Betfair Ends Contract With CryptoLogic to Launch Its Own Poker Product

[Vallerius]

Last week online gaming software developer CryptoLogic confirmed what has been anticipated for over a year-- that British online gaming firm Betfair has ended its contract with the company. Betfair, a firm that has been on the cutting edge of technology and innovation for years, was a poker-only client of CryptoLogic's, and CryptoLogic says that the loss of Betfair as a customer "is expected to have no material adverse effect on CryptoLogic's 2006 financial results. CryptoLogic continues to boast one of the most solid client-bases among online gaming software developers, and recently it scored a deal to provide interactive casino and poker technology to Playboy.
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</O>Betfair meanwhile intends to launch an in-house-developed poker product by the end of October 2006. Last fall Betfair purchased a Danish company named Aglet Technologies, creator of the PokerChamps.com software, and the new product to be unveiled next month is sure to be the culmination of Aglet's ability led by the creative direction of Betfair.
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Although Betfair is for the most part unheard of by the typical American gambler, it enjoys a prominent position in the UK and European market. No company has been more successful than Betfair in operating a sports betting exchange platform. A betting exchange offers a wide array of novel options that are in many ways superior to the offerings of traditional bookmakers. While a bookmaker typically provides a customer with only one set of odds for any given proposition (say a moneyline of -107 for the Yankees beating the Red Sox), Betfair can be thought of as a person-to-person network in which a customer can propose his own odds which other customers would have the ability to accept if they so choose. Think of it as an Ebay that allows users to buy and sell sports bets instead of bidding on tangible goods.

Another innovation of the betting exchange is that it permits a wider array of bets on horse racing and other sports that involve more than two competitors. While the bookmaker only offers wagers on whether certain competitors will perform well enough to win or place, Betfair allows customers to wager than a competitor will NOT win or place.
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This latest particular innovation has caused much scandal and controversy however. Many individuals are adamant that the ability to bet a competitor to lose has thrown the integrity of sports into peril. Two years ago there were vast allegations of horse race fixing in the UK. There were abundant accusations that jockeys, trainers and others with inside information could bet on their horse to lose and then intentionally throw the race and gain a larger winning than the race purse. Betfair's solution to the problem has been to sign Memorandums of Understanding with the UK Jockey Club and other sports organizations, whereby it has offered to share its betting records with the sports organizations in situations where race fixing is reasonably suspected. Betfair has also been reported to have on a few occasions contacted sports authorities before the start of competitions to inform them of irregular patterns. Data obtained by Betfair in 2002 through 2004 and then delivered to the Jockey Club and City of London Police led to a massive investigation that culminated in the arrest of 28 individuals on charges related to race fixing in September of 2004. Charges were eventually dropped against all but eleven of the individuals in July of 2006. Among those still facing charges in Kieren Fallon, who is perhaps the most successful and popular British/Irish jockey in recent history.
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Betting exchanges typically take a small percentage of winnings-- typically 5 percent-- as profit. Losing wagers pay no commission. It is debatable whether such a commission structure is actually a better deal for the customer. In a situation where a bookmaker is offering 8-cent moneylines, the book only takes about 4 percent of each wager as "commission."
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Betfair does not now, nor has it ever, accepted wagers from the American market. It was recently successful in a nearly two-year battle to obtain licensing and regulation to operate in Australia.
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The most popular betting exchange that serves the American market is Betbug, but it has nowhere near the critical mass of Betfair, which is thought to possess between 80 and 90 percent of the overall global betting exchange market.
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Betfair also offers an Exchange Poker platform, which I regretfully have not experienced yet, but I understand that it provides a novel twist on the game of poker, allowing players to bet for or against a multitude of propositions within a game rather than simply betting or folding one's own hand. The company's new poker product release in October will be a standard poker platform.