Posted on: September 14, 2020, 03:14h.
Last updated on: September 14, 2020, 03:55h.
Betfair will pull its betting exchange platform from New Jersey, the only jurisdiction in which it operates in the US, citing disappointing numbers.
The move signals an end to the company’s attempt to bring exchange wagering to America, a concept that never really took off, despite its promise of better odds for customers.
The platform had failed to post any significant growth since its launch in 2016. According to the New Jersey Racing Commission, it recorded a modest handle of around $12.4 million in bets in 2018.
Betting exchanges offer peer-to-peer wagering, allowing bettors to agree to their own odds without the need for a bookmaker. The operator acts as an arbiter, taking a commission on winnings — 12 percent in New Jersey, although its smaller in other markets.
It’s a model that Betfair pioneered, and one that has proved hugely popular in many jurisdictions over the last 20 years, including its native UK.
But Kip Levin, COO of FanDuel, which oversees Betfair’s US operations, told Thoroughbred Daily News that the platform “never hit the critical mass needed for it to be viable.”
Just like online poker, a betting exchange needs customer liquidity to function – the higher the liquidity, the easier it is to match a bet. The Betfair exchange struggled in New Jersey for the same reason that online poker has struggled in the ring-fenced US markets, limited by the size of a state’s population.
Things could have been different. Prior to its merger with Paddy Power — and the enlarged group’s subsequent takeover of FanDuel — Betfair entered the US market through the acquisition of horse racing and account wagering channel TVG.
This meant it could legally lobby lawmakers to pass exchange-friendly legislation, and it was successful in this regard in New Jersey and California, although only New Jersey ever got around to drawing up a set of rules for exchanges and to licensing Betfair.
A population the size of California’s might have got the party started. Instead, when Betfair launched its exchange in New Jersey in 2016 — having waited five years for a license — it was limited to horse racing and only from participating tracks, which included Monmouth Park, Woodbine in Canada, and a handful of other small venues.
Across the pond, the joy of the betting exchange was that you could place a bet on practically anything, provided you could find someone willing to take the opposing position. Despite its best efforts, New Jersey was still a couple of years away from legal sports betting, and the user experience in the Garden State was a very different proposition.
Many tracks snubbed Betfair because they were concerned about the platform cannibalizing the market. Some were also worried that it would spread corruption within the racing industry by encouraging industry insiders to bet on their own horses to lose, for example.
According to Levin, America was simply not ready for exchange wagering, which was up against “a customer base used to exotic wagers and reluctance by major US racing associations to embrace the different business model.”