The wrong side of the track

Independent, Monday March 15, 2004

It is the sport of kings, and tomorrow, at the Cheltenham Festival, its annual banquet begins. High-rollers and high-street punters descend in droves on the Regency town for a three day jamboree that marks the acme of the racing calendar. The Festival is renowned for its atmosphere of egalitarian geniality, not to mention Bacchanalian abandon: its absence in 2001, when foot-and-mouth disease caused its cancellation, hit the racing fraternity's collective soul as much as it did Gloucestershire's economy.

But this year, there is a spectre at the feast. In the wake of the recent uproar surrounding three horses the inoffensively named Ballinger Ridge, Hillside Girl and Ice Saint the racing world has been thrust under the spotlight. For once, though, it is not unscrupulous bookies who are bearing the brunt of the criticism, but the business phenomena known as the betting exchanges.

Betting exchanges are the spawn of the dotcom revolution. The most high-profile is Betfair, launched in June 2000 via a publicity stunt which is proving as prophetic as it was provocative. Betfair paraded the streets of central London with a coffin in a mock-funeral, to mark the 'death of the bookmaker.'

Betfair and its competitors the likes of Betdaq, Sporting Options and Backandlay - allow person-to-person online betting. A punter registers with an exchange and deposits a sum of money to cover bets and liabilities. Each client can then bet against other clients who have also registered with the exchange.

Traditionally, a punter had but one choice to accept the odds offered by a bookmaker. The exchanges allow the punter to play on both sides of the counter to accept odds, or to offer, or 'lay,' them. As Hilary Stewart-Jones, a partner with Berwin Leighton Paisner who specialises in betting law, says: "The exchanges allow punters to lay odds in effect, to back a negative outcome."

Unsurprisingly, the established bookmakers do not like the exchanges. William Hill's ex-chairman, John Brown, castigated them as "illegal" and lambasted the government's "dereliction of duty" in not doing anything about them. Greg Nichols, the chief executive of the British Horseracing Board, claims the exchanges are "having a damaging effect on racing's reputation," and echoes Brown in saying that the government "has a responsibility to enact legislation which restricts the opportunity for racing's integrity to be undermined."

The incidents involving Ballinger Ridge et al are grist to the mill of Nichols and Brown. Champion jockey Kieron Fallon was banned for 21 days by the Jockey Club following Ballinger Ridge's apparently inexplicable loss of the lead in a race at Lingfield on 6 March. Fallon had gained a clear lead when he appeared to slow down prematurely, resulting in a short-head loss. Shortly before the race, the Jockey Club was notified by Betfair that the race had been the subject of "suspicious betting patterns."

Afterwards, Fallon was the subject of a News of the World sting accusing him of passing inside information to journalists posing as wealthy gamblers. Fallon has denied that the information he allegedly passed had any bearing on his performance on Ballinger Ridge, and denials of wrongdoing have also come from those connected with Hillside Girl and Ice Saint.

Hillside Saint's trainer, Alan Berry, is to face a Jockey Club disciplinary inquiry having been charged with conspiring to lay her to lose on betting exchanges in the knowledge that she was lame and could not win in a race at Carlisle last year. And last week, Ice Saint's jockey, Sean Fox, found himself banned for 21 days by the Jockey Club for "stepping off" his mount in a race at Fontwell. All three cases were allegedly accompanied by 'irregular' betting patterns on the exchanges.

The controversy comes at a time when the government is actively seeking the deregulation of the betting and gaming industry. The most recent review of betting and gaming regulation, the Budd Report of July 2001, was followed by a government white paper entitled 'A Safe Bet for Success' in March 2002. Then, in November 2003, the government published a draft Gambling Bill, whose aim is to modernise 'outmoded' legislation governing betting and gaming. It is proposed that a new super-regulator, the Gambling Commssion, will be set up, rather like Ofcom in the media. In this brave new world of consensual bets and informed choices, Blackpool has been earmarked as Britain's answer to Las Vegas.

Much of the Gambling Bill is taken up with age-old issues relating to gambling. It has long been the case that a bet is unenforceable under contract law; no more, according to the bill. The drive for codification is also reflected in the Gambling Commission's putative ability to void unfair bets, and all gambling operators will have to be licensed, whereupon they will obtain a government-endorsed kite-mark signifying their reliability.

But Paul Renney, a partner with Addleshaw Goddard who advises on betting law, doubts that the bill, for all its good intentions, will make it onto the statute books in the near future: "There is some doubt whether the betting and gaming industries have done enough to convince people that their interests are a priority," he says. "In a crowded political timetable, as we approach the last parliamentary session of the present government, I'm not convinced that the bill will clamour loudest among its competitors."

The betting exchanges, despite not being covered by the Budd Report, are in the sights of the legislators. "They will fall within the definition of a betting intermediary," says Stewart-Jones, "and as such will have to be licensed."

Mark Davies, Betfair's director of communications, welcomes any opportunity to achieve greater transparency in an industry that seems unable to shake off an image of being run by men in sheepskin jackets with second-hand Jaguars and less than first-rate ethics. "Our primary interest is to make sure the industry is clean," he says.

Davies points out that Betfair which has a weekly turnover in excess of 50million has signed 'Memoranda of Understanding' with the Jockey Club, the International Cricket Council and the ATP in men's tennis. These agreements allow investigators to demand information from Betfair about the betting patterns of anyone they believe is acting suspiciously. And far from being a 'threat' to racing's integrity, Davies is adamant that Betfair can make it better: "We have a centralised system and an audit trail that enables us to track abnormal betting behaviour, and now, if there's evidence that supports the view that a race was thrown, it's available in black and white."

The Jockey Club has itself imposed rules preventing trainers, owners and stable staff from backing their horses to lose, and jockeys are forbidden from gambling on the result of a race. Richard Brooks, a solicitor who acts for the Jockeys' Association, says that riders fully appreciate the need to prohibit the incentive to fix the result of a race. He adds, "Clearly a far wider group of people can have so called inside information, but how can this be policed? Anyway, why should people not be entitled to use such information in forming their gambling judgments? Racing is built on people believing they know something more than the next punter or the bookie. The bookies have used inside information against the average punter for years."

Meanwhile, as the debate about the betting exchanges rumbles on, Gold Cup day will see the opening of Cheltenham's new 15m Centaur Centre, a multi-purpose facility which its owners envisage hosting sporting tournaments, conferences and horse auctions. For the duration of the festival, punters will be able to utilise its 'extensive betting facilities,' once it has been unveiled by the Princess Royal. It is, after all, the sport of kings.