🔒 🔒 The other side of betting – exchanging views on Betfair’s 20 years in Australia

For two decades, Australians have had the option of doing something that once seemed foreign to the betting market.

They could wager against another punter rather than a bookmaker.

Betfair had been operating at an unsanctioned level for several years before its arrival in 2006 as a licensed platform that formally introduced the betting exchange to Australia.

Thanks to the foresight of the Tasmanian government at the time, Betfair brought a different way of setting prices, taking positions and thinking about the relationship between a wager and the person on the other side of it.

“This is about modernising our wagering industry and embracing innovation rather than resisting it,” former Tasmanian treasurer Michael Aird said when announcing the licence.

The concept was simple enough, although it represented a profound departure from conventional wagering.

A bookmaker posts a price and accepts a bet against its own book, building a margin into the odds, while an exchange creates a marketplace where customers can bet for or against an outcome.

To “back” a horse is to bet that it will win, while to “lay” it is to take the opposite position and accept another customer’s bet that the horse will win.

Betfair matches the two positions rather than becoming the counterparty itself and for that stance it takes a commission from a customer’s net winnings, rather than relying on the traditional bookmaker model of building its margin into the price.

That distinction has always been central to Betfair’s proposition.

So too has the ability to trade a position, allowing punters the opportunity to lock in a profit before the race is run.

Its prices are created by customer interaction, meaning the market can continually adjust as money flows in and opinions change.

That becomes particularly dramatic once a race or sporting contest is underway.

Winx provided one of the most memorable examples in 2017 when she missed the start of the Warwick Stakes and her price blew out to $8.80 in-play.

The extraordinary part was not simply the price movement, but what happened next: the champion recovered to win, turning a moment that looked disastrous into one of the more remarkable in-play betting stories in the exchange’s Australian history.

A similar dynamic applies across sport.

In the AFL, Betfair’s in-play markets have recorded wild swings as momentum changes, with Melbourne trading at $1.01 against St Kilda before the Saints completed a 46-point comeback in the final quarter in 2025.

St Kilda had traded as high as $100, meaning the market had effectively considered the game over.

These moments explain one of the fundamental attractions of an exchange.

The price is not fixed by a bookmaker waiting for the result; it is continually reset by people reacting to what they see happening.

But that model carries an important qualification. An exchange is only as good as its liquidity.

Sufficient money must be available from both backers and layers for customers to get the prices and bet sizes they want.

A heavily traded race can therefore become a deep and competitive market, while a race with little interest can offer fewer opportunities and less attractive prices.

That creates one of the exchange’s enduring challenges.

The more people using Betfair, the more liquidity becomes available, which makes the exchange more useful and encourages further participation.

Conversely, a shallow market can discourage customers, reducing activity and making the market thinner still.

Betfair was an ambitious concept to introduce in Australia because changing customers’ habits was never going to happen overnight.

When the company’s Australian licence was granted in Tasmania, it gave it the regulatory foundation it had been pushing for as a legitimate wagering alternative.

Andrew Twaits, who headed Betfair’s Australian operation, made it clear that the licence was crucial to establishing the business domestically.

“We haven’t been able to set up any infrastructure on the ground, anywhere in Australia, until we’ve had a licence,” Twaits said at the time.

“So it’s important to us from a business perspective that we can now do that.”

Betfair began operating from Hobart and promised jobs and significant economic activity for Tasmania, while the state government anticipated tax revenue and payments to the racing industry.

The first Australian market settled on the licensed exchange was an AFL match between Collingwood and North Melbourne in August 2006.

But racing soon became the exchange’s vulnerability as administrators questioned the wisdom of allowing punters to make a “lay” bet.

Officials, often described as short-sighted, played the integrity card to the point of ad nauseam.

Betting on a horse to lose had always been possible in various forms, but the exchange created a mainstream retail mechanism in which that position could be taken openly and at a price visible to the market.

Concerns arose about whether people with access to inside information could exploit the ability to lay runners.

As a result, Betfair found itself fighting governments as it tried to establish the legal right to operate its model across Australia.

Western Australia became one of the most important early battles, with the company challenging restrictions that effectively sought to prevent betting exchanges from operating in the state.

The High Court ruled in Betfair’s favour in 2008, finding Western Australia’s restrictions breached the constitutional guarantee of free trade between the states. 

It was a decision that did more than secure Betfair’s position: it helped establish the basis on which wagering operators licensed in one Australian jurisdiction could reach customers nationally.

