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Why the betting industry risks losing its battle in Europe

It’s been a busy few days, so some obvious things I might have posted about have fallen by the wayside. Not least of them is the very welcome couple of decisions out of the ECJ in relation to Germany and Austria which stem what seems recently to have been a constant stream of bad news for the so-called private gambling operators (for which read, in many cases, listed companies) in favour of the state-owned monopolies. The cases are crucial for the industry in that they give the lie to the theory that Europe is closing in on the betting industry, and growth will be at a premium going forward. Once again, it is all to play for in a way that doesn’t seem to have been true for almost six months.

But the submissions made to the Greek government,  which is the latest Member State to be looking at a system of licensing, underline why the industry has got itself into its current tricky position, fighting a rearguard action. While they have an obvious and logical argument that consistency and proportionality in betting legislation means treating all gambling operators equally (providing they reach a required standard of protections in the crucial areas of vulnerable people and fighting crime), the private operators have lost ground because some of them prefer to spend time point-scoring at each other’s expense. It has weakened their argument massively in front of legislators, who really only want one thing when it comes to hearing about policy-making, and that is a consistent front. They have had precisely that from the European Lotteries Association (which for all the probable differences of detail among its members have maintained an entirely consistent and simple public position: “don’t allow private operators because they threaten the fabric of society from the perspective of both problem gambling and money laundering”); and they have had precisely the opposite from the private operators.

Take, for example, this submission to the Greeks from Sportingbet:

Betting exchanges may be the source of a series of illegal activity. It is known that several recipients of illegal betting hedge some of their bets at the exchange. It is also obvious that given that an exchange gives its customers the opportunity to offer bets, this creates a clear and distinct flaw in the  legislation. This will give the opportunity to people who are not licensed as betting providers to do so through the exchange. Lastly, the exchanges provide the opportunity (and with minimal cost) for money laundering because two people can pass unlimited amounts between them with one person winning and the other person losing.

We believe it is inappropriate to regulate betting exchanges, and propose a ban on hedging of bets. Moreover, betting exchanges haven’t been included in any other recent laws in other European countries.

Frankly, this sort of self-serving nonsense beggars belief as a lobbying position, and it makes me wonder whether there is anyone at Sportingbet who has a  brain. It’s not a matter of whether you agree with the argument or not (let’s ignore for a moment that this same argument, advanced in Britain for ten years, has got nowhere with anyone who is independent; just as we should, for the sake of discussion, forget that “a ban on the hedging of bets” means that Sportingbet would also be prevented from offering any tennis, snooker, boxing, Cup football, or other two-outcome events): it’s a question of what works from a lobbying perspective for the industry, and what doesn’t. Because the one thing you can bet your life on is the fact that Betfair, as one of the biggest names in the private industry in Europe (and certainly one with among the biggest lobbying presences) will be following Sportingbet into the same set of meetings with the same civil servants and parliamentarians and will be arguing exactly the opposite. The result is no common position from the private industry, and no policy agenda for the Greeks to follow – other than what they are being told by the people who pursue a consistent path which happens to be 180 degrees away from the private sector’s interest.

When I was lobbying for Betfair, I used regularly to go into meetings after Bwin had been in to argue that the solution to gambling problems in Europe was to limit the stakes that punters could place. Why did they argue that? Because they knew very well that from a competitive standpoint, it made life difficult for their biggest threat: Betfair’s average bet size is much bigger than Bwin’s, so capping the stake at, say, £10, would have no effect whatsoever on Bwin but would have a big impact on Betfair’s business model.

Of course, there was a simple and obvious response, had I chosen to give it. I could have argued, literally half an hour after Bwin had given their self-serving position to a policy maker, that the solution to gambling issues in Europe lay instead in ensuring that only those who could really afford to lose lots of money got involved; that policy should be about not broadening the appeal of betting, but deepening it among those who had money to lose; that approaching it from that angle would ensure no loss of tax revenue while also not expanding gambling; in short, that the government’s agenda was best-served by introducing a minimum stake, not a maximum one. If you stopped people ever betting less than £100 a time, you would destroy Bwin’s business model and boost Betfair’s, while also disenfranchising the vast swathes of population that government don’t want to see spending their hard-earned few pennies on gambling.

It goes without saying that I never argued that way, but not because it is not an entirely plausible response. It clearly is. I didn’t argue it because I saw no point in having two operators who ultimately need one thing – for private operators to be allowed to compete in the market, so that we could then do exactly that: compete – arguing two completely conflicting agendas; and because policy, in any case, is better served in other ways than with this narrow, commercial approach. What I did do, of course, (because I had to) was go in and trash the argument that had just been made. Limiting stakes does absolutely nothing to support the objectives of policy which cannot be done in a manner which is significantly more consistent between operators, such as ensuring that protections and checks and balances are put in place to ensure that money is not laundered and the vulnerable are protected. Arguing that these can only be achieved through limiting stakes is like arguing that the only way to reduce road deaths in a world where both Skodas and Ferraris exist is to limit the amount of money that can be spent on a car. It’s nonsense. Clearly, people should be allowed to spend what they like on a car, providing they don’t break the speed limit in whatever happens to be their vehicle of choice.

I struggle to understand what these operators think they are doing, from a public policy perspective. The issue is not that their arguments are so easy to knock down. It is that they are going into meetings in which they are arguing for consistent and proportional legislation which allows competition, and the arguments they use are very clearly (and if not clearly, then quickly demonstrably) arguments designed to limit competition for their own commercial advantage. What’s the point in that? It’s the most obvious way of handing victory to those people who are arguing that monopoly operations are best, because competition and innovation lead to bad things. It is completely, absolutely, and utterly bonkers.

Sportingbet is one of only two operators to have had senior company representatives arrested setting foot on US soil. It is therefore one of the easiest operators to attack in the whole industry, if you are so minded to go down their self-serving route. Why any other operator in the industry would want to do that when 95% of their policy agenda is identical to everyone else’s, heaven only knows. Why Sportingbet, in their turn, want to weaken the position of the entire private industry by arguing a small technical part of the overall picture (not to mention doing it really badly and in a manner which is easy to knock down) is even more baffling.

Sportingbet are a member of the Remote Gambling Association, which is one of two trade bodies for Europe’s gambling operators (itself a bonkers situation because it just underlines the fact that there is not one common position, but my attempts to get them together over the years bore no fruit at all). So is Betfair. That means that Sportingbet lobbies for one thing, Betfair lobbies for another, and the RGA presumably tries to tread a middle ground. Three groups from the private industry arguing different things, not to mention everyone else lining up in their turn. Three, four, five – who knows how many different versions legislators hear in response to the single monopoly position, when what they need to be hearing in response is a single thought: attempting to stifle competition through legislation in an internet world reduces innovation in the legal market and fuels the black market, which exacerbates all the problems which governments want to address. Governments should therefore be setting standards which operators must adhere to, and letting operators compete in taking and receiving bets, however they want to package those bets and whatever margin they want to charge for them.

The private industry has by far the more logical of the two arguments being advanced in Europe, particularly when you think about the aims of the single European market. But because some operators want to spend timing scoring commercial points off others and it therefore can’t articulate a common position, it is fighting a rearguard action. If it ends up losing its battle for legitimacy, it will have only itself to blame.

Posted in Betfair, Betting industry, Europe, Regulation.

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