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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International Olympic Committee head Jacques Rogge

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Olympics @ Wikipedia

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Contract Rules

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This contract will settle (expire) at 100 ($10.00) if there is an official boycott of the 2008 Olympic games in Beijing announced before the commencement of the games.

The contract will settle (expire) at 0 ($0.00) if there is NOT an official boycott of the 2008 Olympic games in Beijing announced before the commencement of the games.

Expiry will be based on official announcements from the Olympic [organizations] on the United States and the member nations of the European Union., as reported in three independent and reliable media sources.

Expiry will be made when an announcement of a boycott is made. Any decisions regarding the announced boycott afterwards will not affect the [original] expiry.

Clarification (added March 26th): These contracts are for a full boycott of the games – not for just the Opening Ceremony. If a country boycotts just the Opening Ceremony, but participates in the games itself, then the contract will not be expired.

Due to the nature of this contract please also see Contract Rule 1.7 Unforeseen Circumstances.

The Exchange reserves the right to invoke Contract Rule 1.8 (Time Protection) if deemed appropriate.

Any changes to the result after the contract has expired will not be taken into account – Exchange Rule 1.4

Please contact the exchange by emailing help@intrade.com if you have any questions regarding this contract before you place a trade.

Important:
Please contact the Exchange if you have any query or uncertainty (including how it may be settled) about this Contract, the Rule above or the Contract Rules before you trade.

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We need specific contracts for the boycott of the opening ceremony. Germany’s Prime Minister will not attend the opening ceremony —they never attend such ceremonies, they say —this has been wrongly interpreted as a “boycott” by some idiots in the media. France’s decision is not taken yet. Other countries’ state persons might boycott.

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NewsFutures hasn’t had any Olympics Boycott prediction markets —Emile, what a shame.

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PopSci PPX had a contract on whether the smog will cause the games to be canceled, but I don’t see it anymore. Instead, they have that strange contract.

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The International Olympic Committee is to attempt to forge a unified approach to sports betting across the Olympic disciplines, working with governments and international federations to prevent corruption associated with gambling [and betting].

Jacques Rogge, the IOC president, announced yesterday that he will try to introduce an early-warning system to alert sports to suspicious betting patterns before the Beijing Games. The IOC is likely to follow the model pioneered in British sport where numerous governing bodies have memorandums of understanding with the betting companies, including the betting exchange Betfair, that allow the formal sharing of information in suspicious circumstances. [...]

Doug Mills / The New York Times

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Once again, Chris Masse was right on the money:

[...] Just like the Olympic City prediction markets, the resignation prediction markets are rarely predictive because there aren’t any reliable advanced indicators to guide the traders. The Olympic committee is secretive and does not grant on merit but on politics (or corruption). As for the embroiled officials (politicians or CEOs), they are secretive too and send false signals (”Read my lips; I will never resign”). In both cases, the event derivative traders don’t have any access to inside information, the only one that counts. So these two types of prediction markets are of inferior quality, which explains why experienced traders don’t speculate on them. [...]

And I provoked a polémique, once again.

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InTrade-TradeSports:

Alberto Gonzales to announce his resignation on/before 30th September 2007

Alberto Gonzales to announce his resignation on/before 31st December 2007

Alberto Gonzales to announce his resignation on/before 31th Mar 2008

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NewsFutures:

Alberto Gonzales won’t remain Attorney General through the rest of Bush’s presidency.

[This one, with a November 2008 deadline, was indeed predictive.]

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Reminder:

Karl Rove will resign from the White House.

Emile Servan-Schreiber:

Chris, how exactly do you define “predictive”? If your criterion is “last trading price above 50%”, that would betray a very limited understanding of the nature of both probability and binary markets. That’s a debate you and I have had ever since the first days of chrisfmasse.com a propos the 2004 US presidential election.

To your credit, I don’t think anyone has yet proposed a good way of assessing the “predictiveness” (predictivity?) of a single binary market after the fact. It is a very difficult question. Does anyone here have an answer?

