PREDICTION MARKETS HAVE ARRIVED: The Sporting Exchange (BetFair-TradeFair) ranks #4 in the Silicon Alley Insiders list of the top 25 digital startups, and is valued at 5 billion US dollars. (Yes, billions.)

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Estimated Value: $5 billion

Business: World&#8217-s largest Internet betting exchange where users can gamble on everything from horseracing to tennis matches.

Location: London, United Kingdom

More Info: About Betfair

CEO: David Yu – [ a US citizen :-D ]

Investors: Index Ventures, JP Morgan Partners, Benchmark Capital, UBS Capital, and Soft Bank.

Analysis: People love gambling, and Betfair provides a safe, simple, and un-sleazy way for them to do it. The company allows bettors to place bets and bookies to arrange them, and it keeps 5% of winnings.

Betfair&#8217-s business is illegal in the United States of Arbitrary Morals, of course (thanks to the gambling lobby?), but the rest of the world isn&#8217-t so uptight. Unlike other British market makers, Betfair has been smart enough not to accept American credit cards, which puts it out of reach of US regulators. We suppose the British government could destroy Betfair with an attack of Americanitis, [????????] but we don&#8217-t see that happening. In fact, their neighbor&#8211-the E.U.&#8211-is reportedly looking into whether or not the U.S. ban on Web betting hurts E.U. companies, and, if so, it might be willing to take the US to the WTO court.

Softbank bought a 23% interest in Betfair for $600M in February of 2006, implying a valuation of $2.6 billion. The company has grown from $10 million in revenue in 2002 to $365 million in 2007 and generated $70M in operating profit in fiscal 2006. We estimate about $500 million in revenue in 2008 and believe the company is worth about 10X that. Thus, we estimate that Betfair is worth about $5 billion.


That will help a lot.

Congrats to the BetFair-TradeFair people.

UPDATE: BetFair&#8217-s valuation will probably drop from $5 billion to $3 billion!!!!

BetFair-TradeFair has won its second Queen’s Award for Enterprise in its eight-year history.

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BetFair Corporate (PDF file):

21st April 2008


Online betting company recognised for International Trade

BETFAIR, the UK’s biggest online betting company, is proud to announce that it has won its second Queen’s Award for Enterprise in its eight year history.

The 2008 award comes in the International Trade category, five years after Betfair was recognised in the Innovation category for creating the first successful betting exchange – a new concept which meant a better deal for customers and greater protections within the betting industry.

Since 2003, Betfair has grown substantially from a company with 100,000 users, of which only 8 percent were from outside the UK and Ireland, to a customer base in excess of one million where over 40 percent are international users.

Winners of the Queen’s Award are selected on the recommendation of the Prime Minister and an independent advisory committee. Betfair joins a select group who have been honoured twice since the inception of the awards in 1966 and it means the company will be able to carry the Queen’s Award emblem for another five years.

David Yu, Chief Executive of Betfair, said: “Upon winning our first award in 2003, our chairman and co-founder Edward Wray said that the company was looking forward to taking this great British innovation onto the global stage. Five years on, this award for International Trade is recognition of the strides we’ve made towards achieving that aim.”

“Betfair continues to pride itself on its innovation, integrity, fairness to customers and a determination to work in partnership with international governments and regulators. Those qualities are being recognised throughout the world and we now have operational bases in Australia and Malta to support over one million registered customers.”

With this award, Betfair joins the likes of Rolls Royce, Weetabix, Aston Martin and who have all been winners in the International Trade category in recent years.

Notes to Editors:

Since winning its first Queen’s award in 2003, Betfair has grown from 200 employees to over 1200 people in 2008, spread across its bases in Hammersmith, Stevenage, Malta and Australia. Driven by cutting-edge technology, Betfair enables customers to choose their own odds, even after an event has started. Betfair processes 5 million transactions a day, more than all of the European stock exchanges combined. Over half of all new customers now come from outside of the UK &amp- Ireland.

In addition to the exchange, Betfair now has an established games portfolio. Betfair Poker, Betfair Games, Betfair Casino and Betfair&#8217-s accumulator products are hosted from Malta. It is an area that has seen significant growth and investment. The company is also developing new revenue streams by providing automated price feeds to third parties, establishing white-label exchanges and through its own Betfair Mobile product. In 2007, Betfair launched a new company, Tradefair, for those wishing to bet on financial markets.

