The pinch of spiralling taxation, compliance and other costs to wagering service providers is set to be further felt by punters, with confirmation that Betfair will lift its minimum commission rate on both racing and sports.
Overrounds, the combined percentage bookmakers offer on an event, have been increasing in the past two years, as major operators have looked to build in greater margins to compensate for the imposition and growth of Point Of Consumption Taxes as well as additional compliance measures.
In a traditional bookmaking set-up, these can be seen by reduced odds on markets, but the market percentage change is not explicitly stated by the wagering service providers (WSPs).
However, the exchange, which charges its commission on the betting transaction, not through its overround, must state what that commission is. In Betfair’s case that fee is called a market base rate (MBR).
MBRs on all Australian racing will increase from 7 per cent to 8 per cent, an effective 14 per cent rise, from March 25. The only exception is NSW and ACT racing, which already operate under an MBR of 10 per cent, given their specific taxation and race fields fee structure.
Non-Australian racing, which does not attract race fields fees, will rise from 5 per cent to 6 per cent, while all sports, apart from NRL which is already at 10 per cent, will jump from 5 per cent to 6 per cent.
The change was communicated to Betfair account members on Tuesday. It is the first change in its MBRs in three years. Betfair has been loath to raise its MBRs in the past due to the impact on liquidity and turnover.
The exchange plays a small but important part in the Australian wagering ecosystem, servicing a largely sophisticated professional trading market.
It is particularly vulnerable to turnover-based taxation and fee models, and the imposition of a 2 per cent turnover-based fee structure on NSW racing in 2017 prompted Betfair to lift that jurisdiction to a 10 per cent MBR.
Victoria underwent a POCT rise from 10 to 15 per cent from July 1, 2024, while NSW POCT jumped to the same rate two years earlier. But additional compliance measures, such as the national self-exclusion program BetStop, have also come in over that time, placing greater regulatory burdens and costs on bookmakers.
The cost of data feeds provided by sports and racing bodies has also increased, something which is causing commercial headaches for small and emerging bookmakers.
In a bid to boost turnover, Racing Victoria introduced the biggest changes to its product fee regime in 10 years ahead of the 2024 spring carnival, including a 50 per cent fee discount for high volume/low margin players.
Bren O’Brien
But The Straight understands that these measures did not have the desired effect of addressing the drop in turnover.
Since the end of the post-pandemic wagering boom in 2023, major bookmakers across Australia have eschewed a turnover-first approach preferring to focus on increasing their own margins.
What this has meant for punters is fewer generosities, more restrictions and higher market percentages.
Betfair was seen as a possible relief to this, but liquidity remains a challenge. Its holds on racing have decreased in concert with the broader industry.
As an example, the Betfair hold across Australian Guineas day at Flemington dropped from $8.1 million in 2022 to $3.7 million on Saturday. The average hold per Flemington race on Betfair in 2022 was $904,000. Last Saturday, it was $372,000.
Sydney racing’s hold on Betfair always trails Melbourne due to the additional MBR costs. The difference between the average hold for last Saturday’s Randwick meeting ($273,000) compared to 2022 ($513,000) is also significant.
Responsible Wagering Australia chief executive Kai Cantwell sees the Betfair MBR change as symptomatic of the broader industry challenges as the expense of running a WSP increases.
“The rising cost of wagering in Australia - driven by increased Point of Consumption Tax rates and regulatory pressures - is putting significant strain on both wagering service providers and customers,” he told The Straight in a statement.
“We are seeing licensed wagering providers being forced to adjust their pricing and business models, which ultimately impacts punters, reduces returns to the racing and sporting industries, and risks driving more Australians to illegal offshore markets where there are no consumer protections or industry contributions to the Australian economy.”
The “leakage” to the unregulated markets is hard to quantify. Racing authorities are aware that Australians are betting offshore but are divided on how it impacts local turnover.
Bren O’Brien
A recent survey in the UK pointed to up to 30 per cent of high-value punters having used unregulated sources to place a bet on horse racing.
It is worth noting that mandated affordability checks have driven much of this trend but as one professional punter told the Racing Post.
“People think that turnover is going down on racing because of what is happening, but that’s not the reality at all. It’s simply that the turnover is going elsewhere,” the punter said.
Australia does not have the burden of affordability checks and the You Win Some, You Lose More parliamentary report in 2023 described them as too great an imposition.
“The rising cost of wagering in Australia - driven by increased Point of Consumption Tax rates and regulatory pressures - is putting significant strain on both wagering service providers and customers” - Responsible Wagering Australia's Kai Cantwell
However, bookmaker groups here do point to the possible federally mandated advertising restrictions on regulated bookmakers which did emanate from that report as being an opportunity for unregulated operators to target Australians.
RWA, which represents bet365, Betfair, Entain, PointsBet, Sportsbet and Unibet, said balance was key when it came to regulation.
“A sustainable wagering environment requires a balanced regulatory approach - one that ensures strong consumer protections while keeping the industry viable so it can continue supporting jobs, racing, and sporting bodies across the country,” Cantwell said.
