. If there was anything hiding in the murk, it can now be seen.

An interesting example of this came in August last year, when a match at the Poland Open in Sopot between Nikolai Davydenko and Martin Arguello-Vasallo raised eyebrows, when Arguello won by default after Davydenko withdrew while leading. You cannot fail to have read about this: not an article about tennis and the ATP now appears without mentioning it. It was all over the press not just for days, but for weeks; and it continues to be brought up, as the ATP’s investigation into what happens continues.

Now, there are a number of things to note about this incident. The first is how it came to light. As I mentioned, we are fully aware of all the betting details on Betfair; but what I didn’t mention is that everyone looking at the site can see bets betting placed, and can see the prices moving in a free market. The 40 or 50,000 pairs of our customers’ eyes that we have on our markets at any one time can all see exactly what is happening to the odds. And our forum allows sports punters to discuss what they can see.

Davydenko’s lawyer criticised Betfair for having sought publicity from the incident but the reality is that we were called by the media, not the other way around; and the reason for that was that what was happening was in the public domain. Everyone on our site could see that the World Number 4 had started at $1.20 and moved out by the end of the first set to $2.28, even though he won it with no apparent difficulty, and was paying $3.75 after losing the opening game of the second set on his serve. And well before he actually pulled out through injury, hundreds of people on our forum were speculating that he must be about to pull out.

I cast no aspersions here: it is entirely possible that the player was carrying an injury and some group of people were aware of the fact. There is no consistent rule across sports, as things stand, against insider trading- the rights and wrongs of which can be debated later perhaps, but it might be worth me mentioning as an aside that we don’t make the rules; we just help to enforce them once they have been made. So I am not suggesting that the match was corrupt. We, as a company, made a decision to void the bets on it, because we felt that the betting itself was not fair. It was clear to us that the betting was leading events, and not the other way around. But I would also mention here that another fallacy of this position was that it served us to do so. A number of people commented at the time that it is all very easy for a bookie to void bets when a result is going against him. But this misunderstands the whole business proposition we have: we are set up like a stock exchange, matching up supply and demand, and taking a cut in the middle. This means that we have no exposure to the result, or, to put it another way, we don’t care who wins. We make money if the event happens, regardless of the outcome, and we make no money if the event is voided. It is also worth mentioning, as an aside, that while many were crying foul about the movement in prices, we also, of course, had full access to the information as to who was betting. The complete audit trail created by our systems and our Know Your Customer checks mean that we know exactly who was behind the bets.

So, we voided the market, at a cost to us. But what happened next is perhaps the most striking of all. One after another, big players around the world came out and said that they had been approached to throw matches. One after the other, they said that they knew of players who had, or had themselves, been offered money by people who wanted them to rig the result. In several instances, these offers were made before the advent of internet-based sports betting.

Now, for me, the big question is, Why did it take a company that stands for transparency to make a stand before anyone mentioned that there was a problem? If we had not voided the bets on the match, would tennis be better or worse off? Is it helpful to know if you have a problem, or would you rather remain ignorant of it until it kills you?

The answer, with some in sport, would appear to be the latter. One sporting body, unconnected with this case, which we approached with a view to signing an information-sharing agreement, actually told us directly that they didn’t want information because they were frightened about the level of corruption it would reveal. Time and again, since the Poland Open, we have been told (although not by the ATP, I should add, who were among the first to embrace the information-sharing agreements we have pioneered) that we are causing sport a problem that didn’t previously exist. And yet, the evidence is there for all to see: we made our stand after people had been approached. Once we made our stand, people started to come out and talk about things. And yet a sizeable number of people want to return to where we were before we blew the whistle.

The reality of this point of view is that it is childish. Corruption is something that no-one here wants to see, and every one of us wishes didn’t exist. But it does exist. And, we cannot, like children confronted by a monster, hope that if we close our eyes, the monster will disappear. Even less can we credibly say that all the time we were sitting with our eyes shut, the monster that stood before us wasn’t there, and that it was only the person that told us to open our eyes that put it there.

