Latest Cases - January 2012

Good afternoon, friends,

In this issue of Punters' Verdict....

  • Bot placed rogue bet on exchange....
  • Suspicions in the punting ranks....
  • Betfair was once so beautiful....
  • Survey the devastation all around....

Bot placed rogue bet on exchange....

I suspect many of you predicted I'd start the New Year with my take
on the Leopardstown Christmas Hurdle fiasco on the Betfair site....

An out-of-control 'bot' attached to a customer's exchange account -
in combination with a simultaneous glitch in Betfair's own database
software - resulted in punters betting in the 'in-running' race
market being offered mountains of 28/1 about 13/8 shot (and
subsequent race winner) Voler La Vedette - from the start of the
race right through to the finishing line by which time she was
almost 5 lengths in front.

A pretty generous offer you might think. And, of course, it was
gladly and greedily matched to the tune of £800,000 by at least 200
sharp-eyed punters who must have thought Xmas had come round all
over again.

But Betfair voided the bets when it became clear something was amiss
on a technical level - the punter offering the big price only had
£1000 or so in his exchange account for a start (at least that's
what Betfair are saying) and should never have been able
to actually build liabilities amounting to some £23 million.

Betfair say that the glitch which enabled the chain of events to
unfold has been fixed. They also say the customer whose bot was a
joint cause of the mayhem has had his account closed. Betfair appear
keen to move on....but plenty of punters aren't....

Suspicions in the punting ranks....

There are a lot of disgruntled Betfair punters out there as a result
of this situation - and not just those 200 punters who had their
big-price in-running bets on Voler La Vedette voided on the basis of
palpable error.

They want to know if the bets would have been voided had Voler La
Vedette NOT won.
They want to know whether - in the case of defeat -
Betfair would have viewed the 28/1 on offer as the legitimate 'in-
play' opinion of a shrewd punter opposed to the horse and allowed
the bets matched at the price to stand. Betfair say bets would have
been voided whatever the outcome. But punters are not so sure
Betfair would have played it so fair.

Nor are they totally convinced by Betfair's 'technical glitch'
explanations for how events transpired on the 28th December. For a
start, no individual customer has come forward to claim ownership of
the account attached to the 'rogue' bot
- the account that
supposedly caused all the trouble.

Suspicions abound that the account in fact belonged to a major
bookmaker - hedging in the exchange markets - who made a mistake and
pressed the wrong buttons with his sausage fingers. In some quarters
Betfair's 'technical glitch' story is seen as Betfair's way of
pulling the bookmaker out of the mire and sparing him from having
to pay out on the accumulated liabilities.

When interviewed on At The Races, Betfair's slippery spokesman, Tony
Calvin
, said punters who believe that are "barking up the wrong
tree.... People think we are protecting the customer but that is not
the case."

Very few Betfair clients consider what comes out of Calvin's mouth
in the course of his job as gospel truth. Indeed many, and I'm one
of them, accept that to be a bookmaker's spokesman is to be a
professional fibber on some levels. It's kind of expected - right or
wrong. It's not a personal thing.

But should it turn out that the exchange is protecting a big
bookmaking client after all then that would amount to a total and
utter scandal - and Calvin would have to hang his head in shame.
There are no 'get-out-of-jail' cards for punters to fall back on
when they press the wrong buttons and mess up - be it with a
bookmaker or on the exchanges. If bookmakers mess up they should be
subject to the same rules as punters - not awarded special status
and protected as though they were the feeble-minded children of
royalty.

Plenty of other punters believe the rogue account actually belonged
to Betfair itself.
(Rumours have circulated for some time that
Betfair play in and profit from their own markets at the expense of
clients. Betfair's use of bots is passed off as a necessary feature
of operation that serves the exchange user in some way but it
represents a source of deep consternation for many 'old-fashioned'
exchange users - myself included - who would prefer an exchange
operator where impartiality is beyond question.)

If it turns out the shambles was the result of a Betfair-controlled
bot
- and it is to be hoped the regulators in Gibraltar, corporate
governance agencies in the UK, IBAS and law enforcement agencies are
actually looking into this situation closely (assisted by people who
understand betting, betting technology and who actually know
what they are talking about) - then Betfair should be made to pay
out on the in-play bets it voided and its executives should be
prosecuted in the courts for fraud.

One thing is beyond doubt. Betting bots (software applications that
run automated tasks) - rather than living and breathing punters -
are controlling more and more of the day-to-day activity on betting
exchanges and the biggest bots are involved in multiple large-scale
transactions in all the most liquid exchange markets. The bots are
the major players these days.

