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Betfair, Racing NSW Legal Battle

Published: November 19, 2009 1:21 pm ET

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In what Australian press reports are calling “a landmark case for bettors,” the controversial betting exchange Betfair and Racing New South Wales opened a legal battle in Australian federal court yesterday.

Betfair says it is being subjected to a “discriminatory burden of a protectionist kind” by a 1.5% turnover tax imposed by Racing NSW. It says the tax is unconstitutional because it restricts free trade. The racing group says there is no constitutional protection for one operator to charge a lower price than a competitor, and says Betfair is suffering from its own decisions.

The racing group is being led by NSW chief executive Peter V’landys, who argues betting exchanges need to support the racing industry that sustains them. Betfair calls the tax discriminatory because it equates to a tax of more than 50% on the revenue it earns charging a 2 to 5% takeout on bets it handles, while TAB, the off-track betting system, pays a tax of about 10% of its gross income on takeout of 16%.

Racing NSW says Betfair effectively crippled itself by choosing a high-turnover, low-margin business model and now expects special favours. Its attorneys say a fee concession already has been granted, since only back bets, not lay bets, are counted as turnover.

The Sydney Morning Herald says the trial has “huge implications for the funding of racing in Australia.” NSW Betfair is half-owned by mogul James Packer.

(Harness Tracks of America)

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