The victory appeared to vindicate Betfair’s broader strategy, but the legal skirmishes were far from over.

Betfair’s business model was particularly exposed to the way racing authorities chose to charge wagering operators.

That became critical in NSW, where Racing NSW introduced a 1.5 per cent turnover fee on wagering operators using its race fields.

For a bookmaker, a turnover charge was significant.

But for an exchange, where the amount of money traded through the platform could be many times greater than the commission the operator actually retained, it posed a particularly difficult commercial problem.

The distinction between turnover and revenue became central to Betfair’s argument.

A million dollars traded through an exchange did not represent a million dollars of income to Betfair.

The company might earn only commission on its customers’ net winnings, yet the fee was calculated against the much larger amount wagered.

Racing NSW chief executive Peter V’landys argued that the issue was not simply about the economics of one wagering operator, but about ensuring the racing industry received appropriate compensation for the product being sold.

“People that profit out of other people’s labour should be paying for it,” V’landys said.

When the High Court upheld the Racing NSW regime in 2012, the consequences extended far beyond Betfair. The judgment secured the race-fields fee model that would reshape how corporate wagering revenue flowed back to the racing industry.

V’landys described the outcome in terms that reflected how important he thought the case was to the racing industry.

“Relief is an understatement,” he said. “This is a relief for the 50,000 participants in NSW. This is a victory for them today.”

He also made clear where he believed the proceeds should go.

“There will be prize money increases next week, there’ll be some substantial money spent on infrastructure throughout NSW,” V’landys said.

For Betfair, the decision represented another harsh reminder that the exchange model was being asked to operate within a racing funding structure largely designed around traditional wagering businesses.

Its legal stoushes had helped establish the ability to operate, but winning the right to compete did not guarantee the commercial conditions required to flourish.

“There will be prize money increases next week, there’ll be some substantial money spent on infrastructure throughout NSW.” – Peter V’landys in 2012.

There was another problem.

The Australian wagering market was changing rapidly, and the exchange was no longer the only disruptive force.

Corporate bookmakers were expanding aggressively, investing heavily in technology, marketing and customer acquisition while offering increasingly sophisticated fixed-odds products and derivatives of traditional totalisator forms of betting.

Betfair was different, but it also had an impact.

At one point, Victoria required its wagering licence holder to offer exchange betting, reflecting the belief that the model represented an important part of the industry’s future.

That requirement was eventually removed in 2019.

The exchange survived, but the original expectation that it would fundamentally displace traditional bookmakers did not materialise.

Its commercial structure also changed.

In 2014, Crown Resorts acquired the remaining 50 per cent of Betfair Australasia for $10 million, taking full ownership of the Australian arm while Betfair continued supplying its exchange technology through a business-to-business arrangement.

Crown’s ownership gave the local exchange continuity, but the structure also separated Betfair Australia from the global business and placed it within a casino group that would face intense regulatory scrutiny. Whether that constrained innovation is difficult to establish.

The company’s relationship with Tasmania also gradually unwound.

Betfair surrendered its Tasmanian sports-betting and race-wagering endorsements in 2015, moved its regulated operations interstate in 2016 and gave up its Tasmanian gaming licence later that year.

Its latest transformation points to more than an exchange-only future. This year Betfair Australia revived CrownBet as a dedicated fixed-odds brand, complementing rather than replacing the exchange.

Yet the exchange itself remains and continues to influence how betting markets operate, despite Betfair being nowhere near one of Australia’s biggest wagering companies.

That endurance matters because Betfair never needed to become Australia’s biggest wagering company to influence how markets operate. It survived because it kept providing price discovery, trading, and liquidity even as the legal and funding landscape constrained its capacity to grow.

For all the predictions made about the betting exchange when it arrived, however, Betfair did not replace the bookmaker.

The revolution was never as complete as its early advocates imagined, but Betfair did not disappear as some racing administrators had hoped.

The rise of US prediction markets has now renewed interest in a model with strong parallels to exchanges.

Customers take opposing positions in a market rather than betting against a traditional bookmaker. 

The Northern Territory expressly provides for betting-exchange licences covering racing, approved sports and novelty events, prompting industry discussion about whether exchange licensing there or in Tasmania could offer a path for prediction markets in Australia. 

That remains a regulatory proposition and not a settled route.

Yet Betfair’s experience over the past 20 years has helped establish the regulatory and commercial precedent for such a model.