Betting and Politics

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I opened my Betfair account on 22nd April 2003. I was one of the first subscribers to Adam Todd's BetTrader and was a founding partner of JuiceStorm.com on 17th February 2007.

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Please do not assume that information in this article applies to the USA only and therefore doesn’t affect you – there is potential for any person in any country to be affected by this.

Most people find politics at best tedious and incomprehensible, and the temptation is to bury your head in the sand and let the politicians get on with it. However, it is sometimes better to be informed and bored than uninformed and in trouble. There is absolutely no doubt that the current relationship between gambling, politics and tax is causing a stir in various parts of the world. It would be foolish to assume that wherever it is that you happen to live is immune.

I do not pretend to understand the laws in various parts of the world, but in the last few years there have definitely been important changes, some of which have yet to be implemented, in the USA, France, Greece, Spain, Italy, Denmark, Germany, Ireland and the UK. There may be others in the pipeline that I am unaware of.

The following are extracts from recent articles on Bookmakersreview, with links to the relevant articles.

USA

It is quite clear that betting with US facing bookies is still a very risky business. This includes those bookies which have moved their domains to .ag sites and those with international branches. My advice is to avoid US bookies and I include those with European branches. It is easy to be complacent and think that nothing has happened recently and therefore things are safe. The way this works is that the US authorities work quietly gathering evidence for years, then suddenly swoop, and the first thing you know about it is the bookie’s website is locked and your money is gone.

Unfortunately some of the articles relevant to this subject have got lost in Bookmakersreview’s move to a new website. These articles, and the one below, written in 2011, gave an insight into the US government’s attitude to paying money back to punters (in a nutshell, they won’t).

Blue Monday a month later Date published: 28 June 2011

A month ago, the United States Attorney for the District of Maryland announced the indictments of ThrillX Systems, the company behind online bookmaker BetEd, and BMX Entertainment, the parent company of Bookmaker.com, both charged for illegal gambling and money laundering.

This detailed article also says:

“In my recent investigation into the payments to the Anne Arundel County Police Department to find out where the funds came from (Bodog), I found an interview with the US Attorney for Maryland Rod J. Rosenstein, responsible for the indictment of BetEd and Bookmaker.com, who stated: “You can’t expect to put every operator out of business. But the ones that are the most flagrant violators of the law and generating the most business — those are the logical targets.” Asked if funds seized will in the long run undermine the ability for offshore gambling sites to pay players, Rosenstein added: “That’s a possibility, and it’s certainly a risk for customers. And it’s a pretty effective deterrent, since customers have no remedy if the gambling operator fails to pay. They won’t be able to go into court and enforce that. It’s an illegal contract.”

Rosenstein also said that online gambling can be prosecuted anywhere that customers are located and that the public should expect to see more enforcement efforts taking place in more jurisdictions.

Now while I find unacceptable that European players can be affected by a US Government decision to go after offshore gambling sites, it’s a fact that if US-facing bookmakers have funds seized, players, no matter where they are, may not get paid. BetEd was just a small bookmaker, but Bookmakers Review received complaints from European players that had money with them and just as with the American players, there is no indication they will ever get back their funds.”

UK

When the UK legislation concerning licensing and tax went through there was considerable concern on forums that only a few bookmakers would buy UK licences. In fact, with a few notable exceptions (Pinnacle and SBObet being the biggest) most of the main bookmakers did in fact get UK licences. What effect the new tax rates will have (at the time of writing this starts next month) remains to be seen.

Europe

Over the past few years various European countries have introduced strict new rules requiring bookmakers to pay for a licence in that country before being allowed to offer betting services there. This is usually put forward as for the safety of the players, but in fact it is all about money and tax. The result, for the punters, is a restricted set of bookmakers, which if you are unlucky only includes that country’s tote operators (like France), or does not include betting exchanges.

Any bookmaker with any scruples will block signups from forbidden countries – if they don’t you run the risk of having your funds confiscated when you try to withdraw. Some governments block the use of cards on sites that do not have the appropriate licence. Some bookies block IP addresses from forbidden countries so that even the homepage is not available to view.

News on German Betting Tax proposals The Guardian, 6 April 2011

A long article prompted by Germany’s federal states saying that private companies bidding for seven national betting licences would face a 16.7% tax on turnover.

The net result of this is likely to be that German customers will not be able to bet with companies such as Betfair who refuse to pay this rate of tax. Betfair did indeed withdraw from Germany when this legislation was passed.

Australia

Some Australian states intorduced a turnover tax (as opposed to a gross profits tax). This is particularly difficult for betting exchanges where the turnover on lay bets at low odds is huge compared to the commission they get from these bets when the short priced selection wins. Betfair increased their commission rates for Australians for certain Australain events as a result, and for a time it looked possible that they would withdraw from Australia completely.

What now?

Does all of this spell the end of matched betting, arbing and tax free betting as we know it?

The answer to that will probably depend a great deal on where you live. Certainly those who live in places like USA and France have very little choice of where they bet, and betting exchanges are not currently available there. This could well spread if other countries adopt draconian taxation rates as Germany did. It is often said that it is impossible to tax online gambling, but governments are realizing that they do not have to tax the individual punters. They simply tax the bookmakers themselves. They then restrict their citizens to using only the taxed bookmakers by making it impossible for them to deposit money into anywhere else. The person who ultimately pays is the punter, because the bookmakers have to offer worse odds in order to pay the taxes.

My advice, for what it is worth, based only on my own opinions is as follows. Matched betting or arbing is not worth breaking the law for – as well as risking your money you also risk a criminal record and possibly even a jail sentence. But as long as it is legal to do so, you should be alright to continue as long as you use common sense. This most definitely involves staying away from bookmakers with US connections, however tempting their offers may be, unless you are prepared to lose your money. You should also be aware that bookies, like everyone else, are finding it harder to make ends meet, and some of them are not managing it. You should be very wary of allowing a large balance to build up in any bookie. Pay attention to the colour coding and comments on the bookie list, keep an eye on SBR and Bookmakersreview, and stick to bookies that have a good reputation and the chances are you will be fine. But don’t bank on this situation continuing indefinitely. Make hay while the sun shines, and be prepared for the possibility of it coming to an end. Now is definitely not the time to be thinking of giving up your job to arb professionally, in my opinion.