Betfair is a licensed betting operator in the UK, and also operates under licenses in Australia, Austria, Italy and Malta. The company is seeking licences elsewhere within the European Union and further afield. Betfair welcomes regulation and is committed to paying the appropriate product fees in every market in which it operates.

Winners in the International Trade category for the Queen’s Award must demonstrate either “outstanding achievement… sustained over not less than three years, [or] continuous achievement in international trade, sustained over not less than six years”.

Congrats to all BetFair-TradeFair employees, to all their traders, and to all their providers.

The Queen&#8217-s Award for Enterprise

The list

How InTrade-TradeSports and BetFair-TradeFair should reach out

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Fred Wilson (a famous NY-based venture capitalist, a &#8220-VC&#8221-):

Really think about if you need that $15,000 a month PR firm. – There are some really good PR firms out there and if you can get one of them to work with your company, then it may be worth considering it. But a mediocre PR firm is not worth it for sure. I encourage our portfolio companies to hire a person inside the company to be an &#8220-evangelist&#8221-. That job includes blogging actively, reading and commenting and linking to other blogs, reaching out to the media and industry analysts and gurus, going to conferences and events, and generally getting the word out. That person can be young and not particularly expensive, certainly nowhere near $15,000 a month. And they have two things that a PR firm cannot offer. They work for you and they represent your company exclusively.


As of today, the BetFair blogging is appalling and works in reverse. The BetFair blog is a digital cockroach that repels the prediction market aficionados. Over the time, the BetFair blog will generate bad publicity for BetFair-TradeFair.

As for InTrade-TradeSports, their little &#8220-bulletin&#8221- is totally uninteresting. It&#8217-s not awful, but it&#8217-s not clever either. It&#8217-s money wasted.

Read the previous blog posts by Chris F. Masse:

  • Collective Prediction – Combining human and machine intelligence in prediction economies
  • BLEG: Maine data
  • Al Gore is off his rocket, going thru the roof.
  • Enterprise Prediction Markets … Without Office Politics
  • Meet bettor/trader Harry Findlay.
  • Uh oh.
  • 3 fundamental aspects that will determine the success of a company

The Sporting Exchange, owner of BetFair and TradeFair, is being considered for inclusion in the 2008 list of The Worlds Most Valuable Digital Startups.

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Wow. :-D

[I left a comment, there. Oh, and I see that WeatherBill made the list, too. :-D ]

Read the previous blog posts by Chris F. Masse:

  • Is Justin Wolfers a libertarian? Probably not.
  • The information technology that caught Eliot Spitzer
  • Eric Zitzewitz’s 10 minutes of fame
  • Fun with conditional probabilities
  • Wrongly Crafted Headlines Of The Day
  • an American, petite, very pretty brunette, 5 feet 5 inches, and 105 pounds
  • Mississippi: Is it a primary or a caucus?

With 45,000 registered Irish customers, BetFair-TradeFair (not TradeSports-InTrade) is the dominant prediction exchange in Ireland.

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Previous blog posts by Chris F. Masse:

  • Prediction Markets
  • Meet professor Justin Wolfers.
  • Become “friend” with me on Google E-Mail so as to share feed items with me within Google Reader.
  • Nigel Eccles’ flawed “vision” about HubDub shows that he hasn’t any.
  • How does InTrade deal with insider trading?
  • Modern Life
  • “The Beacon” is an excellent blog published by The Independent Institute.

TradeFairs David Jack = the $20 million man

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Hidden this morning deep into The Sunday Times:

Betfair, the online sports-betting firm, has invested ?10m to launch Tradefair, a new subsidiary company specialising in bets on the financial markets. It believes that the market for financial betting could exceed ?400m. [*] Tradefair will operate independently of its parent. [**]

?10 million = $20.3 million = €13.9 million &#8212- [Thanks to David Pennock’s Yahoo! Currency Converter. :-D ]

[*] BetFair and TradeFair traders share the same BetFair account, as I understand it.