#1. What I see on the NewsFutures chart above is that the probability of Karl Rove resigning went to about 20% previous to the official announcement in the WSJ, indicating that it was more likely than not that he’d stay at the White House. So, in terms of absolute accuracy, that particular prediction market failed.

#2. Emile-Servan-Schreiber is right that, scientifically, we should assess a series of identical prediction markets, not just one, if we want to determine whether this market-based technology has merit. (And we should assess them comparatively to competitive institutions’ predictions.) Overall, the NewsFutures prediction exchange is indeed predictive.

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Just like the Olympic City prediction markets, the resignation prediction markets are rarely predictive because there aren’t any reliable advanced indicators to guide the traders. The Olympic committee is secretive and does not grant on merit but on politics (or corruption). As for the embroiled officials (politicians or CEOs), they are secretive too and send false signals (“Read my lips; I will never resign”). In both cases, the event derivative traders don’t have any access to inside information, the only one that counts. So these two types of prediction markets are of inferior quality, which explains why experienced traders don’t speculate on them. To have a better understanding of the prediction markets, in addition to the very good argument that EJSS makes, I think we should rate the advanced indicators. When they are of poor quality, we should disclose it to our readers and traders.

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NEXT: Jed Christiansen strongly believes that Chris Masse has a bad understanding of probabilities.

Niall O’Connor of Betting Market believes that, if William Hill opened betting lines on who killed Harry Potter, that’s because they have serious reasons to think that Harry Potter was killed off in the seventh book. Hummmm… Bookmakers are bastards, and many times in the past, those British bastards have opened bets that were 100% lost bets from the clients’ side. I have in mind some so-called “scientific bets” from Ladbrokes on issues that, when examined by real scientists, looked like they were framed to attract suckers and imbeciles.

If it were true that J.K. Rowling has already killed off Harry Potter, and that William Hill received the tip,THEN WHY IS IT THAT THE HIGH-VOLUME NEWSFUTURES PREDICTION MARKET ON HARRY POTTER DOESN’T SHOW ANY SIGN OF PESSIMISM??? Hey, if the info is out, then NewsFutures too would have received it. Niall O’Connor argues that play-money prediction markets are for suckers and the informed people go only to the bookmakers. Hummm… Niall, in this case, it’s a high-volume play-money prediction market (15,813 contracts held), which weakens your argument.

On the other side of the argumentation, the Harry Potter prediction market bears resemblance with the Olympic City prediction markets, which I have criticized as non predictive. One secretive person or group decides the outcome —and there’s no way to divine what they are going to decide because they do not judge on the basis of merit. However, there’s a big difference. In the Harry Potter case, the past is a guide, and experts can analyze J.K. Rowling’s previous six books and make up their mind. Again, no certitude, but there’s enough material to form a probability. Again, no sure thing, but at least we have a probability. See my last blog post for more.

Previous: J.K. Rowling’s The Deathly Hallows = Harry Potter MUST Die! + Harry Potter Must NOT Die!

Harry Potter will survive The Deathly Hallows.

© NewsFutures

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Static chart:

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UPDATE: The contract of the Harry Potter event derivative at NewsFutures may be flawed.

NEXT: THE FATE OF HARRY POTTER IN J.K. ROWLING’S 7TH BOOK, THE DEATHLY HALLOWS: prediction market vs. bookmaker + NEWSFUTURES JUDGES THAT HARRY POTTER IS STILL ALIVE AT THE END OF J.K. ROWLING’S 7TH NOVEL, THE DEATHLY HALLOWS.

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Pinnacle Sports introduced the serious and casual American bettor to reduced pricing, and betting has not been the same since. Even the most casual bettor could see the long term advantage of laying -105 instead of -110. When totaling the wins and losses of hundreds of bets, that five cents saved very well could be (and many times is) the difference between a winning and losing bettor. Alas, Pinnacle Sports is no longer available to the American bettor, who must now seek other reduced juice alternatives.

