If any of you have enjoyed the game again betting on an exchange, like betfair, you know exactly what I'm talking about. If you haven't, while this may be greek to you, but if you want to read on, please go ahead.
In-running betting is a new way to play racing, where when a race goes off, the odds change and you can back a horse (go long the horse, or bet the horse to win), or lay a horse (go short the horse, or bet him to lose). Most in running players do some laying, or "green up" their pre-off positions to try and make the most money. Smaller players, looking to enjoy the excitement of betting a race in-running, tend to go long, so these players provide a ton of liquidity and make the market.
Like the stock market, where you buy a stock at $1 and sell it later for $1.05, for say, $500 profit minus a $8.95 commission at your favorite online broker, this type of betting is taxed in a similar way. If you buy a horse for $1000 at 2.0 and sell $1000 at 1.96, you made a few dollars, and were taxed at a % of your profits. Clearly, the exchange can not tax you at 15% takeout, because you'd owe $150 on your bet, and you only made $40. That would be silly.
However racing - in their infinite wisdom - challenged this set up in Australia. They wanted a tax on turnover, instead of gross profits and did exactly that.
This in turn, of course, changed a betting game for customers of racing in that jurisdiction.
Via an Aussie blog:
- Since the High court decision, a number of 'traders' on NSW racing have been asked to cease operations - including yours truly. Overseas residents have also been contacted, which can be a dilemma as they may need to check the location of the racecourse they'd like bet on! If you are new to the exchange or you're betting in very small amounts you're probably OK for a while.
- Traders enable liquidity and generate interest in markets. This in-turn stimulates wagering via the TAB and bookmakers - with players looking to lay-off/arbitrage/take advantage of better odds. All this generates funding to the racing industry and provides owners with better returns. Why most of the powers that be can't sit down and work this out I'd love to know. I think the term 'vested interests' comes into play.
"....a number of 'traders' on NSW racing have been asked to cease operations"
Racing is telling these people not to bet. In fact, you'd have to be insane to even make a bet, because for the first time in gambling history, you'd win a bet, and owe racing more than you won.
It's 2012 and we need every possible outlet to reach people. We need differentiating products to use as loss leaders. We need new ways to play to get at people who never even would look at us. We need big companies trying to gain new customers by spending their marketing money that we don't have. We need partners, we need technology. We need dynamic pricing, so people who want to trade and follow the sport, can trade and follow the sport. That's exactly what exchanges, in running betting, traders and tech geeks are trying to do.
We should never be doing anything that encourages people not to bet.
For the folks in racing who fought long and hard to get this turnover tax done for the 'good of the sport' - congratulations, you succeeded in driving away customers.