The nature of sport is that it produces clear-cut results, and where there are clear-cut results, there is money to be made speculating on the outcome. This, again, is a basic truth. You may not like the fact that for some people, this is the sport; and I accept that for many, in a perfect world we would simply have no betting at all. Some sports bodies still struggle to accept just how great the demand for betting is. For example, I went to talk to the IOC about betting about eighteen months ago, and they, in line with many others I have met (to be fair to them) were totally incredulous that anyone would want to bet on who would win the 100metres in Beijing. Again, I accept that this is not the Olympic ideal, but it is a fact that they do, and rather than close our eyes to the fact, we should work with it. Because the reality, strange as it may seem, is that for many people, having a bet on the 100metres final retains their interest. If that hundred metres final comprises six Americans, a Jamaican and a Cuban, there will be plenty of people won’t give a monkey’s who wins it, unless they have had a bet to make them feel involved.

Again, I accept that this is not what sports bodies might want in a perfect world. But we don’t live in a perfect world. And if you want to live in the real world, you have to accept that there are plenty of people with strong opinions who want to express them through a bet. Plenty of people don’t accept this. Just this week, the coach of the Brisbane Lions AFL team, Leigh Matthews, showed that he is among those who don’t. Described as “certainly neither a wowser nor a saint, and having no intention of ever becoming either”, Matthews is a four-time premiership coach and was named Player of the 20th Century. He told a press conference just a few days ago that the Australian Football League should sever all ties with the bookmaking industry. Let me quote him: “The one thing that really annoys me is any thought that whatever we do as a game has something to do with people betting on it. I hate that,” he said. “I would prefer that nobody bet on the AFL. Then all innuendo would not exist. It’s one of the unfortunate progressions in the evolution of the world that betting agencies now bet on everything. I think that’s really unhealthy, really unsavoury and really unfortunate.”

As I say, I can understand this view in the ideal: he would rather no-one bet on the sport. But what I do not accept is that betting companies offering bets on the sport is what makes people bet on it. If the legal betting companies offer bets on the sport, it is because there is demand for bets on the sport – and if that demand were not offered in a regulated environment, it would be filled in an unregulated one. So while I do not argue with Matthews’ picture of the ideal, I struggle with the argument that he follows it up with. Again, let me quote him directly: “I think [the AFL] should say to the betting companies `you want to bet on the footy, fine, but don’t include us. Don’t ask us to have rules and regulations that pander to people who might want to bet on a game.”

For me, this view is absurd. It is essential that there are rules in place, and essential that there is a mechanism for those rules to be upheld. The AFL’s own experience of having named information of who is betting on its sport has been that it has been able to help players with addictions, and drive out a problem which could, unchecked, lead to corruption. Having no rules or no means of enforcing them is precisely what leads to problems – not just here but in any walk of life. And yet Matthews’ criticism was taken up by the press. They argue that when people were caught breaking the AFL’s rules preventing players betting as a direct result of the agreement the AFL signed, the sport was shown in a poor light. It wasn’t the fact that rules were being broken that was troubling, but the fact that it had become apparent. It should, wrote one commentator, be all about perception, rather than reality. In other words, it would be better to sweep things under the carpet.

I think, in contrast, that we should accept that the demand of people to be able to bet on a clear-cut result is a fundamental reality, and in itself is not a problem. The trouble is that where there is money to be made, there are also people who would seek to corrupt. Sadly, this, too, is a basic reality of the world we live in. So we must protect against corruption, which means having rules and regulations in place, and a proper means of policing them.

The idea that corruption must be rooted out is uncontentious. The question is simply how we do it. In my view, agreement on this is hindered because many people think that betting causes corruption. But betting in itself is not corrupt. Corrupt betting is corrupt, but corrupt betting is not really betting at all, by definition: it is merely getting guaranteed financial reward through securing a fixed outcome, which isn’t the same as backing your analysis of a given contest and speculating on the chances of a particular outcome at all. In other words, the key part of the phrase ‘corrupt betting’ is not the betting part, but the adjective that precedes it: or to put it another way, corruption is corruption, through whatever channel it happens to manifest itself.

