Yesterday’s High Court decision to strike down Western Australia’s law banning controversial betting exchange Betfair won’t be welcomed by the racing industry or state governments – or Tattersalls’ rival, Tabcorp.

The unanimous decision allows West Australians to resume their Betfair accounts. It’s a decision that will have massive consequences for the $12 billion a year wagering industry right across Australia.

The Tasmanian Government will see it as a vindication for its revenue-reaping, go-it-alone decision to licence Betfair. And the licensed betting agencies, chiefly operating out of the Northern Territory, will believe it is now difficult for state governments, egged on by the TAB operators and the racing industry, to limit their ability to market their services.

But in the long term, the biggest loser will be the racing industry, unless it soon reaches agreements with Betfair and agencies such as Lassiters and Sportsbet on product service fees or other forms of revenue for betting on Australian horse racing.

State governments stand to lose significantly as well. Treasury coffers receive a share of the turnover of TAB operations in their state, and any rapid growth in betting agencies will cut into that. But an even greater threat to the states arises from the fact that the racing industry’s prize money is substantially funded by the TAB under the product agreements Tabcorp and Tattersalls (through UniTAB) have with racing, harness racing and greyhound authorities.

Unless the racing industry can get a share of the profits of non-TAB wagering, which has grown massively in recent years, the states will be under pressure to provide funding for the racing industry. The NSW racing industry has been lobbying the state government for additional funding.

The NSW Government has ordered a review into whether Betfair and other online agencies should be allowed to operate in the state. Yesterday, Alan Cameron, the head of the review, said his gut feeling was that the decision meant they would be allowed to operate, even possibly before he hands down his review in July.

The High Court decision essentially found the WA law preventing its residents betting with Betfair was “unfair” because it imposed protectionist burdens on interstate trade and therefore contravened section 92 of the Constitution.

As Tabcorp’s Bruce Tobin put it: “State governments are rapidly using control of their wagering markets”. And that includes losing the right to ban NT corporate bookmakers from advertising in NSW and Victoria.

Betfair is the immediate winner, but the long term winners will be the corporate bookmakers, mostly operating out of the NT, who already have massive turnovers even with the advertising and other restrictions the state shave imposed. Betfair’s market share outside Tasmania remains small, but that might now change rapidly.

Some racing figures with their heads firmly planted in their racetracks don’t think the decision is of great consequence, this one fact might change their mind – in discussions with NSW racing officials, Betfair have offered to pay a fee of 27cents out of every $100 bet. The TAB currently pays a fee of $5 in every $100 wagered!

The TAB operations are effectively state sanctioned and protected monopolies. Yesterday’s decision means the days of these monopolies remaining are numbered.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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