BetFair actively report betting that appears to them out of the ordinary. And, if any sport regulator has concerns, then BetFair provide them with additional information. BetFair, of course, has no say in whether a criminal offense has been committed, and no input into the prosecution (the Crown Prosecution Service).
In the Fallon case (an Irish jockey suspected of collusion with some bettors), the British police investigated the incidents. BetFair provided testimony. But the British justice decided that mister Fallon shouldn’-t be convicted.
This week, the British police aired an internal report about why they lost the case —-their fault, they write. I won’-t analyze the full case on Midas Oracle, but I just want to touch 2 things:
- The Times (of London) says that “-any prosecution based on race-reading, that is proving a motive by [analyzing] a jockey’-s ride, is doomed because it is open to so many interpretations.”-
- The British Police “-had an inadequate understanding of the nature of online betting exchanges and the process of laying a horse to lose, the mechanism by which the defendants were alleged to have attempted to profit from fixed races.”-
This second point was very clear during the trial, and the media reported, at the time, that BetFair didn’-t do a good job in making sure that the Police would understand all the facts and mechanisms involved. Below are the media excerpts that make that case.
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The Guardian:
[…] [Acting detective inspector Mark Manning] began his investigation by visiting the offices of Betfair, the company through which the bets involved in the case were made. He was told that Fallon’-s fellow defendant Miles Rodgers had risked a total of ?2m, but Manning misunderstood and left with the belief that Rodgers had made a net profit of that amount. By the time the trial opened more than three years later, it had become clear that Rodgers had made a net loss of over ?250,000 on the races concerned. […]
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The Guardian:
[…] In part, the fault is Betfair’-s, for failing to ensure that police investigators understood the meaning of the complex evidence they provided, and for passing pages of irrelevant data to the Crown that provided one of many early embarrassments for the prosecution. […]
The senior detective in charge of the investigation, Mark Manning, had met [Betfair lawyer David O’Reilly] at Betfair’-s offices earlier that year [in 2004]. Manning left with a fundamental misunderstanding – that Rodgers had made a net profit of ?2m from his betting activities, when in fact this was the total amount that had been risked. By the time the trial began, it had become clear that the accounts controlled by Rodgers had in fact made a net loss of more than ?250,000 on the 27 races investigated.
Betfair provided more than 300 pages of data in evidence, showing the betting activities of Rodgers’- accounts on these 27 races. O’-Reilly, the first witness called, claimed in court that this data showed how Rodgers would take bets on certain horses at much bigger odds than were being offered by anyone else. Under cross-examination, however, O’-Reilly was led to the realisation that the Betfair data for eight of the 27 races included details of bets made after the race had started, at which point larger odds could be justified by mid-race developments. Observers were shocked that Betfair could have made such a blunder in handling its own data.
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The father of one of the accused (and now cleared) jockey:
The man from Betfair admitted at the start of the trial he had misled police as to the amounts that had been gambled and then they brought in an expert witness from Australia [Ray Murrihy, Racing NSW’s chief steward] who doesn’-t know how things work here [in the U.K.].
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Daily Mail:
The case highlighted the difficulty of proving, forensically and legally, that a jockey has tried and succeeded in stopping a horse from winning.
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BBC News:
[…] At the end of the day, serious questions will be asked of both City of London Police and the Crown Prosecution Service as to why they agreed to proceed with a case that was so flawed and had little chance of success.
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[…] NEXT: Has BetFair a little part of responsibility in the collapse of the Kieren Fallon trial? […]
I make absolutely no comment on where any ‘blame’ does or doesn’t lie, but I do think that the cost of policing prediction markets should be borne jointly by the provider and the users of the prediction markets in question.
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The taxpayer did not ask for the original prediction market to be run, and has picked up a ?950,000 bill. This could be completely the police’s fault, or completely Betfair’s, or completely someone else’s, I make no comment, and to be fair, it could be completely the police’s fault that the prosecution collapsed (and it could perhaps not be completely the police’s fault).
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However, active policing should be incorporated into the pricing mechanism of the prediction market, and should not be allowed to become a negative externality unpaid for by either the participants or the supplier of the market. People who bet on these markets should have to pay more to use these markets, if there is a bill to be paid for policing them. Likewise, the provider of these markets should charge a higher price for providing this service, so that any costs (in this case ?950,000) are paid for from the original market.
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In this case, racing prediction markets are flawed if the cost of policing them falls on to the taxpayer. When negative externalities are not incorporated into the pricing system, you get an overprovision of markets, and the ?950,000 spent by the taxpayer (presumably mostly on legal fees to lawyers) could really have gone on something better for society.