This is an important point, because the first thing that must be done if the battle against corruption is to be won is to work out who is on whose side here, and what tools we have to fight with. At the moment, the perception exists in sport that betting is the cause, rather than on occasions (and by no means on all occasions) a facilitator, and the inevitable next step in sport’s logic is to blame the betting companies for their problems. And this means that we have a fundamental issue, because the betting companies – by which I mean the legal, regulated, and co-operative betting companies – are actually a tool in the fight.

You can accept that betting for betting’s sake is not in itself the problem, and that 99% of people who make money out of the sporting result, through betting on it, would never consider affecting that result to suit. But that still leaves us with an issue: using the money being generated by that 99% of people to make money out of a corruptly fixed result clearly is a problem. But here we must consider what added ingredient is needed to allow someone to do that – to turn betting from a pastime into a facilitator for corruption. Put simply, “How do you corrupt?”

If you or I decide we want to rig the outcome of a horserace, or a rugby match, or any other sporting event, it isn’t immediately apparent how we would do it sitting here. We can very easily have a bet right here, and right now, on almost any sporting event taking place in the world at the moment; but what we can’t do, sitting here, by ourselves, is affect the outcome. For that, we need the collaboration of the people involved.

Now, there’s a story about Winston Churchill which goes something like this. Winston Churchill, apparently a few the worse for wear – as was his wont – allegedly once approached a lady and asked her if she would be prepared to sleep with him for £1million. She thought about it for a moment, and said she would. He then asked her if she would be prepared to sleep with him for a tenner, and she was horrified. “What do you think I am?” she exclaimed. “Madam,” he replied, “we have established what you are. We are now just negotiating the price.”

As was true of Winston and his target, so is true of sportsmen and corruptors. When I talk to people about corruption in sport, and protest at the idea that internet betting in particular has increased corruption just because the sums of money involved are that much greater, I think of that story about Winston Churchill. Because as far as I am concerned, either you can be corrupted, or you can’t. If you can’t bribe a sportsman or a group of sportsmen to rig a result, then you can’t get a result fixed. And what that means is that the heart of the problem in the issue of corruption in sport is not betting, but is sportsmen willing to be bought.

I realise that pointing the finger at sport, from what appears to be the betting side of the fence, might seem somewhat inflammatory. But the most important point I want to make is that when we consider whose side of the fence is whose, we are currently getting it absolutely wrong. The betting industry doesn’t want bad apples as customers any more than the sports industry wants bad apples participating; and just as more than 99% of your participants are clean, so are more than 99% of ours. Our less than 1% can do the buying; your less than 1% can deliver the goods. The challenge for us both is to rid ourselves of the 1%, and the best way to do that is to work together.

Put another way, the simple fact of the matter is this: if we are to draw a line – not to say dig a bloody great big trench – between sport and corruption, as obviously we must, then the first and most important thing is to understand that the legal betting industry is on the same side of that line as the sports industry. And I say this not just because it serves our purpose for sport to be clean, although it does: if people don’t have confidence in the fairness of the result, they will not bet. I say it because we were set up as a business philosophically because we are lovers of sport. And, having set up something which was designed, in part, to bring complete transparency to the market; and then having set out our stall to share information with sports to help them deal with problems that exist, it has been extremely frustrating to find ourselves attacked as if we are the cause of the problems. If ever there was a case of shooting the messenger, this is it.

In fact, the finger pointing from sport to betting, and to Betfair in particular, has been so great that there are calls around the world for betting to pay sport, because sport now has to deal with integrity issues which betting has caused. Let me say straight up that Betfair has never been against paying sport on the basis of a commercial agreement which recognises that sport is putting on a show and Betfair is benefitting from that. This is not the same as saying that sport ‘owns’ the product, but it simply recognises that there ought to be a symbiotic relationship between the two industries. And we are not suddenly coming to this party under pressure: I spoke at the Sport Accord conference in Madrid in 2003 and told the 80 or so delegates there from sports bodies all round the world that the two things they should expect from a bookmaker in the 21st century were information about what betting was taking place on their matches, to allow them to police their sport better; and a financial contribution to acknowledge that they were putting on the show. But I do have a fundamental problem with betting being asked to pay to ‘clean up’ something that exists whether they are there are not. The integrity of sport is the domain of sport, whether Betfair, or Ladbrokes, or any other betting company in the world exists or not.