American bettors have always shied away from betting exchanges for several reasons:

1. Exchange software has historically been more difficult to learn to use
2. Buying and Selling point spreads is different than traditional wagering
3. Volume is often too low. If only $100 has been offered for wagering, that’s all you can bet (unless you make your own offer, which is a whole other fear for bettors!)

Hopefully this article will show that the above concerns are issues of the past, and that bettors should give betting exchanges like Matchbook.com a second look.

American bettors typically think of “live betting” when they think of betting exchanges. Places like WSEX (the parent company of Matchbook.com) and Tradesports have, and still do, offer live wagering on select TV sporting events. But exchanges have become so much more than just live betting venues. At Matchbook, a bettor can find offerings on most of the “Big 4″ games, such as: full game, 1st half and total of all NBA, NFL games, and full game and total lines on MLB and NHL games. Many “current event” bets are also available, such as American Idol and movie box office returns. So exchanges have developed in to “full service” shops, offering almost everything that a traditional wagering shop does.

If laying -105 was great for pregame bets, how good would -102 be? The commissions vary at the exchanges available to Americans: Tradesports charges 3% commission (for those accepting live even money offers, higher for more or less than even money, and the bets win) and Matchbook charges a flat 2% commission (on winning bets only). So, in essence, bettors are playing in to a -102 line—obviously a very large discount from the traditional -110 full juice bookies charge. The commission rules and structures vary between exchanges, and Tradesports and Matchbook are a prime example of the differences that can occur. Tradesports charges the bettor .5% for accepting an in-running offer, whether or not the bet loses (and an additional 3% if the bet wins). Matchbook charges no commission for accepting an offer, only the winner of the bet pays the 2% commission. So, at Tradesports all of the offers you accept in-running will cost you .5% in commission, and winning bets will cost you a total of 3% commission (at even money). At Matchbook, only your winners will cost you 2% commission. It’s clear that all levels of bettors can benefit from such a low commission.

As previously mentioned, Americans have traditionally shied away from exchanges for a number of reasons. One of the main hurdles that exchange software developers had to clear was the difficulty of developing software that functioned like traditional wagering software. Bettors want to be able to look at betting lines in the same fashion as they have done for years, like this:

PHILADELPHIA: J MOYER +1.5 -160 OVER 8.5 -125 +133
NEW YORK N: T GLAVINE -1.5 +140 UNDER 8.5 +105 -143

No exchange offered anything close to this format—until Matchbook.com‘s revolutionary software was released. Accepting and making an offer has never been easier at an exchange than it is now at Matchbook.com. Here is a game currently offered there:

Over 8.5 $234(my potential win) -105$130 -107$1,306 -130$650
Under 8.5 -$242(my potential loss) +101$1,032 +100$100 -104$2,061

You can see that the Over and Under total are clearly defined, with the amount offered right next to the line. You simply click the price (for example +101$1032), enter the amount you want to take of the U 8.5 to the right (confirm box not shown here) and press submit. It’s just that easy. After you place the bet, the amount you are risking and the amount you can win are displayed right next to the totals (not including the 2% commission). You can see in the above example that I bet on the O 8.5 runs in the Braves game tonight. If the game goes OVER 8.5, I will win $234 (minus the 2% commission) and if the game goes UNDER 8.5, I will lose $242. So the bet was not only just as easy to place as it is at a traditional wagering site, but I also have the convenience of having my risk/win displayed all the way until the game goes off the board. The software at Matchbook.com is just as easy to use as traditional betting software, so bettors no longer need to fear having to learn a “whole new way of betting”.

