Using the popular eBay auction site as a model, a British entrepreneur has developed a horse betting web site that has the U.K. bookmakers crying foul.
According to the Financial Times of London, Andrew Black took his own idea of putting together a new way for horse players to participate in fixed-odds betting, while paying a smaller percentage per bet, based on the eBay philosophy of developing hobby auctioneers or, in this case, bookmakers.
Black, whose business background involved derivatives pricing, established a betting exchange whereby the horseplayer can either lay the odds or take the odds, depending on whether he or she feels the horse will win or lose.
As an example of the way the system works, the Financial Times noted that earlier this year, a player wanted to bet about $115,000 on a horse but at higher odds than those being quoted by the established bookmakers. He turned to Betfair, the betting exchange operated by Black, and found that his bet was quickly accepted. On the other end of the bet, were 109 people who had signed into Betfair on the side of laying the odds that attracted the big bettor.
English bookmakers, who are licensed and taxed, claim that the "hobby bookmakers" are illegal since they essentially are performing the work of a bookmaker without being properly licensed. As it stands, these established bookmakers charge between 15% and 20% while Betfair takes between 2% and 5% commission on every bet.
Betfair says their lawyers believe that everything being done does not violate existing laws. They also argue that technology has outgrown current legal structures. They expect the new gambling commission expected to be created in 2004 to better define their technological progress.