In fact, I would go further than that. Imagine a world where bookmaking is illegal. Take Betfair, and Ladbrokes, and William Hill, and everyone else you care to mention, and close them all down. What happens to sport’s problem then? Does it go away, stay the same, or get bigger? Clearly, it gets bigger – and if you doubt that, let me give you two reasons why.

The first is best exemplified by Hansie Cronje. No-one in New Zealand will be unaware of the scandals that affected the world of cricket in the late 1990s – an era, incidentally, which preceded internet betting, and in which cricket was not alone in experiencing problems: floodlights went off in top-flight UK football matches for reasons which at first were not apparent. Talk to the ICC about those times in cricket and they will readily acknowledge that their problems came from the Indian sub-continent, where – no surprises – bookmaking is illegal. And the source of floodlight failures, too, was eventually traced to Far Eastern illegal betting syndicates, but only because someone was eventually caught red-handed with his hands more or less on the switch.

The second reason is this: tell me why betting was legalised and regulated in the first place, if it wasn’t that it existed illegally and unregulated, and if, being illegal and unregulated, it was not seen to be causing problems which could not be dealt with? The whole basis of regulation is that regulating makes it more difficult to corrupt.

Betfair took the level of regulation a significant step further. I have already talked about our audit trail, but what I didn’t mention was that any sports regulatory body in the world can have the information gathered by that audit trail from us, free of charge. In fact, we can deliver it, via our Bet Monitor technology, in real time – as Stewards not so very far away in Victoria will tell you. In other words, we are providing, without any obligation, information which would otherwise be unknown about betting that is taking place all over the world – information which makes it easier to know what is happening, not harder. And it seems to me that asking the legal, regulated betting market to pay to clean up problems of integrity in sport is like approaching a High Street pharmacy and asking it to pay for the fight against cocaine-smuggling on the grounds that their business is in drugs. The difference between the legal, regulated market and the illegal market is the difference between chalk and cheese. And asking Betfair, or any other well-regulated, well-run global brand, to pay for problems which are seen to originate in the murky world of unregulated, illegal, bookmaking seems to me to be entirely missing the point.

To illustrate my point a little further, here’s the page from Wikipedia on match-fixing. You will see if you look at it more closely that it claims that cheating on sport started with the Ancient Olympics, and with battles between gladiators. When I once mentioned this on a radio interview, I was taken to task over it by a journalist from a British national newspaper, the Guardian, who accused me of being disingenuous. The amount of match-fixing today, he said, was of a completely different proportion, and the sums of money involved were much greater.

Even aside from my story about Winston Churchill, I would take issue with that. First of all, on what empirical grounds can anyone justifiably claim that there is more match-fixing today than there was before? Isn’t the perception that there is simply born of the fact that we can see it better today than we could a decade ago? Are there more diseases these days, or do we just diagnose them better?

To go back to my earlier analogy, are there more speeding cars, or are we now in a position to clock them? Did people start taking drugs to improve their sporting performances the week after drugs testing came in, or were they taking them before we had tests, and just doing so undetected? Was Jacques Rogge, the President of the IOC, justified when he commented during the Athens Olympic that, “Each positive test is a blessing for us because it’s eliminating the cheats and protecting the clean athletes. The more we find, the better.” I would say absolutely he was.

In truth, the basic fact is that it is simply not possible to make any judgment whatsoever on what the level of corruption in sport was before we had a means of tracking it, just as it is impossible to know how many athletes in the past used performance-enhancers to bring them medals. We might think that in a bye-gone era, the world was a nobler place; and on the whole, we might be right. But if the Chicago White Sox were throwing the World Series in 1919, and Liverpool and Manchester United were colluding over a result in 1915 – on that occasion, not for a betting return, incidentally, but to ensure survival in the top division at the expense of Chelsea, who consequently went down – and if these are scandals we happen to know about because someone happened to sing about them, then how can we possibly make a judgment about the bigger picture?

