The British-based online betting company Betfair has announced a "rescue package" under which it will cover the losses for most of the customers of the Sporting Options betting exchange, which ceased operations and was placed under administration Monday.
Under the Betfair plan, 5,000 of the 5,300 customers (or 95%) who were owed money when Sporting Options ceased operations, could be compensated in full in the next few days.
The package has been agreed with Sporting Options' administrator and approved by Betfair's board of directors, the company said in a statement Tuesday.
"Our rescue package reflects Betfair's commitment to the betting exchange punter and to the nascent betting exchange industry. It is a testament to Betfair's financial strength that we are in a position to be able to do this," said Stephen Hill, Betfair's chief executive. "The demise of Sporting Options shows why we urgently need the new gambling bill, not only to regulate online bookmakers but also to update regulation for the wider betting industry so that all punters are properly protected.
Hill said customers funds at Betfair are held on trust in a separate, ring-fenced account which is audited by KPMG.
"Protecting customers' funds should be a condition of a bookmaker's license and further, the new gambling commission should have the power to conduct spot-check audits of online and bricks and mortar bookmakers to ensure that this is the case," said Mr Hill. "The confidence that our customers have in the security of their deposits with Betfair has helped us to become the global leader in our field."
According to Betfair, here are the general terms under which Sporting Options customers can recoup some of their losses through the company:
--Sporting Options customers with up to £1,000 in their Sporting Options account will have the amount they are owed credited to their Betfair account, if they have one. Customers of Sporting Options who do not have a Betfair account will be required to open one and pass the standard "Know Your Customer" checks, which involves supplying two separate forms of ID and a bank account or card details.
--Customers with over £1,000 will receive a minimum of £1,000 credited to their Betfair account, or 20% of their total Sporting Options account balance, whichever is the greater. Once credited to your account the amount can be withdrawn at any time. Further, these customers will then be eligible to receive cash rebates in the form of a reduced commission rate until their account balance has been discharged, or until Nov. 30, 2006 at the latest. Conditions of the rescue package include that each customer satisfactorily completes Betfair's "Know Your Customer" process.
Another online betting service, BETDAQ, praised Betfair for its actions and announced that it was prepared to step in had Betfair not come to the rescue.
"We had discussions with the administrators about undertaking a similar gesture but it quickly became clear that an alternative package was in place," said BETDAQ's Rob Hartnett. "The events of the last 24 hours have been regrettable but the actions of one company, whatever they turn out to have been, should not be used to damn a whole industry. The prompt action of Betfair and BETDAQ in expelling Sporting Options from the Betting Exchange Trade Association is indicative of our intent to protect our hard earned reputations as high quality, low margin alternatives to the traditional betting sector."