Debate on Betting Exchanges Heats Up

Chris Schef, executive vice president of Thoroughbred Racing Associations, said the U.S. racing industry can't afford to allow Internet betting exchanges to continue to infringe illegally, and suggested the industry form its own exchange to monopolize the U.S. market.

In a two-part panel discussion on betting exchanges Wednesday at the Symposium on Racing in Tucson, Ariz., Scherf said he would ask the TRA board Thursday to make the issue of betting exchanges a priority.

"There should be a dialogue and a priority in this industry to decide where we are going on this issue," Scherf said.

Internet betting exchanges, which allow handicappers to bet on or against a horse to win or lose, are considered illegal in the U.S. and most countries besides the UK and Ireland. BetFair is the most popular of such Internet exchanges, which have been accused of accepting wagers from people in countries where exchanges are illegal and in some cases taking data and simulcasting signals without authorization.

In June the Paris-based International Federation of Horseracing Authorities appointed Maurits Bruggink as executive director to oversee a plan to curtail illegal wagering around the world.

In an earlier panel discussion Bruggink and Andrew Harding, chief executive of the Australian Racing Board, said the exchanges are a financial threat to the industry and undermine the integrity of the sport by allowing people to bet on horses to lose.

Alan Marzelli, the president of the Jockey Club and a member of an IFHA committee on international betting, shared the panel with Bruggink and Harding and their position that the concept of betting exchanges poses an immediate and long-term threat to horseracing.

"It is a problem we need to solve, not as a country or state, but as a world," Marzelli said.

The IFHA is working to stop the illegal Internet wagering through international enforcement of U.S. laws and federal legislation. However, Scherf said there needs to be a "plan b". That plan is based on creating an industry-owned exchange that would monopolize U.S. racing an ensure revenue protection.

"There has been no reaction to this from the industry," Scherf said. "Instead of sealing our fate, we've done nothing."

Eugene Christiansen, chairman of Christiansen Capital Advisors, a gaming industry consulting firm, said that betting exchanges are vital to the future of the industry and that returning to a world without BetFair and other exchanges, like Harding called for in the first session, was a sheer "fantasy."

"Betting exchanges on the Internet are not going to go away," Christiansen said. He said the prevalence of such exchanges demonstrates that customers are looking for an alternative to pari mutual wagering and the industry should listen to what bettors want.

Niall Wass, BetFair director of marketing, who was in the audience for the first panel discussion and then invited to answer questions in the second session, agreed the industry needs to give bettors what they want.

BetFair operates under legal conditions in the UK and Wass said he believed an agreement between the company and the U.S. racing industry could be worked out as well.

"I think there is a huge opportunity here for the U.S. industry and someone needs to grab it before it slips away," Wass said.

Meanwhile, Bruggink said it is his job to stop betting exchanges which are "fundamentally flawed" and infringe on intellectual property rights.

Bruggink mapped out an action plan to work on an IFHA "seal of approval" to help bettors identify which Web betting exchanges are operating under legal terms and those that are not. He also said he would continue to work with credit card companies, Internet Service Providers and policy-makers worldwide to put an end to a "crooked business."