The challenge now is to take the attitude that Jacques Rogge has to drugs testing and apply it to betting, not being fearful of instances we find to occur, but to be confident that transparency is rooting out the corruption and tipping the risk/reward ratio dramatically in favour of the regulator and away from the corruptor. For that, we first need to draw on another of Mr. Rogge’s pronouncements in Greece. “You have 10,500 athletes in the Olympic village,” he told the world’s press. “You do not have 10,500 saints. You will always have cheats.” We have to acknowledge that the only people who can corrupt sport are the players, and we have to educate those players about how they will be caught and how they will lose their livelihoods and their reputations when they are. And to do that, we first need to educate sport about how they can do the catching: the only way to know whether players are corrupted is to have the names of the people behind the bets, and then use forensic analysis to make the often easy links between the bettors and the participants. Any attempts to look at the betting quantum and make judgments on it are absolutely doomed to failure, and the only people who will gain anything from doing so are the media. So sport needs to put itself in a position where it has access to named information, wherever it can get it. If it is not doing that, it is not using the tools available. I find it amazing that any sporting body would turn down named information from a betting operator willing to provide it with no strings attached, and yet, from the top down, there are plenty who do.

Don’t get me wrong. I am not trying to suggest that sport is riddled with corruption. I am an optimist, and I hope and expect, like everyone here, that 99.9% of sport is played for the Corinthian ideal of winning. But it is clear that sports – perhaps because they are being told so by the media – now feel that they have a problem which they feel they didn’t have before. The immediate reaction is to point the finger, rather than take steps to do something to tighten regulation in a manner which perhaps should have happened years ago, and it is not difficult to see why this has happened. It is easy enough to make what appears at first a logical jump: betting has increased; corruption has become apparent; therefore betting is causing corruption. It’s like saying, “it’s raining, and I don’t have an umbrella, therefore I will inevitably get wet”.

But what if it’s pointed out that there is no reason for you to go outside? Suddenly, the argument falls apart. And what if you understand that the increase in betting has moved in parallel with the increase in transparency? Suddenly, the logic doesn’t hold there either. But that growth in transparency of betting has led people to believe that there has been a growth of corruption, and the result is that sport is setting itself against the very people it should be working with. Again, I can understand how this is happening. Many in sports regulation genuinely don’t see that this problem is not new, like a patient diagnosed with cancer who insists that he felt fine yesterday and still feels fine today. But understanding why we are where we are doesn’t mean we should continue to plough the same furrow. We have to get out of it before we dig it so deep that we’ll never be able to do so. As a first step, that means understanding that transparency is not to be feared, and the people who bring it should not be resisted and looked at suspiciously. And second – away from words and onto concrete actions – it means sport starting to use the tools provided for them by betting operators who want to work in partnership, which would make it easier to combat the problems facing them than any other measure. Use the audit trail, link betting to names, and root corruption out of sport.

Understanding this, and acting on it, would allow sport to make the most of the commercial advantages that the betting market brings. I am not talking specifically about betting companies paying them directly for commercial agreements, although that is precisely what Betfair is doing voluntarily in Australia with the AFL, NRL, and cricket among others; we have done it with British greyhounds, and Irish horseracing; and we have committed to doing it elsewhere. I am also not talking about sponsorships coming from the betting companies, although it is interesting to note that just last week, Reinhard Rauball, the President of the Bundesliga in Germany, affirmed that the ban on foreign gambling advertisements would cost German football between €100 million and €300 million every year in lost revenues. I understand that even if we got to the point where regulators and betting operators were working in partnership to stop corruption, many sports would prefer to keep at arms length from betting companies in other areas, and I fully respect that. Rather, I am referring to the notion that betting plays a significant role in helping sports to internationalise their marketplaces, and ultimately, we now all compete in the global village.