The second fear American bettors have of exchanges is that they have to think of a point spread as ONE ENTITY that is to be either bought or sold. Bettors are so used to thinking of the Braves O 8.5 and the Braves U 8.5 as two things, it’s often difficult for them to switch gears and think of only one thing: Braves O 8.5. When trading on Tradesports you must think of the Braves total as one thing to be bought or sold. You must designate a price, or accept an offer at the current price, and you must BUY or SELL the Braves O 8.5. If you BUY the Braves O 8.5 at 50 for 10 contracts, your position will be reflected like this:

Braves 8.5 +10

If you SELL the Braves O 8.5 at 50 for 10 contracts your position will be reflected like this:

Braves 8.5 -10

Many bettors find that format confusing because they must abandon the OVER and UNDER format they’re used to. At Matchbook.com, positions are bought and sold in the same fashion that traditional wagering is done (see the above Braves total example). A bettor is not forced to buy or sell one object at Matchbook.com, and the bettor does not have to convert the price to a traditional line (e.g. “50″ at Tradesports= a +100 line). At Matchbook.com, a bettor will see the traditional +100 lines format he or she is used to dealing with.

The last main concern of American bettors concerning exchanges is volume. A low juice line doesn’t mean much when only $100 has been offered on the line you want to bet. Volume is rapidly becoming a non-issue at Matchbook.com. By noon, there is usually at least $1,000-$2,000 available on sides and $500-$1,000 on totals for all the main sports. Throughout the day there is anywhere from $2,000-$20,000 available for the taking. And if your line or bet amount is not available, make an offer! Making an offer at Matchbook.com is just as easy as taking an offer; it’s only a two step operation.

Hopefully Part I addressed any fears or concerns bettors that are new to exchanges might have. Part II of this article will uncover some of Matchbook.com‘s future plans and summarize all the pros and cons of exchange betting.

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Part I of this article addressed the concerns American bettors might have regarding exchange betting. Part II will highlight the short and long term advantages of exchange betting, and hopefully solidify exchange betting as a necessary tool in the American bettor’s arsenal.

First, some issues concerning Tradesports mentioned in the Mess Hall forum at MajorWager.com need to be addressed. Part I of this article mentioned that the total commission for accepting an offer that wins would be 1.5%; this is not the case if an offer is accepted pregame. In January, Tradesports changed their commission structure, which included charging no fees for pregame trades. So if a bettor accepts an offer pregame, he will be charged ZERO commission on the trade and at expiry. Also, it was brought up that American bettors currently have very little options when depositing at Tradesports. ACH is not currently online, and it seems that the only way to deposit there is to send a bank wire or paper check. Lastly, it was pointed out that Tradesports bettors can view offers in the traditional American moneyline way (-110) by trading on an alternate website: TradeBetX.

Now that American bettors (hopefully) are over the fear of using exchanges, why should bettors they be using them? What are the advantages?

There are many advantages to using exchanges:

1. Very low commissions compared to traditional bookmaking
2. Live betting options
3. No limit reductions or having an account closed for winning too much
4. Stability from a business standpoint

Bettors can plainly see that any time one can lay -102 instead of -110 he or she must take advantage of the reduced pricing. The live betting comes in very handy when having a pregame bet, and adjustments need to be made during the event (i.e. your bet is a sure loser and you need to get off of it by betting the other side!). Also, there is often good value to be found just betting an event in-running. Many times one will see bettors putting up offers that are, simply put, gifts. Not having limits reduced or an account closed due to winning too much is paramount for the professional bettor. As many shops that supposedly take “sharp” bettors very aggressively limit and boot winning, professional players more than ever, having an out that actually WANTS a bettor to bet more (because they get more commission) is a breath of fresh air. Also, from a business standpoint, exchanges aren’t subject to the drastic swings that traditional bookies are. Players are betting against each other and the exchange is taking a commission. The outcome of any of the games isn’t a concern for an exchange. As long as the exchange has enough volume to generate commission, the exchange is in a solid position to produce a profit.