[**] I suppose (based on BetFair&#8217-s share of the UK betting market) that TradeFair wants 5% of that (for a start) &#8212-so that would be ?20 million. &#8212- But we don&#8217-t know what that ?400 million figure came from, in the first place. David Jack&#8217-s wet dreams? For the UK market only (in an increasingly global environment for exchanges)? For what year exactly? 2008? 2026? Mystery. Of course, no source is cited.

Previously: Binaries and Spreads: BetFair spins off TradeFair. + Meet David Jack, the managing director of TradeFair. + TradeFair Binaries User Guide – What is Trading? + BetFair’s Global Warming Prediction Markets — CFM’s Views + Why does Tradefair care about Prediction Markets – by TradeFair&#8217-s David &#8220-$20 million&#8221- Jack – 2007-12-06

Why does Tradefair care about Prediction Markets

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Are prediction markets good at providing a true measure of probability?

Crowd theory says yes, business interests may complicate things.

How is accuracy obtained?

Well of course the answer is obvious – if you want an accurate measure of probability look at the fundamentals for yourself and then ask a lot of people for their opinion. If you encourage the participants to put either reputation and/or money at risk their prediction skills get better. If you provide a platform where systems can participate as well as individuals then not only is the best assessment of probability obtained but it becomes highly dynamic and shifts with every small change in the underlying markets/world conditions.

Sounds complicated, but what does this mean for a business?

Well, simply build an exchange that can provide unprecedented capacity and let the world decide what the likelihood is of an event happening.

And who are Tradefair?

Tradefair is Betfair&#8217-s new home for the financial bettor and trader – our binaries exchange product has opened with straightforward traditional financial markets (FTSE up/down) but one of the things that excites us hugely is the inclusion of market types such as Interest Rates. We call these the &#8220-unhedgeables&#8221-, markets that we all have an opinion on, all understand some of the fundamentals but don&#8217-t have the safety net of an underlying market to hedge into. We are starting in a modest way but we firmly believe that the ONLY place that true market sentiment can be measured is on an exchange.

Why does Tradefair care about prediction markets?

Take a look at Betfair today – it has some of the most liquid, volatile and high participation prediction markets in the world. Participation drives the price down and provides fantastic value to our customers. This has allowed us to build a business that we are all really proud of. The Tradefair team believe that by focusing on financial markets, delivering exchange technology that allows mass participation in an accessible, highly available and transparent manner will allow us bring that same value proposition to the financial sector.

BetFair traders discuss TradeFairs 0-100 trading interface.

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And conclude that that&#8217-s the way to go!!!!! – (page 2):

BinarySoft Chris 27 Nov 10:38
I won&#8217-t be one of the initial MMers nope, but I may well do it at some point next year, depending on the spreads of the initial MM(s). That&#8217-s also assuming they do have a MM – launching TF Binaries without a MM would be a very unwise move! You are right that decimal odds are a bit counter-intuitive for trading – this is one of the main reasons why I developed BDI (binary-betting interface to the Betfair API) and it also means expanding it to allow support for Tradefair should be possible with very few alterations to the interface – possibly as straightforward as just displaying both BF and TF markets in the market navigation tree :)

BinarySoft Chris 30 Nov 10:32
If it&#8217-s a native binary exchange (and I suspect it is), then tradefair will remain a *separate* exchange, because the conversion from binary – decimal is not exact.

Dr Who 06 Dec 07:37
jules, BinarySoft Chris, or whoever you are, I take it you&#8217-re the guy behind BinarySoft. Just guessing of course.
Tell me, what is that nonsense on your site which says, &#8220-Binary prices are the most natural and intuitive way of expressing odds&#8221-? How can you possibly be taken seriously making a gaff like that? Why go to all the trouble to make decimal prices, which are in fact the most natural and intuitive way of expressing odds, into a completely arbitrary system like yours? When [Tradesports] started I spent a while developing an app to convert their daft Buy/Sell pricing system into decimal notation so I could arb between TS and BF. Now I&#8217-m sure there may be some city types who are used to the Buy/Sell system but to call it a &#8216-natural&#8217- or &#8216-intuitive&#8217- way of expressing odds is complete b0llox. I wish your software well but can&#8217-t see why anyone on earth would want to deviate from what is being offered on BF or Tradefair. Unless you can persaude me otherwise with an argument I haven&#8217-t thought of :)