In other words, although sports today recognize that they need to embrace a modern, global audience, they spend a lot of time working against the very sorts of organizations which might help it to achieve one.

Let me give you an example. There is a racing newsletter published in Australia called BetAngel. It is dedicated to a whole new audience who, since the arrival of Betfair, trade the sports markets as if they were the financial markets. Their March edition began with the words, “Wind back nearly eight years ago, when Betfair started and I joined them, I had no idea what Cheltenham was all about” – before going on, for eleven pages, to lay out the best strategies for punting on Britain’s premier Jumps Racing festival. In a similar vein, Betfair this year had e-mails from all over the world eulogising about the up-to-the-minute coverage and ideas being distributed far and wide by Betfair Radio on that same Cheltenham Festival – from Cyprus, Belgium, India, Singapore and – yes – New Zealand. The extent to which we are broadening the appeal of British horseracing is incontestable if you look at our international audience and the 85 or so countries from which we list customers. By virtue of the mechanism by which we pay to British racing a percentage of the profits which we achieve on British racing, it is fair to say that today money is coming in from the four corners of the earth which just a few years ago was staying firmly put.

Betfair is committed to paying sports bodies a percentage of the profits achieved on betting on events run under their jurisdiction. But if the betting markets continue to be seen as a problem, then they cannot at the same time be seen as an opportunity, and sports worldwide cannot make the most of that commitment. In contrast, if we could get sports administrators to realise that we do not threaten their integrity in a regulated and open environment; if we could get them to work with us, on commercial terms, and not against us; if we could get them to understand that the utopian world of no betting on sport is exactly that – utopian – and that the sensible thing is to work with the regulated market to ensure maximum transparency and minimum outlets for those would corrupt; if we could do all these things, then it wouldn’t be a question of sport putting on the show and the betting industry benefitting. It would be a question of sport broadening and maintaining its audience; of sharing in the first derivative market which stems from it – the betting market; and of the two industries working together to ensure that every tool is used to keep both the underlying commodity and the derivative market clean.

So I am here today to try to give you a new understanding of sports betting. I want you to understand that as far as we at Betfair are concerned, the regulated betting industry today is not some backwater of corruption in smoke-filled rooms, but a modern leisure industry which engages its customers and allows them to get involved on a participatory level that enhances their enjoyment; that it is an industry which harnesses those customers, and wants to do so in partnership with sport rather than at the expense of sport; that what sport today should expect from a modern bookmaking operator, as I told Sport Accord back in 2003, is a financial return which recognises that sport is putting on the show and seeks to demonstrate the good faith that leads to partnerships that leads to everyone growing the cake; and – entirely unconnected with any commercial agreement – they should expect information on what betting is taking place on their product, and – and I cannot over-emphasize this enough – by whom, in order to allow it to fulfil its role of policing the sport.

There are plenty of issues facing sport today, as there always will be. But feeling it has to fight betting should simply not be one of them. Sport has to fight corruption, using every tool it can; and the betting companies, who also, like the sports bodies, have brand names to defend; and, in a way that sports do not, more often than not have market values and share prices to protect, have to fight it too. So in conclusion, let me say it one more time: the legal and regulated betting companies around the world want to work with sport, not against it. But they need sports to recognise that it isn’t betting that causes problems, but corruption. I hope we can fight it together.

Thank you.

Mark Davies of BetFair

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Mark Davies (Managing Director of Corporate Affairs of BetFair)

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The best text that I have ever read about sports betting.

It’s that kind of speech that the US Congress should hear.

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The Winston Churchill joke was lame.

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Took me like one hour to read it in full, but every sentence was worth my effort.

All the issues he raised were known to me, but it was fine to see them all gathered in one place.

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I’m still persuaded that the Winston Churchill joke was lame.