It's a situation that can only corrode the punter's trust in betting
exchanges - driving them back into the arms of the traditional
bookmaker and creating a demand for a new player to step forward and
provide a betting exchange that strictly adheres to the person-to-
person ethos betting exchanges were originally founded and operated
on before the big snout of corporate greed got stuck into the
trough.

Betfair was once so beautiful....

Acting chief executive, Stephen Morana, described himself as
"personally devastated" when asked to comment on the shambles in the
Christmas Hurdle market.

Long-term users of the Betfair exchange can identify with his
devastation. There was a time that we considered Betfair just the
ultimate betting innovation.
I remember using the site for the first
time back in 2001/2002 and just LOVING it...

  • The prices were better than the bookmakers offered - and if
    you didn't like the price on offer you could request a price you did
    like

  • The markets were transparent. You could see exactly what money
    was down on what participant in each and every market - something
    you simply didn't and don't get when betting with a traditional
    bookmaker.

  • The site offered punters the opportunity to back AND lay -
    paving the way for hedging and trading activity.

  • Winning was encouraged. If you win too often or too much when
    betting with a bookmaker then your business will eventually be
    turned down. That simply wouldn't and couldn't happen on an
    exchange.

Betfair was a virtual betting revolution. It was a punter's
paradise. It was all you could dream of. For years we punters had
worked with the bookmaker's size 12 jackboot pressed down on our
throats. We'd had no choice. When Betfair came along the world of
betting suddenly contained so many possibilities... so much
potential... we were living and betting in a golden age....

Yes, it was early days.... Yes, maybe I'm a naïve and misty-eyed old
fool... Yes, maybe I'm just a dreamer.... But who would have thought
it could go so wrong so quickly?

In just one thin decade Betfair has degenerated into just another
corporate animal which has forgotten how to serve (or is content to
ignore) the very thing that made it what it was in the first place -
its customer base.
These days Betfair's priority is to suck its
customer base dry for the benefit of executives and shareholders.

Fair enough. I guess that's how the chips of capitalism fall. But
any good business - any business with a hope of having a future at
least - must provide quality service. And that is something Betfair
has forgotten.

Survey the devastation all around....

Tony Calvin says the debacle that occurred on the 28th December was
"highly embarrassing" and admitted the betting experience was
"unacceptable".

Betfair must tread very carefully. These highly embarrassing and
unacceptable episodes of poor service that adversely affect the
customer and stand against his interests and concerns are becoming
something of a bad habit....

Just a few examples of recent poor service and questionable
attitudes towards customers....

  • In 2008 Betfair introduced Premium Charges (amounting to 20%
    of gross profits) for specific successful exchange users - in effect
    taking a decision to penalize winners. This premium charge was
    raised to 60% for some customers in June 2011 - a move that ignited
    outrage. It's an issue I touched on back in October 2011.

  • In September 2011 Betfair failed to process a significant
    number of bets, including some winners, into the biggest ever Tote
    Jackpot pool.

  • We've also had the 'lost data' scandal where hackers filched
    Betfair customer payment card details, 2.28m encrypted payment card
    account numbers, 3.16m account user names with encrypted security
    questions and 89,744 account usernames with bank account details and
    Betfair took no action whatsoever to inform affected customers of
    the loss.

And these are just issues I've covered in this column. Spend an hour
or two on the Betfair forums and you'll come across plenty more and
high volumes of dissatisfaction and criticism of the Betfair
'regime'.

Betfair is in serious danger of becoming the betting industry
equivalent of Ryanair - a brand and business model customers have a
poor opinion of and will use only until something better comes along
to replace it.

Punters will still use Betfair because liquidity levels on
competition exchanges are not big enough - yet - to precipitate mass
migration.

Betfair must hope the tipping point that brings about such a
migration does not arrive. But if they continue to operate in the
style they've adopted in recent times then I'm betting that it will.
When there's a big enough need the market inevitably delivers
what is required.

Someone somewhere out there will be looking at ways to topple
Betfair and take over the exchange game.
You can rely on it - that's
the way the world works.

Betfair doesn't appear to be interested in or capable of learning
from its own mistakes. That's yet another mistake. An ambitious new
operator has an opportunity to do the learning for them - and that
can only benefit his prospects in the marketplace.

I'll be back with the Verdict next week.

The Judge

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