BinarySoft Chris 06 Dec 11:40
Dr Who – I appreciate that binary prices will not be the most suitable for everyone, and also they may take a little while to get used to for people previously used to thinking purely in terms of decimal odds. However, the vast majority of the people who have made the switch to binary prices agree that thinking purely in terms of percentage chances is a faster and simpler way to trade (and also a more natural way to price any contract/market).
See this link for more comparisons:
This states the case pretty convincingly in favour of binary prices – what advantages can you come up with for decimal odds?

BinarySoft Chris 06 Dec 11:52
Another advantage in favour of using binary prices for trading is that &#8220-buying&#8221- and &#8220-selling&#8221- are more natural ways of describing the trading process than &#8220-backing&#8221- and &#8220-laying&#8221-, especially for people who aren&#8217-t used to betting exchanges. Also, the fact that Tradefair natively uses binary prices means that Betfair appear to be in favour of this method of expressing odds (well certainly for financial bets anyway). The next version of BDI will also be able to access both Betfair and Tradefair from the same interface, with seamless switching between Betfair/Tradefair markets. Currently, users of Tradefair and (non-BDI) users of Betfair will have to keep on switching between decimal and binary odds if they wish to trade on both exchanges – it&#8217-s probably easier to just think in terms of a single way of expressing odds.

Dr Who 06 Dec 12:19
I said &#8221- My argument is that decimal notation is a much more intuitive and natural way to express [probabilities].&#8221- I&#8217-ve just read that back and frankly its complete b0llox. I&#8217-m happy to try out your interface Chris and see how it feels. I&#8217-m always happy to change my position if the facts warrant change but I found the Tradesports interface difficult.

BinarySoft Chris     06 Dec 17:04
One of the issues with that exchange you mentioned [TradeSports] is that it deals in &#8220-lots&#8221- – each lot is normally $0.10/point but it can vary for different markets and thus can get pretty confusing. Every other binary betting related product uses stakes expressed purely in terms of amount/point (Tradefair, other financial bookmakers and BDI).

Previously: BetFair officially launches TradeFair, one month exactly after it was announced on Midas Oracle, and the mugshot of its managing director published for all to see.


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TradeFair Binaries:

TradeFair Prediction Markets

Hint: A binary bet represents the probability or percentage likelihood of an event happening. In the example above the price is 66 to sell and 67 to buy. You should buy if you think there is a greater than 67% likelihood of the event happening OR sell if you think the probability is less than 66% likelihood of the event NOT happening.


Thank you, Eric Zitzewitz and Justin Wolfers (among others).

Interpreting Prediction Market Prices as Probabilities – (PDF – Abstract) – by Justin Wolfers and Eric Zitzewitz – 2005-02-01

While most empirical analysis of prediction markets treats prices of binary options as predictions of the probability of future events, Manski (2004) has recently argued that there is little existing theory supporting this practice. We provide relevant analytic foundations, describing sufficient conditions under which prediction markets prices correspond with mean beliefs. Beyond these specific sufficient conditions, we show that for a broad class of models prediction market prices are usually close to the mean beliefs of traders. The key parameters driving trading behavior in prediction markets are the degree of risk aversion and the distribution on beliefs, and we provide some novel data on the distribution of beliefs in a couple of interesting contexts. We find that prediction markets prices typically provide useful (albeit sometimes biased) estimates of average beliefs about the probability an event occurs.

Previously: BetFair’s Global Warming Prediction Markets — CFM’s Views – Out of their 3 event derivatives on global warming, the first two, at least, are flawed products.


Meet David Jack, the managing director of TradeFair.

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David Jack is on the right&#8230- (here with Andrew &#8220-Bert&#8221- Black, the BetFair co-founder).

David Jack, the managing director of TradeFair

David Jack (Managing Director of TradeFair, a BetFair spin-off)

Previously: Binaries and Spreads: BetFair spins off TradeFair.

NEXT: Why does Tradefair care about Prediction Markets – by TradeFair&#8217-s David Jack – 2007-12-06