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Andrew Black:

We moved in last Thursday – I couldn’t be there in the morning as I had to go to court to face up to a speeding infringement. It didn’t go well – I picked up four points and lost my licence [driving license] for six months as it took me over 12 points. If the offence had been one day later I’d have been alright – I had three points on 30 July 2004 and this offence was on 29 July 2007. Of the four offences on my licence three were on roads where the speed limit has been reduced in recent years. Two were on the A3 where the speed limit goes 70, 50, 40, 30 with the road hardly changing at all until you get to the 30mph section.

I’m not happy about it. I’ve been driving for 26 years picking up next to no points and no accidents. I haven’t changed, it’s the law and the way it’s being enforced that’s changed. Any number of good drivers I know have picked up points in recent times, including my mother-in-law who has just picked up the first points of her life at the age of 75 for driving at 34 mph over Barnes Common, a completely open stretch of land.

I was particularly irritated by the rationale of the ban. I have four children at two different schools – it’s impossible for one person to drop them off at the right times. The farm is well off the beaten track – it’s a ten minute walk to get to the edge of my land and the postman, paper boy and bin men won’t come down to the house as it’s too far. In court they spent a while asking about my business and the state of my finances – I’d hoped they would let me off with a fine, but they banned me because (or so it seemed) I could afford a driver. My lawyer suggested beforehand that they would do this – basically I was discriminated against on account of my wealth.

English laws are so unfair to billionaires. I suggest he calls in Steve “White Knight” Roman.

The biggest problem with people assessing the “success” of most prediction markets is that most people have problems understanding probabilities. If every [favorite] won, the market would actually be pretty inaccurate! Sports bettors understand this, but when it’s applied to other fields journalists and others tend to forget about it. I’ve written more about the phenomenon here. I agree that InTrade would likely be even better if the market had more people participating, but that doesn’t make it inaccurate.

Tyler Cowen:

[...] de facto limits on the size of effective bets are the biggest problem hindering effective price discovery. [...]

Via Barry Ritholtz, David Leonhard:

[...] Then there is Mr. Ravitch, a 27-year-old lawyer turned poker player whose previous claim to fame was his role in exposing an online-poker cheating scandal. In late December, he started posting notes on an Internet message board vowing to profit from what he saw as Intrade’s blatant inefficiencies. He has generally been announcing his trades as he makes them, and most of them have paid off. In the span of just six weeks, he says, he has earned a 35 percent return. “I believe quite simply that the people who are trading on Intrade and the methods they’re using are so flawed that they can’t be right in the long run,” he told me. [...] But that’s why the existence of people like Mr. Ravitch is so welcome. As more traders try to exploit Intrade’s inefficiencies, those inefficiencies will become rarer and rarer. [...]

Zubin Jelveh talks back to David Leonhard.

Related: Felix Salmon talks back to Justin Wolfers.

As of today, Larry Craig is still a member of the US Senate, till November 2008. He did not resigned. What happened, from his first statement highlighted in the first sentence above, is that he later changed his mind —which we are all entitled to do under any Constitution, of course.

To say “I intent to” means nothing, as Larry Craig said privately to his lawyer, and as veteran Tim Russert knows too well:

MR. RUSSERT: If, if you do not win the Republican nomination for president, will you run as an independent in 2008?

REP. PAUL: I have no intention to do that.

MR. RUSSERT: Absolute promise.

REP. PAUL: I have no intention of doing that.

MR. RUSSERT: Well, but “no intention” is a wiggle word.

REP. PAUL: Well, OK, I deserve one wiggle now and then, Tim. I mean, what the devil…

MR. RUSSERT: So no–so no Shermanesque statement.

REP. PAUL: You know, I…

MR. RUSSERT: “I will not run as an independent.”

REP. PAUL: Well, I can be pretty darned sure that I have no intention, no plans of doing it, and that’s about 99.9 percent. I don’t like people who are such absolutists, “I will never do this, or I will win, I’m going to come in first.” I don’t like those absolutists terms in politics.

MR. RUSSERT: But the door’s open a little bit.

REP. PAUL: Not very much. It really isn’t. I, I don’t–Tim, we just raised $10 million in two days. We haven’t even had a race, we have February 5th coming up. We have a campaign to run. Why–do you ask all the other–how many other candidates have you asked, “Are you going to run as a third party candidate if you don’t win?” Have you asked John McCain that?