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Most traditional bookmakers flag up suspicious activity on accounts very quickly, and don’t let people smash in in size repeatedly, because it is the bookmakers own money which is at risk. As a former bookmaking trader, I believe that incorporating those kind of decisions across the variety of exchanges prediction markets, would be beneficial to the UK taxpayer, and to the exchanges themselves. Would be great to see it introduced one day, if it happens that I am right (which I may be, or may not be
).
INSANE IDEA ALERT
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We could put in place a system where any user who bets on a prediction market that is subsequently investigated by police becomes liable proportionately for the costs of that investigation :-D. The cost of policing should stem from the original users of the market (although there is an accrued benefit to future users if there have been previous convictions, acting as a deterrent to the miscreants, so maybe future users could contribute to, even on clean markets). The proportion of the cost of policing borne by users should be dependent upon their relatived elasticity of demand for the market (in comparison to the prediction market provider/supplier), with the higher their relative elasticity, the greater the percentage of the cost paid for by prediction market customers, rather than the prediction market provider. :-). (A joint sharing of costs according to relative elasticities of demand creates the smallest deadweight loss).
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Overall though, ?950,000 bills for the taxpayer are a pretty bad thing to start with, but are much more damaging when it is a negative externality not incorporated into the original supply/demand function of the prediction markets in question. If you want to use racing prediction markets, it is to your benefit if they are clean, and prediction market users should have to pay for the privilege of keeping it clean, if their demand for wagers on that prediction market isn’t perfectly inelastic (which it isn’t).
ehhhhhhhhhhhhhhhhh, No.
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(sorry, a simple “No” was too short a message)
[…] NEXT: Has BetFair a little part of responsibility in the collapse of the Kieren Fallon trial? […]
I make absolutely no comment on where any ‘blame’ does or doesn’t lie, but I do think that the cost of policing prediction markets should be borne jointly by the provider and the users of the prediction markets in question.
–
The taxpayer did not ask for the original prediction market to be run, and has picked up a ?950,000 bill. This could be completely the police’s fault, or completely Betfair’s, or completely someone else’s, I make no comment, and to be fair, it could be completely the police’s fault that the prosecution collapsed (and it could perhaps not be completely the police’s fault).
–
However, active policing should be incorporated into the pricing mechanism of the prediction market, and should not be allowed to become a negative externality unpaid for by either the participants or the supplier of the market. People who bet on these markets should have to pay more to use these markets, if there is a bill to be paid for policing them. Likewise, the provider of these markets should charge a higher price for providing this service, so that any costs (in this case ?950,000) are paid for from the original market.
–
In this case, racing prediction markets are flawed if the cost of policing them falls on to the taxpayer. When negative externalities are not incorporated into the pricing system, you get an overprovision of markets, and the ?950,000 spent by the taxpayer (presumably mostly on legal fees to lawyers) could really have gone on something better for society.
–
Most traditional bookmakers flag up suspicious activity on accounts very quickly, and don’t let people smash in in size repeatedly, because it is the bookmakers own money which is at risk. As a former bookmaking trader, I believe that incorporating those kind of decisions across the variety of exchanges prediction markets, would be beneficial to the UK taxpayer, and to the exchanges themselves. Would be great to see it introduced one day, if it happens that I am right (which I may be, or may not be
).
INSANE IDEA ALERT
–
We could put in place a system where any user who bets on a prediction market that is subsequently investigated by police becomes liable proportionately for the costs of that investigation :-D. The cost of policing should stem from the original users of the market (although there is an accrued benefit to future users if there have been previous convictions, acting as a deterrent to the miscreants, so maybe future users could contribute to, even on clean markets). The proportion of the cost of policing borne by users should be dependent upon their relatived elasticity of demand for the market (in comparison to the prediction market provider/supplier), with the higher their relative elasticity, the greater the percentage of the cost paid for by prediction market customers, rather than the prediction market provider. :-). (A joint sharing of costs according to relative elasticities of demand creates the smallest deadweight loss).
–
Overall though, ?950,000 bills for the taxpayer are a pretty bad thing to start with, but are much more damaging when it is a negative externality not incorporated into the original supply/demand function of the prediction markets in question. If you want to use racing prediction markets, it is to your benefit if they are clean, and prediction market users should have to pay for the privilege of keeping it clean, if their demand for wagers on that prediction market isn’t perfectly inelastic (which it isn’t).
ehhhhhhhhhhhhhhhhh, No.
–
(sorry, a simple “No” was too short a message)