A story published by The Times this week accuses the Paddy Power Betfair Group of placing strategic bets with on-course bookmakers in order to lower starting price (SP) odds and therefore reduce payouts to their own customers.
The report, which is based on accounts from “three people with knowledge of the practice,” alleges that major betting sites call specific bookmakers at race courses to place large bets that result in a sharp reduction of the SP. Consequently, any punters who bet on horses at the SP receive smaller payouts and the bookmaker saves money.
One particularly scandalous allegation from the report claims that bookmakers will target specific punters with this tactic. One anonymous source cited in the report named Paddy Power specifically and said they will “often” place a big bet to reduce the SP if a customer has an active accumulator that looks likely to pay out.
These claims are especially noteworthy considering most major bookmakers offer “best odds guaranteed” promises to their customers. These guarantees state that if a customer places a bet at the fixed odds price but the horse goes off at a higher SP, the bookmaker will pay that punter at the SP. These guarantees lose some of their luster if it turns out major bookmakers are indeed manipulating starting prices.
Starting prices are supposed to be free of this type of manipulation. As Paddy Power helpfully explains on one of its own help pages, the starting price is set at the beginning of a race as the declared price of each horse.
The Paddy Power website explains that the SP “is set by several agents, including the Mirror Group newspapers, the Press Association and freelancers, but mainly by on-course bookmakers. The SP is also partly determined by the price movements on betting exchanges.”
That page continues:
“One of the advantages of betting with us is our Guaranteed Price Promise; if the Starting Price is greater than the price you have taken, you will receive the SP. This applies to both early prices and board prices on all UK and Ireland horseracing and greyhound racing.
You cannot lose out by taking the price:
Take 2/1 and if your selection wins at 6/4 you get 2/1!
Take 2/1 and if your selection wins at 4/1 you get paid at 4/1!”
Nowhere on that page does it state that Paddy Power may actually bet down those starting prices in order to reduce payouts to customers. It will be a very bad look for Paddy Power and other bookmakers if these allegations end up proving true.
The Times report also points out that this sort of price manipulation is not illegal and that the practice is said to be “industry-wide.” A TV analyst familiar with the practice told The Times that this practice was once limited to smaller races with less betting handle that made them easier to manipulate, but that it has spread to much more prominent races as well. He named the Galway Races as one example of events that can now be manipulated in this manner.
Some of the Claims are Based on Anonymous Sources
One potential issue with this report is its reliance on anonymous sources. It’s not just that The Times does not name its sources for the report – that much is understandable considering the sensitive nature of the subject.
What’s troubling is the vague phrasing used to describe the sources for the most specific allegations against the Paddy Power Betfair Group. At one point, the article describes the sources as “people with knowledge of the practice.” In another instance, the report refers to “people with direct knowledge of its use at Paddy Power.”
However, other more general allegations do describe sources with greater specificity. At one point, The Times quotes a “former Paddy Power trader” who explained that the evidence for these allegations is right there in the open for anyone to see.
The former trader explained to The Times:
“There’s a total disconnect in the Betfair market, where could be €5 million of bets matched on a horse. It could be a favourite at 11-4 but all of a sudden it’s 6-4 at the on-course SP, and people are wondering where they are getting such tight odds.
“Obviously someone was shoveling a load of money onto the SP just before the race went off to drive it down.”
The Times did also manage to speak to a Paddy Power spokesman. In a quote given to The Times, the spokesman said the following:
“As with any bookmaker, we will hedge to control our liabilities. This hedging could be done via our Betfair Exchange, through other off-course bookmakers, or through on track bookmakers.”
When The Times asked the spokesman if SP manipulation was different than hedging due to its purpose being specifically to reduce customers’ winnings, the spokesman declined to comment further.
Just the Latest in a Stretch of Bad News for the Online Betting Industry
This week’s story from The Times is just the latest in a recent stretch of negative press coverage plaguing the online betting industry. In August, 888 was fined a record £7.8 million for failing to prevent gamblers who had entered self-exclusion programs from accessing their accounts and losing millions.
A Guardian report followed shortly thereafter alleging that online tipsters have been purposely recommending bad bets in order to increase their affiliate commissions from betting sites. In that report, the Guardian explained that affiliate advertisers earn money by referring new players to betting sites and receiving a share of those players’ losses.
The Guardian article was short on evidence, but the damage was done. Sky Bet later closed its affiliate program, citing regulatory concerns regarding affiliate advertising.
Less than two weeks later, four gambling firms were censured for breaching advertising standards. One or more affiliates of 888, Sky Vegas, Ladbrokes and Casumo had spread a fake news story of a down-on-his-luck gambler winning a bit jackpot that he used to pay off medical debts for his sick wife and take her on vacation.
Advertising links were inserted into those stories to promote those four gambling sites. The UK’s Advertising Standards Authority did not fine those companies due to the affiliates acting without authorization, but it did put gambling sites on notice: regulators are watching and next time operators may not get off with just a warning.
As online betting firms find themselves under increasing scrutiny, pushing the boundaries of acceptable behavior is a risky game. Customers and regulators alike are unlikely to have much sympathy for companies that already earn significant sums with the odds stacked firmly in their favor. Online bookmakers would be wise to avoid anything that even gives an appearance of foul play.