MR. RUSSERT: Well, if someone has a history of running as a third party candidate, sure. You ran in ’88 as a Libertarian.

REP. PAUL: Yeah, well, I know…

MR. RUSSERT: It’s a logical question.

REP. PAUL: …but there are independents. So I–ask them, too.

MR. RUSSERT: I will.

External Link: The gay sexual life of US Senator Larry Craig

Hillary [Clinton] did not show good judgment in her areas of influence — the legal fiefdom, health care and running oppo-campaigns against Bill’s galpals.

“She hasn’t accomplished anything on her own since getting admitted to Yale Law,” wrote Joan Di Cola, a Boston lawyer, in a letter to The Wall Street Journal [*] this week, adding: “She isn’t Dianne Feinstein, who spent years as mayor of San Francisco before becoming a senator, or Nancy Pelosi, who became Madam Speaker on the strength of her political abilities. All Hillary is, is Mrs. Clinton. She became a partner at the Rose Law Firm because of that, senator of New York because of that, and (heaven help us) she could become president because of that.”

[*] I couldn’t get the damn link.

Previously: Will Hillary Clinton win the 2008 US presidential elections?

[...] In part, the fault is Betfair’s, for failing to ensure that police investigators understood the meaning of the complex evidence they provided, and for passing pages of irrelevant data to the Crown that provided one of many early embarrassments for the prosecution. [...]

The senior detective in charge of the investigation, Mark Manning, had met [Betfair lawyer David O'Reilly] at Betfair’s offices earlier that year [in 2004]. Manning left with a fundamental misunderstanding – that Rodgers had made a net profit of £2m from his betting activities, when in fact this was the total amount that had been risked. By the time the trial began, it had become clear that the accounts controlled by Rodgers had in fact made a net loss of more than £250,000 on the 27 races investigated.

Betfair provided more than 300 pages of data in evidence, showing the betting activities of Rodgers’ accounts on these 27 races. O’Reilly, the first witness called, claimed in court that this data showed how Rodgers would take bets on certain horses at much bigger odds than were being offered by anyone else. Under cross-examination, however, O’Reilly was led to the realisation that the Betfair data for eight of the 27 races included details of bets made after the race had started, at which point larger odds could be justified by mid-race developments. Observers were shocked that Betfair could have made such a blunder in handling its own data.

The father of one of the accused (and now cleared) jockey:

The man from Betfair admitted at the start of the trial he had misled police as to the amounts that had been gambled and then they brought in an expert witness from Australia [Ray Murrihy, Racing NSW's chief steward] who doesn’t know how things work here [in the U.K.].

Daily Mail:

Fallon trial at a glance

[Good recap.]

Daily Mail:

The case highlighted the difficulty of proving, forensically and legally, that a jockey has tried and succeeded in stopping a horse from winning.

Exactly.

BetFair’s co-founder Andrew Black’s empty comment.

British Horseracing Authority

Previously: There are a bunch of bozos at BetFair, in the anti-fraud and legal departments, apparently.

NEXT: Do sports prediction markets corrupt sport? No.

[...] [Acting detective inspector Mark Manning] began his investigation by visiting the offices of Betfair, the company through which the bets involved in the case were made. He was told that Fallon’s fellow defendant Miles Rodgers had risked a total of £2m, but Manning misunderstood and left with the belief that Rodgers had made a net profit of that amount. By the time the trial opened more than three years later, it had become clear that Rodgers had made a net loss of over £250,000 on the races concerned. [...]

Who are the bozos who received that Inspector Manning, that day, at BetFair?

BBC News:

[...] At the end of the day, serious questions will be asked of both City of London Police and the Crown Prosecution Service as to why they agreed to proceed with a case that was so flawed and had little chance of success.

Did the BetFair managers do enough to bring a clear-cut case to justice? Probably not.

More: Financial Times

NEXT: FALLON CASE: BetFair lawyer David O’Reilly is not the man… to say the least.