There are also a few potential disadvantages to using exchanges:

1. Learning new software
2. Difficulty depositing and withdrawing, fees too expensive
3. Not enough volume on games of lesser interest
4. Not offering a full range of games
5. Drastically reduced live betting options and/or very low volume on those games
6. Straight bets only

Management at Matchbook.com was contacted in regards to most of the above. The current climate in the offshore gambling industry has made payouts and deposits very difficult in most cases. One way to move funds easily is to do interbook transfers. Matchbook.com currently offers free interbook transfers to and from: Pinnacle, Olympic, WSEX, Mansion, CRIS, and 5Dimes. When asked why live betting wasn’t offered on every game, Matchbook.com responded as follows:

With the exception of the biggest events of the year, live markets really need a dedicated market maker to keep them trading smoothly. As a result we only set games live if we know we’ll have market maker pricing them up after every play. The alternative (setting all games live) would also make it harder to scroll through the day’s card, as the rotation-number order isn’t always chronological, and you’d have a lot of empty boxes in between the main markets.

While it would indeed create more “clutter” on the site and lots of empty offers (take a look at Tradesports any day of the week), it would benefit Matchbook.com to reconsider the above position. While Tradesports and Betfair obviously don’t make much commission on the lesser games that have very low volume, there is indeed a market for every game. As bettors become more and more comfortable with live betting then more volume will come on even the smaller games that are offered. Matchbook.com should follow Tradesports‘ lead and attempt to offer markets on all the games that they offer pregame markets for and see how it goes. Even a little commission is better than none, and live bettors would like to see more markets available.

As for the volume on markets, Matchbook.com had this to say:

As we enter our third year, Matchbook liquidity is far beyond our expectations in the hours going into game time, but we still need to improve in a couple of areas. Minor NCAAB and NCAAF markets were disappointing last season, and we really need to get better liquidity overnight and in the mornings. We think there will be big improvements here over the coming months, though, in direct proportion to the number of API programs that new users have been developing. API programs allow large-scale users to skip the whole web interface when placing bets, and we’ve been getting requests almost daily for API documentation to facilitate the development of market making programs and arbitrage against other exchanges.

Without a doubt, Pinnacle Sports‘ exit from the U.S. market has facilitated a dramatic volume growth for Matchbook.com. Many posters on the forums refer to Matchbook.com as “the new Pinnacle”. It’s clear that Matchbook.com has a firm plan for future volume and liquidity. They are adding new market makers on a daily basis, and it’s obvious they are becoming the flagship of exchanges for American bettors.

Although Matchbook.com‘s commission structure is low, there are plans being developed to drive commissions even lower. Concerning lowering the commission rate, Matchbook.com had this to say:

However, we do have a new structure we’d like to unveil over the summer. Basically, we will reward people for posting up offers rather than hitting offers that are already there. Even if a market is -108 by +106, we want to get people asking for +107. So far in baseball and the NFL, we’ve been achieving one-cent markets pretty routinely, but the goal is to use a new commission structure to bring in our NBA and college sports to one cent as well. We haven’t finalized it yet, but the basic idea is to charge a discounted rate when you make an offer, and a standard rate when you accept one.

The above would accomplish two things: 1) lower commission rates and 2) increase volume and liquidity. If bettors know they can save 1% in commission, they will post offers instead of sitting back and waiting for the offers to come to them, thereby increasing volume.

There are very few downsides to exchange betting, all bettors should at least give it a try. Matchbook.com is a financially solid operation with lots of volume, and most bettors will find everything they need—with much lower juice. Matchbook.com offers quite a few deposit options; bettors should give Matchbook.com a try and see if it’s a good fit for their betting styles. Now is a great time to give Matchbook.com a look, commission free! Just deposit at least $1000 and a bettor can play for two weeks commission free. Details can be found on the front page of www.matchbook.com (click on the “Big Boy Special” link).

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David Stalcup
Editor-in-Chief, MajorWager.com
editor -at- majorwager <.> com

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Disclosure: Matchbook.com is a current advertiser at MajorWager.com and the author is a customer of Matchbook.com.

Note: Neither MajorWager.com nor the author was solicited by Matchbook.com to produce this article and neither received any compensation for this article.

[This two-part article from David Stalcup is cross-posted from MajorWager: Part I + Part II]